10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number: 1-32733

ACRES COMMERCIAL REALTY CORP.

(Exact name of registrant as specified in its charter)

Maryland	20-2287134
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

390 RXR Plaza, Uniondale, New York 11556

(Address of principal executive offices) (Zip Code)

(516) 535-0015

(Registrant’s telephone number, including area code)

865 Merrick Avenue, Suite 200 S, Westbury, NY 11590

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	ACR	New York Stock Exchange
8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock	ACRPrC	New York Stock Exchange
7.875% Series D Cumulative Redeemable Preferred Stock	ACRPrD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes  ☑ No

The number of outstanding shares of the registrant’s common stock on November 4, 2021 was 9,423,608 shares.

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT

ON FORM 10-Q

		PAGE
PART I		3
Item 1:	Financial Statements	3
	Consolidated Balance Sheets - September 30, 2021 (unaudited) and December 31, 2020	3
	Consolidated Statements of Operations (unaudited) Three and Nine Months Ended September 30, 2021 and 2020	5
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three and Nine Months Ended September 30, 2021 and 2020	6
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) Three and Nine Months Ended September 30, 2021 and 2020	7
	Consolidated Statements of Cash Flows (unaudited) Nine Months Ended September 30, 2021 and 2020	9
	Notes to Consolidated Financial Statements - September 30, 2021 (unaudited)	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	71
Item 4:	Controls and Procedures	73
PART II		74
Item 1:	Legal Proceedings	74
Item 1A:	Risk Factors	74
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3	Defaults Upon Senior Securities	75
Item 5	Other Information	75
Item 6:	Exhibits	75
SIGNATURES		80

PART I

ITEM 1. FINANCIAL STATEMENTS

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30, 2021			December 31, 2020
	(unaudited)
ASSETS (1)
Cash and cash equivalents	$	109,949		$	29,355
Restricted cash		32,406			38,386
Accrued interest receivable		6,678			7,372
CRE loans		1,845,688			1,541,992
Less: allowance for credit losses		(18,863	)		(34,310	)
CRE loans, net		1,826,825			1,507,682
Investment securities available-for-sale		—			2,080
Principal paydowns receivable		25,010			4,250
Loan receivable - related party		11,675			11,875
Investments in unconsolidated entities		1,548			1,548
Investments in real estate		32,799			33,806
Right of use assets		5,984			5,592
Intangible assets		3,041			3,294
Other assets		5,835			8,783
Assets held for sale		—			61
Total assets	$	2,061,750		$	1,654,084
LIABILITIES (2)
Accounts payable and other liabilities	$	3,987		$	2,068
Management fee payable - related party		1,128			442
Accrued interest payable		2,521			6,036
Borrowings		1,602,602			1,304,727
Lease liabilities		3,560			3,107
Distributions payable		3,260			1,725
Accrued tax liability		1			57
Liabilities held for sale		1,422			1,540
Total liabilities		1,618,481			1,319,702
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.001:  10,000,000 shares authorized 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,800,000 and 4,800,000 shares issued and outstanding		5			5
Preferred stock, par value $0.001:  6,800,000 shares authorized 7.875% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,600,000 and 0 shares issued and outstanding		5			—
Common stock, par value $0.001:  41,666,666 and 125,000,000 shares authorized; 9,423,608 and 10,162,289 shares issued and outstanding (including 333,329 and 11,610 of unvested restricted shares)		9			10
Additional paid-in capital		1,182,706			1,085,941
Accumulated other comprehensive loss		(8,594	)		(9,978	)
Distributions in excess of earnings		(730,862	)		(741,596	)
Total stockholders’ equity		443,269			334,382
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,061,750		$	1,654,084

The accompanying notes are an integral part of these statements

3

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Continued)

(in thousands, except share and per share data)

	September 30, 2021		December 31, 2020
	(unaudited)
(1) Assets of consolidated variable interest entities (“VIEs”) included in total assets above:
Restricted cash	$	32,385	$	38,353
Accrued interest receivable		4,089		5,398
CRE loans, pledged as collateral (3)		1,169,809		1,231,184
Principal paydowns receivable		25,010		4,250
Other assets		314		114
Total assets of consolidated VIEs	$	1,231,607	$	1,279,299
(2) Liabilities of consolidated VIEs included in total liabilities above:
Accounts payable and other liabilities	$	129	$	136
Accrued interest payable		679		806
Borrowings		960,709		1,027,929
Total liabilities of consolidated VIEs	$	961,517	$	1,028,871

(3) Excludes the allowance for credit losses.

The accompanying notes are an integral part of these statements

4

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
REVENUES
Interest income:
CRE loans	$	23,946		$	24,482		$	74,294		$	78,482
Securities		—			100			161			6,521
Other		40			56			73			168
Total interest income		23,986			24,638			74,528			85,171
Interest expense		14,534			13,033			46,960			43,974
Net interest income		9,452			11,605			27,568			41,197
Real estate income		2,627			—			7,013			—
Other revenue		17			19			49			62
Total revenues		12,096			11,624			34,630			41,259
OPERATING EXPENSES
Management fees - related party		1,700			1,284			4,405			4,728
Equity compensation - related party		771			1,905			961			3,118
Real estate operating expenses		2,401			—			6,713			—
General and administrative		2,664			5,295			8,533			11,552
Depreciation and amortization		16			12			75			34
Provision for (reversal of) credit losses, net		537			(8,172	)		(15,447	)		49,449
Total operating expenses		8,089			324			5,240			68,881
		4,007			11,300			29,390			(27,622	)
OTHER INCOME (EXPENSE)
Net realized and unrealized gain (loss) on investment securities available-for-sale and loans and derivatives		—			96			878			(186,243	)
Fair value and other adjustments on asset held for sale		—			(3,371	)		—			(8,089	)
Loss on extinguishment of debt		(9,006	)		—			(9,006	)		—
Other income		71			134			505			192
Total other income (expense)		(8,935	)		(3,141	)		(7,623	)		(194,140	)
(LOSS) INCOME BEFORE TAXES		(4,928	)		8,159			21,767			(221,762	)
Income tax benefit		—			—			—			—
NET (LOSS) INCOME		(4,928	)		8,159			21,767			(221,762	)
Net income allocated to preferred shares		(4,877	)		(2,588	)		(11,033	)		(7,763	)
NET (LOSS) INCOME ALLOCABLE TO COMMON SHARES	$	(9,805	)	$	5,571		$	10,734		$	(229,525	)
NET (LOSS) INCOME PER COMMON SHARE - BASIC	$	(1.03	)	$	0.51		$	1.09		$	(21.47	)
NET (LOSS) INCOME PER COMMON SHARE - DILUTED	$	(1.03	)	$	0.51		$	1.09		$	(21.47	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		9,553,412			10,964,604			9,818,138			10,692,743
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		9,553,412			10,966,286			9,836,603			10,692,743

The accompanying notes are an integral part of these statements

5

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net (loss) income	$	(4,928	)	$	8,159		$	21,767		$	(221,762	)
Other comprehensive income (loss):
Reclassification adjustments for realized losses on investment securities available-for-sale included in net (loss) income		—			106			—			185,463
Unrealized losses on investment securities available-for-sale, net		—			—			—			(191,283	)
Reclassification adjustments associated with net unrealized losses from interest rate swaps included in net (loss) income		466			467			1,384			788
Unrealized losses on derivatives, net		—			—			—			(7,233	)
Total other comprehensive income (loss)		466			573			1,384			(12,265	)
Comprehensive (loss) income before allocation to preferred shares		(4,462	)		8,732			23,151			(234,027	)
Net income allocated to preferred shares		(4,877	)		(2,588	)		(11,033	)		(7,763	)
Comprehensive (loss) income allocable to common shares	$	(9,339	)	$	6,144		$	12,118		$	(241,790	)

The accompanying notes are an integral part of these statements

6

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

	Common Stock						Series C Preferred		Series D Preferred		Additional Paid-In			Accumulated Other Comprehensive			Retained Earnings (Distributions in Excess			Total Stockholders’
	Shares			Amount			Stock		Stock		Capital			(Loss) Income			of Earnings)			Equity
Balance, December 31, 2020		10,162,289		$	10		$	5	$	—	$	1,085,941		$	(9,978	)	$	(741,596	)	$	334,382
Purchase and retirement of common stock		(744,778	)		(1	)		—		—		(9,518	)		—			—			(9,519	)
Amortization of stock-based compensation		—			—			—		—		19			—			—			19
Net income		—			—			—		—		—			—			13,056			13,056
Distributions and accrual of cumulative preferred stock dividends		—			—			—		—		—			—			(2,588	)		(2,588	)
Amortization of terminated derivatives		—			—			—		—		—			456			—			456
Balance, March 31, 2021		9,417,511		$	9		$	5	$	—	$	1,076,442		$	(9,522	)	$	(731,128	)	$	335,806
Proceeds from issuance of preferred stock		—			—			—		5		114,995			—			—			115,000
Offering costs		—			—			—		—		(4,235	)		—			—			(4,235	)
Purchase and retirement of common stock		(273,789	)		—			—		—		(4,317	)		—			—			(4,317	)
Stock-based compensation		333,329			—			—		—		—			—			—			—
Amortization of stock-based compensation		—			—			—		—		171			—			—			171
Net income		—			—			—		—		—			—			13,639			13,639
Distributions and accrual of cumulative preferred stock dividends		—			—			—		—		—			—			(3,568	)		(3,568	)
Amortization of terminated derivatives		—			—			—		—		—			462			—			462
Balance June 30, 2021		9,477,051		$	9		$	5	$	5	$	1,183,056		$	(9,060	)	$	(721,057	)	$	452,958
Offering costs		—			—			—		—		(232	)		—			—			(232	)
Purchase and retirement of common stock		(53,443	)		—			—		—		(889	)		—			—			(889	)
Stock-based compensation		—			—			—		—		—			—			—			—
Amortization of stock-based compensation		—			—			—		—		771			—			—			771
Net loss		—			—			—		—		—			—			(4,928	)		(4,928	)
Distributions and accrual of cumulative preferred stock dividends		—			—			—		—		—			—			(4,877	)		(4,877	)
Amortization of terminated derivatives		—			—			—		—		—			466			—			466
Balance, September 30, 2021		9,423,608		$	9		$	5	$	5	$	1,182,706		$	(8,594	)	$	(730,862	)	$	443,269

The accompanying notes are an integral part of these statements

7

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)

(in thousands, except share data)

(unaudited)

	Common Stock					Series C Preferred		Additional Paid-In			Accumulated Other Comprehensive			Retained Earnings (Distributions in Excess			Total Stockholders’
	Shares			Amount		Stock		Capital			(Loss) Income			of Earnings)			Equity
Balance, December 31, 2019		10,626,864		$	11	$	5	$	1,085,062		$	1,821		$	(530,501	)	$	556,398
Cumulative effect of accounting change for adoption of credit loss guidance		—			—		—		—			—			(3,032	)		(3,032	)
Balance, January 1, 2020		10,626,864		$	11	$	5	$	1,085,062		$	1,821		$	(533,533	)	$	553,366
Stock-based compensation		63,818			—		—		—			—			—			—
Amortization of stock-based compensation		—			—		—		498			—			—			498
Forfeiture of unvested stock		(9,996	)		—		—		—			—			—			—
Net loss		—			—		—		—			—			(196,521	)		(196,521	)
Distributions and accrual of cumulative preferred stock dividends		—			—		—		—			—			(2,588	)		(2,588	)
Securities available-for-sale without an allowance for credit losses, fair value adjustment, net		—			—		—		—			(5,926	)		—			(5,926	)
Designated derivatives, fair value adjustment		—			—		—		—			(6,772	)		—			(6,772	)
Balance, March 31, 2020		10,680,686		$	11	$	5	$	1,085,560		$	(10,877	)	$	(732,642	)	$	342,057
Stock-based compensation		5,477			—		—		—			—			—			—
Amortization of stock-based compensation		—			—		—		715			—			—			715
Net loss		—			—		—		—			—			(33,400	)		(33,400	)
Accrual of cumulative preferred stock dividends		—			—		—		—			—			(2,587	)		(2,587	)
Designated derivatives, fair value adjustment		—			—		—		—			(140	)		—			(140	)
Balance, June 30, 2020		10,686,163		$	11	$	5	$	1,086,275		$	(11,017	)	$	(768,629	)	$	306,645
Equity component of 12% Senior Unsecured Notes		—			—		—		3,108			—			—			3,108
Stock-based compensation		11,611			—		—		(1	)		—			—			(1	)
Amortization of stock-based compensation		—			—		—		1,905			—			—			1,905
Net income		—			—		—		—			—			8,159			8,159
Accrual of cumulative preferred stock dividends		—			—		—		—			—			(2,588	)		(2,588	)
Securities available-for-sale without an allowance for credit losses, fair value adjustment, net		—			—		—		—			106			—			106
Designated derivatives, fair value adjustment		—			—		—		—			467			—			467
Balance, September 30, 2020		10,697,774		$	11	$	5	$	1,091,287		$	(10,444	)	$	(763,058	)	$	317,801

The accompanying notes are an integral part of these statements

8

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	For the Nine Months Ended
	September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	21,767		$	(221,762	)
Adjustments to reconcile net income (loss) from operations to net cash provided by operating activities:
(Reversal of) provision for credit losses, net		(15,447	)		49,449
Depreciation, amortization and accretion		11,943			4,298
Amortization of stock-based compensation		961			3,118
Net realized and unrealized (gain) loss on investment securities available-for-sale and loans and derivatives		(878	)		186,177
Fair value and other adjustments on asset held for sale		—			8,089
Loss on extinguishment of debt		4,043			—
Changes in operating assets and liabilities		3,105			(9,080	)
Net cash provided by operating activities		25,494			20,289
CASH FLOWS FROM INVESTING ACTIVITIES:
Origination and purchase of loans		(964,357	)		(209,102	)
Principal payments received on loans		644,954			340,462
Proceeds from sale of loans		—			17,453
Purchase of investment securities available-for-sale		—			(24,610	)
Principal payments on investment securities available-for-sale		—			4,733
Proceeds from sale of investment securities available-for-sale		2,958			37,764
Investment in loan - related party		—			(12,000	)
Principal payments received on loan - related party		200			25
Purchase of furniture and fixtures		(176	)		—
Net cash (used in) provided by investing activities		(316,421	)		154,725
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock (net of $4,467 of underwriting discounts and offering costs)		110,533			—
Repurchase of common stock		(14,725	)		—
Proceeds from borrowings:
Securitizations		675,223			639,074
Senior secured financing facility		131,878			128,495
Warehouse financing facilities and repurchase agreements		591,890			275,039
Senior unsecured notes		150,000			50,000
Payments on borrowings:
Securitizations		(745,386	)		(319,418	)
Senior secured financing facility		(124,056	)		—
Warehouse financing facilities and repurchase agreements		(284,890	)		(827,684	)
Convertible senior notes		(55,736	)		(21,182	)
Senior unsecured notes		(50,000	)		—
Payment of debt issuance costs		(9,692	)		(14,774	)
Settlement of derivative instruments		—			(11,762	)
Distributions paid on preferred stock		(9,498	)		(2,588	)
Distributions paid on common stock		—			(8,767	)
Net cash provided by (used in) financing activities		365,541			(113,567	)
NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		74,614			61,447
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEG. OF PERIOD		67,741			94,434
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	142,355		$	155,881

The accompanying notes are an integral part of these statements

9

ACRES COMMERCIAL REALTY CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(unaudited)

NOTE 1 - ORGANIZATION

ACRES Commercial Realty Corp., a Maryland corporation, along with its subsidiaries (collectively, the “Company”), is a real estate investment trust (“REIT”) that is primarily focused on originating, holding and managing commercial real estate (“CRE”) mortgage loans and other commercial real estate-related debt investments. On July 31, 2020, the Company’s management contract was acquired from Exantas Capital Manager Inc. (the “Prior Manager”), a subsidiary of C-III Capital Partners LLC (“C-III”), by ACRES Capital, LLC (the “Manager”), a subsidiary of ACRES Capital Corp. (collectively, “ACRES”), a private commercial real estate lender exclusively dedicated to nationwide middle market CRE lending with a focus on multifamily, student housing, hospitality, office and industrial property in top United States (“U.S.”) markets (the “ACRES acquisition”).

The Company has qualified, and expects to qualify in the current fiscal year, as a REIT.

The Company conducts its operations through the use of subsidiaries that it consolidates into its financial statements. The Company’s core assets are consolidated through its investment in ACRES Realty Funding, Inc. (“ACRES RF”), a wholly-owned subsidiary that holds CRE loans, CRE-related securities and investments in CRE securitizations, which are consolidated as VIEs as discussed in Note 3, and special purpose entities.

Reverse Stock Split

Effective February 16, 2021, the Company completed a one-for-three reverse stock split of its outstanding common stock. The accompanying financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented. In addition, the Company adopted articles of amendment to its charter, which provided that the par value of the Company’s common stock remained $0.001 immediately after effect was given for the reverse stock split. No fractional shares were issued in connection with the reverse stock split. Stockholders who otherwise held fractional shares of the Company’s common stock as a result of the reverse stock split received a cash payment in lieu of such fractional shares. In May 2021, the Company adopted articles of amendment to its charter to decrease its authorized shares of capital stock from 225,000,000 shares, consisting of 125,000,000 shares of common stock and 100,000,000 shares of preferred stock to 141,666,666 shares, consisting of 41,666,666 shares of common stock and 100,000,000 shares of preferred stock.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the accounting policies set forth in Note 2 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The consolidated financial statements include the accounts of the Company, majority-owned or controlled subsidiaries and VIEs for which the Company is considered the primary beneficiary. All inter-company transactions and balances have been eliminated in consolidation.

Basis of Presentation

All adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows have been made.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management 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 within the period of financial results. Actual results could differ from those estimates. Estimates affecting the accompanying consolidated financial statements include but are not limited to the net realizable and fair values of the Company’s investments and derivatives, the estimated useful lives used to calculate depreciation, the expected lives over which to amortize premiums and accrete discounts, reversals of or provisions for expected credit losses and the disclosure of contingent liabilities.

10

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified. The resulting global proliferation of the virus led the World Health Organization to designate COVID-19 as a pandemic and numerous countries, including the U.S., to declare national emergencies. Many countries responded to the outbreak by instituting quarantines and restrictions on travel, which resulted in the closure or remote operation of non-essential businesses. Such actions produced material and previously unforeseeable shocks to global markets, disruptions to global supply chains and adversity to many industries and economies as whole. While the U.S. and certain countries around the world have eased restrictions and financial markets have stabilized to some degree in connection with the discovery and distribution of vaccines, the pandemic, exacerbated by virus variants, continues to cause uncertainty on the U.S. and global economies generally, and the CRE business in particular, that make estimates and assumptions as of September 30, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19. The Company believes the estimates and assumptions underlying the consolidated financial statements are reasonable and supportable based on the information available at September 30, 2021. Actual results may ultimately differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid investments with original maturities of three months or less at the time of purchase. At September 30, 2021 and December 31, 2020, approximately $108.4 million and $27.3 million, respectively, of the reported cash balances exceeded the Federal Deposit Insurance Corporation and Securities Investor Protection Corporation deposit insurance limits of $250,000 per respective depository or brokerage institution. However, all of the Company’s cash deposits are held at multiple, established financial institutions, in multiple accounts associated with its parent and respective consolidated subsidiaries, to minimize credit risk exposure.

Restricted cash includes required account balance minimums primarily for the Company’s CRE debt securitizations, term warehouse financing facilities and repurchase agreements as well as cash held in the syndicated corporate loan collateralized debt obligations (“CDOs”).

The following table provides a reconciliation of cash, cash equivalents and restricted cash on the consolidated balance sheets to the total amount shown on the consolidated statements of cash flows (in thousands):

	September 30,
	2021		2020
Cash and cash equivalents	$	109,949	$	122,105
Restricted cash		32,406		33,776
Total cash, cash equivalents and restricted cash shown on the Company’s consolidated statements of cash flows	$	142,355	$	155,881

Hotel Operating Revenue

Hotel operating revenue, which is presented in real estate income on the consolidated statements of operations, consists of amounts derived from hotel operations, including room sales and other hotel revenues. The Company recognizes hotel operating revenue when guest rooms are occupied, services have been provided or fees have been earned. Revenues are recorded net of any sales, occupancy or other taxes collected from customers on behalf of third parties. The following provides additional detail on room revenue and other operating revenue:

• Room revenue is recognized when the Company’s hotel satisfies its performance obligation of providing a hotel room. The hotel reservation defines the terms of the agreement including an agreed-upon rate and length of stay. Payment is typically due and paid in full at the end of the stay with some customers prepaying for their rooms prior to the stay. Payments received from a customer prior to arrival are recorded as an advance deposit and are recognized as revenue at the time of occupancy.

• Other operating revenue is recognized at the time when the goods or services are provided to the customer or when the performance obligation is satisfied. Payment is due at the time that goods or services are rendered or billed.

Investment in Real Estate

The Company amortizes the value allocated to lease right of use assets and related in-place lease liabilities, when determined to be operating leases, using the straight-line method over the remaining lease term. The value allocated to any associated above or below market lease intangible asset or liability is amortized to lease expense over the remaining lease term. The estimated useful lives of the right of use assets and lease liabilities are each 66.3 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

Leases

The value of the operating leases are determined through the discounted cash flow method and are recognized on the consolidated balance sheet as offsetting right of use assets and lease liabilities. The operating lease for the Company’s office space is amortized over the lease term, or 7.3 years, using the effective-interest method. The Company’s operating lease for office equipment is amortized over the lease term, or three years, using the straight-line method.

Income Taxes

The Company recorded a full valuation allowance against its net deferred tax assets of $63.0 million (tax effected expense of $21.2 million) at September 30, 2021, as the Company believes it is more likely than not that the deferred tax assets will not be realized. This assessment was based on the Company’s cumulative historical losses and uncertainties as to the amount of taxable income that would be generated in future years by the Company’s taxable REIT subsidiaries.

Earnings per Share

The Company presents both basic and diluted earnings per share (“EPS”). Basic EPS excludes dilution and is computed by dividing net income (loss) allocable to common shareholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.

Recent Accounting Standards

Accounting Standards Adopted in 2021

In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance that provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives and other contracts, related to the expected market transition from the London Interbank Offered Rate (“LIBOR”), and certain other floating-rate benchmark indices to alternative reference rates. The guidance generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination.

In June 2021, Exantas Capital Corp. 2020-RSO8, Ltd.’s (“XAN 2020-RSO8”) and Exantas Capital Corp. 2020-RSO9, Ltd.’s (“XAN 2020-RSO9”) senior notes’ benchmark rate, one-month LIBOR, was replaced with the compounded Secured Overnight Financing Rate (“Compounded SOFR”) plus a benchmark adjustment. As each securitizations’ indentures included terms referencing a benchmark rate replacement, no amendments to the indentures were required. The Company will apply the replacement of the benchmark rate prospectively by adjusting the effective interest rate. Additionally, all of the Company’s underwritten loans contain terms that allow for a change to an alternative benchmark rate upon the discontinuation of LIBOR. For the Company’s remaining financial instruments utilizing LIBOR as a benchmark rate, the guidance is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur.

Accounting Standards to be Adopted in Future Periods

In August 2020, the FASB issued guidance that removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation into a debt component and an equity or derivative component. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives and the convertible instrument is not issued with substantial premiums accounted for as paid-in capital. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate. The guidance also revises the derivative scope exception for contracts in an entity’s own equity and improves the consistency of EPS calculations. The guidance is effective for larger public business entities’ annual periods, and interim periods therein, beginning after December 15, 2021 and for smaller reporting entities after December 15, 2023. Early application is permitted for fiscal years beginning after December 15, 2020. The Company is in the process of evaluating the impact of this guidance.

Reclassifications

Certain reclassifications have been made to the 2020 consolidated financial statements, including the consolidated statement of operations and the consolidated statement of cash flows, to conform to the 2021 presentation. These reclassifications had no effect on net income (loss) reported nor the total change in cash flows for each type of cash flow activity on the consolidated statement of cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

NOTE 3 - VARIABLE INTEREST ENTITIES

The Company has evaluated its loans, investments in unconsolidated entities, liabilities to subsidiary trusts issuing preferred securities (consisting of unsecured junior subordinated notes), securitizations, guarantees and other financial contracts in order to determine if they are variable interests in VIEs. The Company regularly monitors these legal interests and contracts and, to the extent it has determined that it has a variable interest, analyzes the related entity for potential consolidation.

Consolidated VIEs (the Company is the primary beneficiary)

Based on management’s analysis, the Company was the primary beneficiary of six VIEs at September 30, 2021 and December 31, 2020 (collectively, the “Consolidated VIEs”).

The Consolidated VIEs are CRE securitizations and CDOs that were formed on behalf of the Company to invest in real estate-related securities, commercial mortgage-backed securities (“CMBS”), syndicated corporate loans, corporate bonds and asset-backed securities and were financed by the issuance of debt securities. By financing these assets with long-term borrowings through the issuance of debt securities, the Company seeks to generate attractive risk-adjusted equity returns and to match the term of its assets and liabilities. The primary beneficiary determination for each of these VIEs was made at each VIE’s inception and is continually assessed.

The Company has exposure to losses on its securitizations to the extent of its investments in the subordinated debt and preferred equity of each securitization. The Company is entitled to receive payments of principal and interest on the debt securities it holds and, to the extent revenues exceed debt service requirements and other expenses of the securitizations, distributions with respect to its preferred equity interests. As a result of consolidation, the debt and equity interests the Company holds in these securitizations have been eliminated, and the Company’s consolidated balance sheets reflect the assets held, debt issued by the securitizations to third parties and any accrued payables to third parties. The Company’s operating results and cash flows include the gross amounts related to the securitizations’ assets and liabilities as opposed to the Company’s net economic interests in the securitizations. Assets and liabilities related to the securitizations are disclosed, in the aggregate, on the Company’s consolidated balance sheets. For a discussion of the debt issued through the securitizations see Note 11.

Creditors of the Company’s Consolidated VIEs have no recourse to the general credit of the Company, nor to each other. During the nine months ended September 30, 2021 and 2020, the Company did not provide any financial support to any of its VIEs nor does it have any requirement to do so, although it may choose to do so in the future to maximize future cash flows from such investments to the Company. There are no explicit arrangements that obligate the Company to provide financial support to any of its Consolidated VIEs.

The following table shows the classification and carrying values of assets and liabilities of the Company’s Consolidated VIEs at September 30, 2021 (in thousands):

	CRE Securitizations		Other		Total
ASSETS
Restricted cash	$	31,925	$	460	$	32,385
Accrued interest receivable		4,089		—		4,089
CRE loans, pledged as collateral (1)		1,169,809		—		1,169,809
Principal paydowns receivable		25,010		—		25,010
Other assets		314		—		314
Total assets (2)	$	1,231,147	$	460	$	1,231,607
LIABILITIES
Accounts payable and other liabilities	$	129	$	—	$	129
Accrued interest payable		679		—		679
Borrowings		960,709		—		960,709
Total liabilities	$	961,517	$	—	$	961,517

(1) Excludes the allowance for credit losses.

(2) Assets of each of the Consolidated VIEs may only be used to settle the obligations of each respective VIE.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

Unconsolidated VIEs (the Company is not the primary beneficiary, but has a variable interest)

Based on management’s analysis, the Company is not the primary beneficiary of the VIEs discussed below since it does not have both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Accordingly, the following VIEs are not consolidated in the Company’s financial statements at September 30, 2021. The Company continuously reassesses whether it is deemed to be the primary beneficiary of its unconsolidated VIEs. The Company’s maximum exposure to risk for each of these unconsolidated VIEs is set forth in the “Maximum Exposure to Loss” column in the table below.

Unsecured Junior Subordinated Debentures

The Company has a 100% interest in the common shares of Resource Capital Trust I (“RCT I”) and RCC Trust II (“RCT II”), respectively, with a value of $1.5 million in the aggregate, or 3.0% of each trust, at September 30, 2021. RCT I and RCT II were formed for the purposes of providing debt financing to the Company. The Company completed a qualitative analysis to determine whether or not it is the primary beneficiary of each of the trusts and determined that it was not the primary beneficiary of either trust because it does not have the power to direct the activities most significant to the trusts, which include the collection of principal and interest through servicing rights. Accordingly, neither trust is consolidated into the Company’s consolidated financial statements.

The Company records its investments in RCT I and RCT II’s common shares of $774,000 each as investments in unconsolidated entities using the cost method, recording dividend income when declared by RCT I and RCT II. The trusts each hold subordinated debentures for which the Company is the obligor in the amount of $25.8 million for each of RCT I and RCT II. The debentures were funded by the issuance of trust preferred securities of RCT I and RCT II.

The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs at September 30, 2021 (in thousands):

	Unsecured Junior Subordinated Debentures			Maximum Exposure to Loss
ASSETS
Accrued interest receivable	$	5		$	—
Investments in unconsolidated entities		1,548		$	1,548
Total assets		1,553
LIABILITIES
Accrued interest payable		181		N/A
Borrowings		51,548		N/A
Total liabilities		51,729		N/A
Net (liability) asset	$	(50,176	)	N/A

At September 30, 2021, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to any of its unconsolidated VIEs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table summarizes the Company’s supplemental disclosure of cash flow information (in thousands):

	For the Nine Months Ended
	September 30,
	2021			2020
Supplemental cash flows:
Interest expense paid in cash	$	33,889		$	38,246
Income taxes paid in cash	$	—		$	—
Non-cash operating activities include the following:
Receipt of right of use assets	$	(479	)	$	—
Execution of operating leases	$	479		$	—
Non-cash investing activities include the following:
Proceeds from the relinquishment of investment securities available-for-sale	$	—		$	369,873
Non-cash financing activities include the following:
Repayment of repurchase agreements from the relinquishment of investment securities available-for-sale	$	—		$	(369,873	)
Distributions on preferred stock accrued but not paid	$	3,260		$	6,900

15

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

NOTE 5 - LOANS

The following is a summary of the Company’s loans (dollars in thousands, except amounts in footnotes):

Description	Quantity		Principal		Unamortized (Discount) Premium, net (1)			Amortized Cost		Allowance for Credit Losses			Carrying Value		Contractual Interest Rates (2)(3)	Maturity Dates (4)(5)
At September 30, 2021:
CRE loans held for investment:
Whole loans (6)(7)		95	$	1,853,168	$	(12,180	)	$	1,840,988	$	(18,578	)	$	1,822,410	1M LIBOR plus 2.70% to 1M LIBOR plus 9.00%	November 2021 to September 2025
Mezzanine loan (6)		1		4,700		—			4,700		(285	)		4,415	10.00%	June 2028
Total CRE loans held for investment			$	1,857,868	$	(12,180	)	$	1,845,688	$	(18,863	)	$	1,826,825
At December 31, 2020:
CRE loans held for investment:
Whole loans (6)(7)		95	$	1,515,722	$	(6,144	)	$	1,509,578	$	(32,283	)	$	1,477,295	1M LIBOR plus 2.70% to 1M LIBOR plus 9.00%	January 2021 to January 2024
Mezzanine loan (6)		1		4,700		—			4,700		(301	)		4,399	10.00%	June 2028
Preferred equity investments (8)		2		27,650		64			27,714		(1,726	)		25,988	11.00% to 11.50%	June 2022 to April 2023
Total CRE loans held for investment			$	1,548,072	$	(6,080	)	$	1,541,992	$	(34,310	)	$	1,507,682

(1) Amounts include unamortized loan origination fees of $11.7 million and $5.7 million and deferred amendment fees of $469,000 and $495,000 at September 30, 2021 and December 31, 2020, respectively. Additionally, the amounts include unamortized loan acquisition costs of $29,000 and $118,000 at September 30, 2021 and December 31, 2020, respectively.

(2) The Company’s whole loan portfolio of $1.9 billion and $1.5 billion had a weighted-average one-month LIBOR floor of 1.03% and 1.88% at September 30, 2021 and December 31, 2020, respectively. At September 30, 2021, all but one of the Company’s floating-rate whole loans had one-month LIBOR floors. At December 31, 2020, all whole loans had one-month LIBOR floors.

(3) Excludes one whole loan that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

(4) Maturity dates exclude contractual extension options, subject to the satisfaction of certain terms that may be available to the borrowers.

(5) Maturity dates exclude four and three whole loans, with amortized costs of $49.1 million and $39.7 million, in maturity default at September 30, 2021 and December 31, 2020, respectively.

(6) Substantially all loans are pledged as collateral under various borrowings at September 30, 2021 and December 31, 2020.

(7) CRE whole loans had $140.6 million and $67.2 million in unfunded loan commitments at September 30, 2021 and December 31, 2020, respectively. These unfunded loan commitments are advanced as the borrowers formally request additional funding and meet certain benchmarks, as permitted under the loan agreement, and any necessary approvals have been obtained.

(8) The interest rate on the Company’s preferred equity investments paid at 8.00%. The remaining interest was deferred until payoff, which occurred in March 2021 and April 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The following is a summary of the contractual maturities of the Company’s CRE loans held for investment, at amortized cost (in thousands, except amounts in the footnotes):

Description	2021		2022		2023 and Thereafter		Total
At September 30, 2021:
Whole loans (1)	$	85,013	$	530,398	$	1,176,479	$	1,791,890
Mezzanine loan		—		—		4,700		4,700
Total CRE loans (2)	$	85,013	$	530,398	$	1,181,179	$	1,796,590
Description	2021		2022		2023 and Thereafter		Total
At December 31, 2020:
Whole loans (1)	$	599,053	$	540,639	$	330,143	$	1,469,835
Mezzanine loan		—		—		4,700		4,700
Preferred equity investments		—		6,452		21,262		27,714
Total CRE loans (2)	$	599,053	$	547,091	$	356,105	$	1,502,249

(1) Excludes four and three whole loans, with amortized costs of $49.1 million and $39.7 million, in default at September 30, 2021 and December 31, 2020, respectively.

(2) At September 30, 2021, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $14.3 million, $87.2 million and $1.7 billion in 2021, 2022 and 2023 and thereafter, respectively. At December 31, 2020, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $112.4 million, $125.1 million and $1.3 billion in 2021, 2022 and 2023 and thereafter, respectively.

At September 30, 2021, approximately, 22.0%, 18.4% and 15.7% of the Company’s CRE loan portfolio was concentrated in the Southeast, Southwest and Mountain regions, respectively, based on carrying value, as defined by the National Council of Real Estate Investment Fiduciaries. At December 31, 2020, approximately 21.4%, 17.9% and 16.1% of the Company’s CRE loan portfolio was concentrated in the Mountain, Southwest and Southeast regions, respectively, based on carrying value. No single loan or investment represented more than 10% of the Company’s total assets and no single investor group generated over 10% of the Company’s revenue.

Principal Paydowns Receivable

Principal paydowns receivable represents loan principal payments that have been received by the Company’s servicers and trustees but have not been remitted to the Company. At September 30, 2021, the Company had $25.0 million of loan principal paydowns receivable, all of which was received in cash by the Company in October 2021. At December 31, 2020, the Company had $4.3 million of loan principal paydowns receivable, all of which was received in cash by the Company in January 2021.

NOTE 6 - FINANCING RECEIVABLES

The following table shows the activity in the allowance for credit losses for the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands, except amount in the footnote):

	Nine Months Ended September 30, 2021			Year Ended December 31, 2020
	CRE Loans			CRE Loans
Allowance for credit losses:
Allowance for credit losses at beginning of period	$	34,310		$	1,460
Adoption of the new accounting guidance		—			3,032
(Reversal of) provision for credit losses		(15,447	)		30,815
Realized loss on sale of loan (1)		—			(997	)
Allowance for credit losses at end of period	$	18,863		$	34,310

(1) The allowance for credit losses included a realized loss of $997,000 that was charged to the allowance related to one CRE loan sale that occurred during the year ended December 31, 2020. There was no such charge off during the nine months ended September 30, 2021.

17

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

During the three months ended September 30, 2021, the Company recorded a provision for expected credit losses of $537,000 in connection with an increase in the size of the CRE loan portfolio, offset by an improvement in macroeconomic conditions. During the nine months ended September 30, 2021, reversals of expected credit losses in the first and second quarters of 2021 outpaced the provision during the third quarter of 2021, resulting in a net reversal of expected credit losses of $15.4 million. Overall, the reversal of expected credit losses was attributable to declines in expected unemployment and continued improvement in macroeconomic conditions, loan paydowns and improved collateral operating performance.

Beginning in the first quarter through the second quarter of 2020, expected credit losses on the Company’s CRE loan portfolio were negatively impacted by higher than expected unemployment and increased volatility in CRE asset pricing and liquidity in connection with the COVID-19 pandemic. While projections of declining unemployment and recoveries in CRE asset pricing began to improve during the three months ended September 30, 2020, resulting in a reversal of expected credit losses of $8.1 million, the impact of COVID-19 in the first two quarters of 2020 resulted in a provision for expected credit losses of $48.5 million during the nine months ended September 30, 2020.

During the three and nine months ended September 30, 2021, the Company individually evaluated an office loan in the East North Central region with a $19.9 million principal balance, two hotel loans in the Northeast region with $23.3 million of total principal balances and a hotel loan in the East North Central region with a $8.4 million principal balance for which sale or foreclosure was determined to be probable. The Company obtained an updated appraisal in October 2021 on the office loan, which indicated an as-is appraised value of $17.6 million. The Company consequently recorded a provision for credit losses of $400,000 during the three months ended September 30, 2021 to increase the current expected credit losses (“CECL”) allowance to $2.3 million on the loan, which was based on the new appraised value of the collateral. Additionally, the Company received a bid to sell the note on one hotel loan in the Northeast region with a $9.3 million principal balance. Using the bid less estimated costs to sell, the Company individually evaluated the loan and recorded a reversal of credit losses of $465,000 during the three months ended September 30, 2021. The loan had a CECL allowance of $1.8 million at September 30, 2021. The hotel loan in the East North Central region and other hotel loan in the Northeast region were determined to have no CECL allowance as the as-is appraised values on the properties were in excess of the principal and interest balances.

Credit quality indicators

Commercial Real Estate Loans

CRE loans are collateralized by a diversified mix of real estate properties and are assessed for credit quality based on the collective evaluation of several factors, including but not limited to: collateral performance relative to underwritten plan, time since origination, current implied and/or reunderwritten loan-to-collateral value ratios, loan structure and exit plan. Depending on the loan’s performance against these various factors, loans are rated on a scale from 1 to 5, with loans rated 1 representing loans with the highest credit quality and loans rated 5 representing loans with the lowest credit quality. Loans are rated a 2 at origination. The factors evaluated provide general criteria to monitor credit migration in the Company’s loan portfolio; as such, a loan’s rating may improve or worsen, depending on new information received.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The criteria set forth below should be used as general guidelines and, therefore, not every loan will have all of the characteristics described in each category below.

Risk Rating	Risk Characteristics
1	• Property performance has surpassed underwritten expectations.
	• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.
2	• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded.
	• Occupancy is stabilized, near stabilized or is on track with underwriting.
3	• Property performance lags behind underwritten expectations.
	• Occupancy is not stabilized and the property has some tenancy rollover.
4	• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers.
	• Occupancy is not stabilized and the property has a large amount of tenancy rollover.
5	• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Expected sale proceeds would not be sufficient to pay off the loan at maturity.
	• The property has a material vacancy rate and significant rollover of remaining tenants.
	• An updated appraisal is required upon designation and updated on an as-needed basis.

All CRE loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Mezzanine loans and preferred equity investments may experience greater credit risks due to their nature as subordinated investments.

For the purpose of calculating the quarterly provision for credit losses under CECL, the Company pools CRE loans based on the underlying collateral property type and utilizes a probability of default and loss given default methodology for approximately one year after which it immediately reverts to a historical mean loss ratio.

Credit risk profiles of CRE loans at amortized cost were as follows (in thousands, except amounts in the footnotes):

	Rating 1		Rating 2		Rating 3		Rating 4		Rating 5		Total (1)
At September 30, 2021:
Whole loans, floating-rate (2)	$	—	$	1,310,042	$	353,430	$	123,647	$	53,869	$	1,840,988
Mezzanine loan		—		—		4,700		—		—		4,700
Total	$	—	$	1,310,042	$	358,130	$	123,647	$	53,869	$	1,845,688
At December 31, 2020:
Whole loans, floating-rate	$	—	$	611,838	$	599,208	$	262,398	$	36,134	$	1,509,578
Mezzanine loan		—		—		4,700		—		—		4,700
Preferred equity investments		—		—		6,452		21,262		—		27,714
Total	$	—	$	611,838	$	610,360	$	283,660	$	36,134	$	1,541,992

(1) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Includes one $20.8 million whole loan, risk rated a 3, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

Credit risk profiles of CRE loans by origination year at amortized cost were as follows (in thousands, except amounts in the footnotes):

	2021		2020		2019		2018		2017		Prior		Total (1)
At September 30, 2021:
Whole loans, floating-rate: (2)
Rating 2	$	944,534	$	197,627	$	114,859	$	53,022	$	—	$	—	$	1,310,042
Rating 3 (3)		10,315		10,084		190,708		108,327		16,496		17,500		353,430
Rating 4		—		—		28,420		86,025		—		9,202		123,647
Rating 5		—		—		22,373		9,300		19,900		2,296		53,869
Total whole loans, floating-rate		954,849		207,711		356,360		256,674		36,396		28,998		1,840,988
Mezzanine loan (rating 3)		—		—		—		4,700		—		—		4,700
Total	$	954,849	$	207,711	$	356,360	$	261,374	$	36,396	$	28,998	$	1,845,688
	2020		2019		2018		2017		2016		Prior		Total (1)
At December 31, 2020:
Whole loans, floating-rate: (2)
Rating 2	$	221,364	$	279,077	$	111,397	$	—	$	—	$	—	$	611,838
Rating 3		43,579		246,073		246,944		45,142		—		17,470		599,208
Rating 4		—		77,495		129,536		46,220		—		9,147		262,398
Rating 5		—		13,938		—		19,900		—		2,296		36,134
Total whole loans, floating-rate		264,943		616,583		487,877		111,262		—		28,913		1,509,578
Mezzanine loan (rating 3)		—		—		4,700		—		—		—		4,700
Preferred equity investments
Rating 3		—		6,452		—		—		—		—		6,452
Rating 4		—		—		21,262		—		—		—		21,262
Total preferred equity investments		—		6,452		21,262		—		—		—		27,714
Total	$	264,943	$	623,035	$	513,839	$	111,262	$	—	$	28,913	$	1,541,992

(1) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Acquired CRE whole loans are grouped within each loan’s year of issuance.

(3) Includes one $20.8 million whole loan, originated in 2018, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

20

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

Loan Portfolio Aging Analysis

The following table presents the CRE loan portfolio aging analysis as of the dates indicated for CRE loans at amortized cost (in thousands, except amounts in footnotes):

	30-59 Days		60-89 Days		Greater than 90 Days (1)		Total Past Due		Current (2)		Total Loans Receivable (3)		Total Loans > 90 Days and Accruing
At September 30, 2021:
Whole loans, floating-rate (4)	$	—	$	—	$	39,798	$	39,798	$	1,801,190	$	1,840,988	$	19,898
Mezzanine loan		—		—		—		—		4,700		4,700		—
Total	$	—	$	—	$	39,798	$	39,798	$	1,805,890	$	1,845,688	$	19,898
At December 31, 2020:
Whole loans, floating-rate	$	—	$	—	$	11,443	$	11,443	$	1,498,135	$	1,509,578	$	11,443
Mezzanine loan		—		—		—		—		4,700		4,700		—
Preferred equity investments		—		—		—		—		27,714		27,714		—
Total	$	—	$	—	$	11,443	$	11,443	$	1,530,549	$	1,541,992	$	11,443

(1) During the three and nine months ended September 30, 2021, the Company recognized interest income of $480,000 and $1.7 million, respectively, on the three loans with principal payments past due greater than 90 days at September 30, 2021. During the three and nine months ended September 30, 2020, the Company recognized interest income of $605,000 and $1.8 million, respectively, on these loans.

(2) Includes two whole loans, with amortized costs of $28.3 million, in maturity default at December 31, 2020.

(3) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(4) Includes one $20.8 million whole loan, which is current, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

At September 30, 2021 and December 31, 2020, the Company had four and three CRE loans in maturity default, respectively, with total amortized costs of $49.1 million and $39.7 million, respectively. One of the four loans in maturity default, with a carrying value of $17.6 million at September 30, 2021, completed the receipt of the deed-in-lieu of foreclosure in October 2021 on the collateral, based on an as-is appraised value. Two of the four loans in maturity default at September 30, 2021 are making current interest payments, while one of the loans was on non-accrual status.

The Company received proceeds of $28.8 million relating to the payoffs of its preferred equity investments during the nine months ended September 30, 2021.

Troubled Debt Restructurings (“TDRs”)

There were no TDRs for the nine months ended September 30, 2021 and 2020.

During the nine months ended September 30, 2021, the Company entered into 13 agreements that extended loans by a weighted average period of 11 months and, in certain cases, modified certain other loan terms. Three formerly forborne borrowers and one borrower performing in accordance with a forbearance agreement were in maturity default at September 30, 2021. No loan modifications during the nine months ended September 30, 2021 resulted in TDRs.

NOTE 7 - INVESTMENT IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES

In November 2020, the Company received the deed in lieu of foreclosure on a hotel property that formerly collateralized a $38.0 million CRE whole loan. The Company determined that the acquisition of the hotel property should be accounted for as an asset acquisition. The Company obtained third-party valuations of the acquired assets and assumed liabilities. The fair value of the total net assets acquired was $39.8 million.

21

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The following table summarizes the book value of the Company’s investments in real estate and related intangible assets (in thousands, except amounts in the footnotes):

	September 30, 2021									December 31, 2020
	Cost			Accumulated Depreciation & Amortization			Book Value			Cost			Accumulated Depreciation & Amortization			Book Value
Assets acquired:
Investments in real estate (1)	$	34,104		$	(1,305	)	$	32,799		$	33,929		$	(123	)	$	33,806
Right of use assets (2)(3)		5,603			(74	)		5,529			5,603			(11	)		5,592
Intangible assets (4)		3,337			(296	)		3,041			3,336			(42	)		3,294
Total		43,044			(1,675	)		41,369			42,868			(176	)		42,692
Liabilities assumed:
Lease liabilities (3)		(3,113	)		41			(3,072	)		(3,113	)		6			(3,107	)
Total		(3,113	)		41			(3,072	)		(3,113	)		6			(3,107	)
	$	39,931					$	38,297		$	39,755					$	39,585

(1) Includes approximately $180,000 and $5,000 of furniture and fixtures purchased for the property, subsequent to the date of acquisition, at September 30, 2021 and December 31, 2020, respectively.

(2) Right of use assets include a right of use asset associated with an acquired ground lease of $3.1 million accounted for as an operating lease and a below-market lease intangible asset of $2.5 million at September 30, 2021 and December 31, 2020.

(3) Refer to Note 8 for additional information on the Company’s remaining operating leases.

(4) Intangible assets include a franchise agreement intangible asset of $2.7 million and $2.8 million and a customer list intangible asset of $352,000 and $477,000 at September 30, 2021 and December 31, 2020, respectively.

The right of use assets and lease liabilities comprised an acquired ground lease that was determined to be an operating lease and associated below-market lease intangible asset. The lease payments on the ground lease consist of air rights rent, retail rent and parking rent, the amounts of which are specifically determined in the executed lease agreement and subsequently increased based on the increase of the consumer price index over a specified number of periods. The Company recorded approximately $35,000 of offsetting amortization and accretion on its ground lease right of use assets and lease liabilities during the nine months ended September 30, 2021.

During the three and nine months ended September 30, 2021, the Company recorded amortization expense of approximately $94,000 and $282,000, respectively, on its intangible assets. The Company expects to record amortization expense of $375,000, $375,000, $355,000, $210,000 and $210,000 during the 2021, 2022, 2023, 2024 and 2025 fiscal years, respectively, on its intangible assets.

NOTE 8 - LEASES

In addition to the ground lease discussed in Note 7, the Company has operating leases for office space and office equipment. The leases have terms that expire between January 2024 and July 2028. The leases on the office space and office equipment contain options for early termination granted to the Company and the lessor. Lease payments are determined as follows:

• Office space: payments are made on a fixed schedule, escalating annually, and also include the Company’s responsibility for a percentage of increases in the building’s property taxes and operating expenses over the base year.

• Office equipment: payments are made on a fixed schedule.

The following table summarizes the Company’s operating leases (in thousands):

	September 30, 2021
Operating Leases:
Right of use assets	$	455
Lease liabilities	$	(488	)
Weighted average remaining lease term:	6.8 years
Weighted average discount rate:		10.65	%

22

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The following table summarizes the Company’s operating lease costs and cash payments during the respective periods (in thousands):

	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Lease Cost:
Operating lease cost	$	24	$	50

The following table summarizes the Company’s operating leases by maturity date based on undiscounted cash flows (in thousands):

	Operating Leases
2021	$	24
2022		97
2023		99
2024		99
2025		102
Thereafter		274
Subtotal		695
Less: impact of discount		(207	)
Total	$	488

NOTE 9 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The following table summarizes the Company’s investment securities available-for-sale, carried at fair value, including those pledged as collateral (in thousands, except amount in the footnote):

	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
At December 31, 2020:
CMBS, fixed-rate	$	2,080	$	—	$	—	$	2,080

(1) The amortized cost of CMBS excluded accrued interest receivable of $56,000 at December 31, 2020.

Beginning in the first quarter of 2020, the COVID-19 pandemic produced material and previously unforeseeable liquidity shocks to credit markets. This resulted in significant declines in the pricing of the Company’s investment securities available-for-sale, which triggered substantial margin calls by its counterparties and, in certain cases, formal notices of events of default, all of which were withdrawn or rescinded as of April 19, 2020. As a result of these circumstances and the uncertainty caused by the COVID-19 pandemic, substantially all of the Company’s remaining CMBS available-for-sale were sold as of April 2020.

During the nine months ended September 30, 2020, the Company incurred losses of $186.1 million on its CMBS portfolio, including realized losses of $180.3 million primarily attributable to the sale of 67 CMBS as of April 2020.

During the nine months ended September 30, 2020, the Company recorded unrealized losses of $5.8 million, which included $203,000 of unrealized gains during the three months ended September 30, 2020, on two CMBS securities on its consolidated statements of operations as the fair values of the securities were less than the amortized cost bases and the securities were expected to sell prior to recovery of the amortized cost bases. In March 2021, the Company sold these two positions, resulting in cash proceeds of $3.0 million and gains of $878,000 during the nine months ended September 30, 2021.

NOTE 10 - INVESTMENTS IN UNCONSOLIDATED ENTITIES

The Company’s investments in unconsolidated entities at September 30, 2021 and December 31, 2020 comprised a 100% interest in the common shares of RCT I and RCT II with a value of $1.5 million in the aggregate, or 3.0% of each trust. The Company records its investments in RCT I’s and RCT II’s common shares as investments in unconsolidated entities using the cost method, recording dividend income when declared by RCT I and RCT II. During the three and nine months ended September 30, 2021, the Company recorded dividends from its investments in RCT I’s and RCT II’s common shares, reported in other revenue on the consolidated statement of operations, of $16,000 and $49,000, respectively. During the three and nine months ended September 30, 2020, the Company recorded dividends of $19,000 and $62,000, respectively.

23

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

NOTE 11 - BORROWINGS

The Company historically has financed the acquisition of its investments, including investment securities and loans, through the use of secured and unsecured borrowings in the form of securitized notes, secured term warehouse financing facilities, a senior secured financing facility, senior unsecured notes, convertible senior notes and trust preferred securities issuances. Certain information with respect to the Company’s borrowings is summarized in the following table (dollars in thousands, except amounts in the footnotes):

	Principal Outstanding		Unamortized Issuance Costs and Discounts		Outstanding Borrowings		Weighted Average Borrowing Rate			Weighted Average Remaining Maturity	Value of Collateral
At September 30, 2021:
XAN 2020-RSO8 Senior Notes	$	173,600	$	1,142	$	172,458		2.02	%	13.4 years	$	260,488
XAN 2020-RSO9 Senior Notes		119,824		1,191		118,633		3.91	%	15.6 years		169,371
ACR 2021-FL1 Senior Notes (1)		675,223		5,605		669,618		1.57	%	14.7 years		802,643
Senior secured financing facility		41,182		3,586		37,596		5.75	%	5.8 years		217,835
CRE - term warehouse financing facilities (2)(3)		320,515		50		320,465		2.05	%	27 days		421,644
4.50% Convertible Senior Notes		88,014		2,204		85,810		4.50	%	319 days		—
5.75% Senior Unsecured Notes (4)		150,000		3,526		146,474		5.75	%	4.9 years		—
Unsecured junior subordinated debentures		51,548		—		51,548		4.09	%	14.9 years		—
Total	$	1,619,906	$	17,304	$	1,602,602		2.62	%	9.9 years	$	1,871,981
	Principal Outstanding		Unamortized Issuance Costs and Discounts		Outstanding Borrowings		Weighted Average Borrowing Rate			Weighted Average Remaining Maturity	Value of Collateral
At December 31, 2020:
XAN 2019-RSO7 Senior Notes	$	415,621	$	2,861	$	412,760		1.60	%	15.3 years	$	516,979
XAN 2020-RSO8 Senior Notes		388,459		4,164		384,295		1.62	%	14.2 years		475,347
XAN 2020-RSO9 Senior Notes		234,731		3,857		230,874		3.31	%	16.3 years		285,862
Senior secured financing facility		33,360		4,046		29,314		5.75	%	6.6 years		239,385
CRE - term warehouse financing facility (2)		13,516		1,258		12,258		2.66	%	299 days		20,000
4.50% Convertible Senior Notes		143,750		6,498		137,252		4.50	%	1.6 years		—
12.00% Senior Unsecured Notes		50,000		3,574		46,426		12.00	%	6.6 years		—
Unsecured junior subordinated debentures		51,548		—		51,548		4.18	%	15.7 years		—
Total	$	1,330,985	$	26,258	$	1,304,727		2.83	%	13.0 years	$	1,537,573

(1) Value of collateral excludes exit fees of $752,000 and interest received of $87,000 at September 30, 2021.

(2) Principal outstanding includes accrued interest payable of $320,000 and $16,000 at September 30, 2021 and December 31, 2020, respectively.

(3) In October 2021, the Company extended the maturity of its Barclays Bank PLC (“Barclays”) and JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) CRE - term warehouse financing facilities to October 2022 and October 2024, respectively, and allowed the Wells Fargo Bank, N.A. (“Wells Fargo”) CRE - term warehouse financing facility to mature.

(4) Includes deferred debt issuance costs of $320,000 at September 30, 2021 from the redeemed 12.00% senior unsecured notes due 2027 (“12.00% Senior Unsecured Notes”).

24

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

Securitizations

The following table sets forth certain information with respect to the Company’s consolidated securitizations at September 30, 2021 (in thousands, except amount in footnotes):

	Closing Date	Maturity Date	Permitted Funded Companion Participation Acquisition Period End (1)	Reinvestment Period End (2)	Total Note Paydowns Received from Closing Date through September 30, 2021
XAN 2020-RSO8	March 2020	March 2035	March 2023	N/A	$	262,143
XAN 2020-RSO9 (3)	September 2020	April 2037	N/A	N/A	$	125,970
ACR 2021-FL1	May 2021	June 2036	N/A	May 2023	$	—

(1) The permitted funded companion participation acquisition period is the period in which principal repayments can be utilized to purchase loans held outside of the respective securitization that represent the funded commitments of existing collateral in the respective securitization that were not funded as of the date the respective securitization was closed.

(2) The reinvestment period is the period in which principal proceeds received before the end of the period may be used to acquire CRE loans for reinvestment into the securitization.

(3) XAN 2020-RSO9 includes a future advances reserve account of $7.7 million at September 30, 2021 to fund unfunded commitments, which is reported in restricted cash on the consolidated balance sheet.

The investments held by the Company’s securitizations collateralize the securitizations’ borrowings and, as a result, are not available to the Company, its creditors, or stockholders. All senior notes and preferred shares of the securitizations held by the Company at September 30, 2021 and December 31, 2020 were eliminated in consolidation.

XAN 2019-RSO7

In April 2019, the Company closed Exantas Capital Corp. 2019-RSO7, Ltd. (“XAN 2019-RSO7”), a $687.2 million CRE debt securitization transaction that provided financing for CRE loans. In May 2021, the Company exercised the optional redemption on XAN 2019-RSO7 in conjunction with the closing of ACRES Commercial Realty 2021-FL1 Issuer, Ltd. (“ACR 2021-FL1”) (see below).

XAN 2020-RSO8

In March 2020, the Company closed XAN 2020-RSO8, a $522.6 million CRE debt securitization transaction that provided financing for CRE loans. In June 2021, the benchmark rate on XAN 2020-RSO8’s senior notes, previously one-month LIBOR, was replaced with Compounded SOFR plus a benchmark adjustment.

XAN 2020-RSO9

In September 2020, the Company closed XAN 2020-RSO9, a $297.0 million CRE debt securitization transaction that provided financing for CRE loans. In June 2021, the benchmark rate on XAN 2020-RSO9’s senior notes, previously one-month LIBOR, was replaced with Compounded SOFR plus a benchmark adjustment.

ACR 2021-FL1

In May 2021, the Company closed ACR 2021-FL1, a $802.6 million CRE debt securitization transaction that provided financing for CRE loans. ACR 2021-FL1 includes a reinvestment period, which ends in May 2023, that allows it to acquire CRE loans for reinvestment into the securitization using uninvested principal proceeds. ACR 2021-FL1 issued a total of $675.2 million of non-recourse, floating-rate notes to third parties at par. Additionally, ACRES RF retained 100% of the Class F and Class G notes and a subsidiary of ACRES RF retained 100% of the outstanding preference shares. The preference shares are subordinated in right of payment to all other securities issued by ACR 2021-FL1.

At closing, the senior notes issued to investors consisted of the following classes: (i) $431.4 million of Class A notes bearing interest at one-month LIBOR plus 1.20%; (ii) $100.3 million of Class A-S notes bearing interest at one-month LIBOR plus 1.60%; (iii) $37.1 million of Class B notes bearing interest at one-month LIBOR plus 1.80%; (iv) $43.1 million of Class C notes bearing interest at one-month LIBOR plus 2.00%; (v) $50.2 million of Class D notes bearing interest at one-month LIBOR plus 2.65%; and (vi) $13.0 million of Class E notes bearing interest at one-month LIBOR plus 3.10%.

All of the notes issued mature in June 2036, although the Company has the right to call the notes anytime after May 2023.

25

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

Corporate Debt

4.50% Convertible Senior Notes and 8.00% Convertible Senior Notes

The Company issued $100.0 million aggregate principal of its 8.00% convertible senior notes due 2020 (“8.00% Convertible Senior Notes”) and $143.8 million aggregate principal of its 4.50% convertible senior notes due 2022 (“4.50% Convertible Senior Notes”) in January 2015 and August 2017, respectively. In conjunction with the issuance of the 4.50% Convertible Senior Notes, the Company extinguished $78.8 million of aggregate principal of its 8.00% Convertible Senior Notes. In January 2020, the remaining 8.00% Convertible Senior Notes were paid off upon maturity.

During the three months ended September 30, 2021, the Company repurchased $55.7 million of its 4.50% Convertible Senior Notes, resulting in a charge to earnings of $1.5 million, comprising an extinguishment of debt charge of $1.2 million in connection with the acceleration of the market discount and interest expense of $304,000 in connection with the acceleration of deferred debt issuance costs.

The following table summarizes the 4.50% Convertible Senior Notes at September 30, 2021 (dollars in thousands, except the conversion price and amounts in the footnotes):

	Principal Outstanding		Borrowing Rate			Effective Rate (1)(2)			Conversion Rate (3)(4)	Conversion Price (4)		Maturity Date
4.50% Convertible Senior Notes	$	88,014		4.50	%		7.43	%	27.7222	$	36.06	August 15, 2022

(1) Includes the amortization of the market discounts and deferred debt issuance costs, if any, for the 4.50% Convertible Senior Notes recorded in interest expense on the consolidated statements of operations.

(2) During the three and nine months ended September 30, 2021 and 2020, the effective interest rate for the 4.50% Convertible Senior Notes was 7.43%.

(3) Represents the number of shares of common stock per $1,000 principal amount of the 4.50% Convertible Senior Notes’ principal outstanding, subject to adjustment as provided in the Third Supplemental Indenture (the “4.50% Convertible Senior Notes Indenture”).

(4) The conversion rate and conversion price of the 4.50% Convertible Senior Notes at September 30, 2021 are adjusted to reflect quarterly cash distributions in excess of a $0.30 distribution threshold, as defined in the 4.50% Convertible Senior Notes Indenture.

The 4.50% Convertible Senior Notes are convertible at the option of the holder at any time up until one business day before the respective maturity date and may be settled in cash, the Company’s common stock or a combination of cash and the Company’s common stock, at the Company’s election. The closing price of the Company’s common stock was $16.17 on September 30, 2021, which did not exceed the conversion price of its 4.50% Convertible Senior Notes at September 30, 2021.

Senior Unsecured Notes

5.75% Senior Unsecured Notes Due 2026

On August 16, 2021, the Company issued $150.0 million of its 5.75% senior unsecured notes due 2026 (the “5.75% Senior Unsecured Notes”) pursuant to its Indenture, dated August 16, 2021 (the “Base Indenture”), between it and Wells Fargo, now Computershare Trust Company, N.A. (“CTC”), as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated August 16, 2021, between it and Wells Fargo, now CTC, (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). Prior to May 15, 2026, the Company may at its option redeem the 5.75% Senior Unsecured Notes, in whole or in part, at a redemption price equal to the sum of (i) 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date, and (ii) a make-whole premium. On or after May 15, 2026, the Company may at its option redeem the 5.75% Senior Unsecured Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the 5.75% Senior Unsecured Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.

The Indenture contains restrictive covenants that, among other things, require the Company to maintain certain financial ratios. The foregoing limitations are subject to exceptions as set forth in the Supplemental Indenture. At September 30, 2021, the Company was in compliance with these covenants. The Indenture provides for customary events of default that include, among other things (subject in certain cases to customary grace and cure periods): (i) non-payment of principal or interest, (ii) breach of certain covenants contained in the Indenture or the 5.75% Senior Unsecured Notes, (iii) an event of default or acceleration of certain other indebtedness of the Company or a subsidiary in which the Company has invested at least $75 million in capital within the applicable grace period and (iv) certain events of bankruptcy or insolvency. Generally, if an event of default occurs (subject to certain exceptions), CTC or the holders of at least 25% in aggregate principal amount of the then outstanding 5.75% Senior Unsecured Notes may declare all of the notes to be due and payable.

26

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

12.00% Senior Unsecured Notes Due 2027

On July 31, 2020, the Company entered into a Note and Warrant Purchase Agreement (the “Note and Warrant Purchase Agreement”) with Oaktree Capital Management, L.P. (“Oaktree”) and Massachusetts Mutual Life Insurance Company (“MassMutual”) pursuant to which the Company may issue to Oaktree and MassMutual from time to time up to $125.0 million aggregate principal amount of 12.00% Senior Unsecured Notes. The 12.00% Senior Unsecured Notes had an annual interest rate of 12.00%, payable up to 3.25% (at the election of the Company) as pay-in-kind interest and the remainder as cash interest. On July 31, 2020, the Company issued to Oaktree and MassMutual $42.0 million and $8.0 million aggregate principal amount, respectively, of the 12.00% Senior Unsecured Notes.

On August 18, 2021, the Company entered into an agreement with Oaktree and MassMutual that provided for the redemption in full of the outstanding balance of the 12.00% Senior Unsecured Notes, including a waiver of certain sections of the Note and Warrant Purchase Agreement. On August 20, 2021, the redemption was consummated and a payment to Oaktree and MassMutual was made for an aggregate $55.3 million, which consisted of (i) principal in the amount of $50.0 million, (ii) interest in the amount of approximately $329,000 and (iii) a make-whole amount of approximately $5.0 million. In connection with the redemption, the Company recorded a charge to earnings of $8.0 million, comprising an extinguishment of debt charge of $7.8 million in connection with (i) the $5.0 million net make-whole amount and (ii) the $2.8 million acceleration of the remaining market discount; and interest expense of $218,000 in connection with the acceleration of deferred debt issuance costs.

Senior Secured Financing Facility and Term Warehouse Financing Facilities

Borrowings under the Company’s senior secured financing facility and term warehouse facilities are guaranteed by the Company or one or more of its subsidiaries. The following table sets forth certain information with respect to the Company’s senior secured financing and term warehouse financing facilities (dollars in thousands, except amounts in footnotes):

	September 30, 2021									December 31, 2020
	Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate			Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate
Senior Secured Financing Facility
Massachusetts Mutual Life Insurance Company (1)	$	37,596	$	217,835		12		5.75	%	$	29,314	$	239,385		15		5.75	%
CRE - Term Warehouse Financing Facilities
Barclays Bank PLC		109,471		138,422		6		1.95	%		—		—		—		—	%
JPMorgan Chase Bank, N.A. (2)(3)		210,994		283,222		14		2.10	%		12,258		20,000		1		2.66	%
Total	$	358,061	$	639,479						$	41,572	$	259,385

(1) Includes $3.6 million and $4.0 million of deferred debt issuance costs at September 30, 2021 and December 31, 2020, respectively.

(2) Outstanding borrowings include accrued interest payable.

(3) Includes $50,000 and $1.3 million of deferred debt issuance costs at September 30, 2021 and December 31, 2020, respectively, which includes $678,000 of deferred debt issuance costs at December 31, 2020 from other term warehouse financing facilities with no balance.

27

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The following table shows information about the amount at risk under the warehouse financing facilities (dollars in thousands):

	Amount at Risk (1)		Weighted Average Remaining Maturity	Weighted Average Interest Rate
At September 30, 2021:
CRE - Term Warehouse Financing Facilities
Barclays Bank PLC (2)	$	29,312	29 days		1.95	%
JPMorgan Chase Bank, N.A. (2)	$	73,020	26 days		2.10	%

(1) Equal to the total of the estimated fair value of loans sold and accrued interest receivable, minus the total of the warehouse financing agreement liabilities and accrued interest payable.

(2) In October 2021, the Company extended the maturity of its Barclays and JPMorgan Chase CRE - term warehouse financing facilities to October 2022 and October 2024, respectively.

The Company was in compliance with all financial covenants in each of the respective agreements at September 30, 2021 and December 31, 2020.

CRE - Term Warehouse Financing Facilities

In February 2012, an indirect wholly-owned subsidiary entered into a master repurchase and securities agreement, which was subsequently replaced with an amended and restated master repurchase agreement in July 2018, (the “Wells Fargo Facility”) with Wells Fargo to finance the origination of CRE loans. In October 2021, the Wells Fargo Facility matured.

In April 2018, an indirect wholly-owned subsidiary of the Company entered into a master repurchase agreement (the “Barclays Facility”) with Barclays to finance the origination of CRE loans. In connection with the Barclays Facility, the Company fully guaranteed all payments and performance under the Barclays Facility pursuant to a guaranty agreement (the “Barclays Guaranty”). In October 2021, the Barclays Facility and the Barclays Guaranty were amended to extend the revolving period of the facility to October 2022 and to modify the guaranty to limit financial covenants to be applicable when there are outstanding transactions.

In October 2018, an indirect wholly-owned subsidiary of the Company entered into a master repurchase agreement (the “JPMorgan Chase Facility”) with JPMorgan Chase to finance the origination of CRE loans. In September and October 2021, the JPMorgan Chase Facility was amended twice, resulting in (i) the extension of the JPMorgan Chase Facility’s maturity date to October 2024, (ii) an update to the Company’s tangible net worth requirement and minimum liquidity covenant as set forth in the guarantee agreement and (iii) a modification of market terms regarding the replacement of LIBOR upon determination of a benchmark transition event.

In November 2021, an indirect, wholly-owned subsidiary of the Company (the “Subsidiary”) entered into a $250.0 million Master Repurchase and Securities Contract Agreement with Morgan Stanley Mortgage Capital Holdings LLC (“Morgan Stanley”), to be used to finance the Company’s core commercial real estate lending business (the “Morgan Stanley Facility”). Each repurchase transaction will specify its own terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate. The financing provided by the Morgan Stanley Facility matures in November 2022, with two one-year automatic extensions unless the Subsidiary provides notice of its intent not to extend the facility. The Subsidiary also has the right to request an extension for an additional one-year period after the second automatic extension to the extent it is utilized. The Company paid a structuring fee to Morgan Stanley as well as other reasonable closing costs.

The Morgan Stanley Facility contains margin call provisions that provide Morgan Stanley with certain rights if the value of purchased assets declines (“Margin Deficit”). Under these circumstances, Morgan Stanley may require the Subsidiary to transfer cash in an amount necessary to eliminate such Margin Deficit or repurchase the asset(s) that resulted in such Margin Deficit.

The Company guaranteed the Subsidiary’s payment and performance under the Morgan Stanley Facility pursuant to a guaranty agreement (the “Morgan Stanley Guaranty”), subject to a limit of 25% of the then currently unpaid aggregate repurchase price of all purchased assets. The Morgan Stanley Guaranty includes certain financial covenants required of the Company, including required liquidity, required capital, ratios of total intendedness to equity and EBITDA requirements. Also, the Subsidiary’s direct parent, ACRES Realty Funding, Inc. (“Pledgor”), executed a Pledge Agreement with Morgan Stanley pursuant to which Pledgor pledged and granted to Morgan Stanley a continuing security interest in any and all of Pledgor’s right, title and interest in and to the Subsidiary, including all distributions, proceeds, payments, income and profits from Pledgor’s interests in the Subsidiary.

28

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The Morgan Stanley Facility specifies events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement. The remedies for such events of default are also customary for this type of financing arrangement and include acceleration of the principal amount outstanding under the Morgan Stanley Facility and liquidation by Morgan Stanley of purchased assets then subject to the Morgan Stanley Facility.

Contractual maturity dates of the Company’s borrowings’ principal outstanding by category and year are presented in the table below (in thousands):

	Total		2021		2022		2023		2024		2025 and Thereafter
At September 30, 2021:
CRE securitizations	$	968,647	$	—	$	—	$	—	$	—	$	968,647
Senior secured financing facility		41,182		—		—		—		—		41,182
Term warehouse financing facilities (1)(2)		320,515		320,515		—		—		—		—
4.50% Convertible Senior Notes		88,014		—		88,014		—		—		—
5.75% Senior Unsecured Notes		150,000		—		—		—		—		150,000
Unsecured junior subordinated debentures		51,548		—		—		—		—		51,548
Total	$	1,619,906	$	320,515	$	88,014	$	—	$	—	$	1,211,377

(1) Includes accrued interest payable in the balances of principal outstanding.

(2) In October 2021, the Company extended the maturity of its Barclays and JPMorgan Chase CRE - term warehouse financing facilities to October 2022 and October 2024, respectively, and allowed the Wells Fargo CRE - term warehouse financing facility to mature.

NOTE 12 - SHARE ISSUANCE AND REPURCHASE

In May 2021, and subsequently in June 2021, the Company issued a total of 4.6 million shares of 7.875% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) at a public offering price of $25.00 per share. The Company received net proceeds of $110.5 million after $4.5 million of underwriting discounts and other offering expenses. Dividends are payable quarterly in arrears at the end of January, April, July and October. The Series D Preferred Stock has no maturity date and the Company is not required to redeem the Series D Preferred Stock at any time. On or after May 21, 2026, the Company may, at its option, redeem the Series D Preferred Stock, in whole or part, at any time and from time to time, for cash at $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date.

On or after July 30, 2024, the Company may, at its option, redeem its 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”), in whole or in part, at any time and from time to time, for cash at $25.00 per share, plus accrued and unpaid distributions, if any, to the redemption date. Effective July 30, 2024 and thereafter, the Company will pay cumulative distributions on the Series C Preferred Stock at a floating rate equal to three-month LIBOR plus 5.927% per annum based on the $25.00 liquidation preference, provided that such floating rate shall not be less than the initial rate of 8.625% at any date of determination.

At September 30, 2021, the Company had 4.8 million shares of Series C Preferred Stock and 4.6 million shares of Series D Preferred Stock outstanding, with weighted average issuance prices, excluding offering costs, of $25.00.

In March 2016, the Board of Directors (“Board”) approved a share repurchase program and in November 2020, the Board reauthorized and approved the continued use of the Company’s existing share repurchase program in order to repurchase up to $20.0 million of the currently outstanding shares of the Company’s common stock through March 31, 2021. In March 2021, the Board authorized the extension of the previous $20.0 million authorization through the second quarter of 2021 or until the $20.0 million is fully deployed. Additionally, the Board authorized the Company to enter into written trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”) in connection with the authorized repurchases. During the nine months ended September 30, 2021, the Company repurchased $14.7 million of its common stock, or approximately 1.1 million shares. In total, the Company repurchased 1,607,382 shares for $20.0 million, excluding broker fees and commissions, during its deployment of the program. During the nine months ended September 30, 2020, the Company did not repurchase any shares of its common or preferred stock through this program.

29

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

In connection with the Note and Warrant Purchase Agreement, the 12.00% Senior Unsecured Notes give Oaktree and MassMutual warrants to purchase an aggregate of up to 1,166,653 shares of common stock at an exercise price of $0.03 per share, subject to certain potential adjustments. On July 31, 2020, concurrently with the issuance of the 12.00% Senior Unsecured Notes, the Company issued to Oaktree warrants to purchase 391,995 shares of common stock for an aggregate purchase price of $42.0 million and issued to MassMutual warrants to purchase 74,666 shares of common stock for an aggregate purchase price of $8.0 million. The warrants are recorded in additional paid-in capital on the consolidated balance sheet at their fair value of $3.1 million at issuance. At any time and from time to time prior to January 31, 2022, the Company may elect to issue to Oaktree and MassMutual warrants to purchase an additional 699,992 shares of common stock for a purchase price equal to the principal amount of the additional 12.00% Senior Unsecured Notes being issued. The warrants are immediately exercisable on issuance and expire seven years from the issuance date. The warrants can be exercised with cash or as a net exercise.

NOTE 13 - SHARE-BASED COMPENSATION

In June 2021, the Company’s shareholders approved the ACRES Commercial Realty Corp. Third Amended and Restated Omnibus Equity Compensation Plan (the “Omnibus Plan”) and the ACRES Commercial Realty Corp. Manager Incentive Plan (the “Manager Plan” and together with the Omnibus Plan, the “Plans”). The Omnibus Plan was amended (i) increase the number of shares authorized for issuance by an additional 1,100,000 shares of common stock less any shares of common stock issued or subject to awards granted under the Manager Plan; and (ii) extend the expiration date of the Omnibus Plan from June 2029 to June 2031. The maximum number of shares that may be subject to awards granted under the Omnibus Plan and the Manager Plan, determined on a combined basis, will be 1,700,817 shares of common stock.  

The Company recognized stock-based compensation expense of $771,000 and $961,000 during the three and nine months ended September 30, 2021, respectively, and $1.9 million and $3.1 million during the three and nine months ended September 30, 2020, respectively, related to restricted stock.

The following table summarizes the Company’s restricted common stock transactions:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Unvested shares at January 1, 2021		11,610		$	6.46
Issued		333,329			17.39
Vested		(11,610	)		6.46
Forfeited		—			—
Unvested shares at September 30, 2021		333,329		$	17.39

The unvested restricted common stock shares are expected to vest during the following years:

Year	Shares
2021		—
2022		83,331
2023		83,331
2024		83,331
2025		83,336
Total		333,329

The shares issued during the nine months ended September 30, 2021 will vest in installments over a four-year period, pursuant to the terms of the respective award agreements. At September 30, 2021, total unrecognized compensation costs relating to unvested restricted stock was $4.9 million based on the grant date fair value of shares granted. The cost is expected to be recognized over a weighted average period of 3.7 years.

30

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The following table summarizes the status of the Company’s vested stock options at September 30, 2021:

Vested Options	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Vested at January 1, 2021		3,333		$	76.80
Vested		—			—
Exercised		—			—
Forfeited		—			—
Expired		(3,333	)		76.80
Vested at September 30, 2021		—		$	—		—	$	—

There were no options granted during the nine months ended September 30, 2021 or 2020. The outstanding stock options had contractual terms of ten years and expired in May 2021.

Under the Company’s Fourth Amended and Restated Management Agreement, as amended (“Management Agreement”), incentive compensation is paid quarterly. Up to 75% of the incentive compensation is paid in cash and at least 25% is paid in the form of an award of common stock, recorded in management fees on the consolidated statements of operations. No incentive compensation was paid to the Manager for the three and nine months ended September 30, 2021 or 2020. No incentive compensation was paid to the Prior Manager for the nine months ended September 30, 2020.

The Omnibus Plan and the Manager Plan are administered by the compensation committee of our Board (the “Compensation Committee”). In 2020, the Compensation Committee and the Board created parameters for equity awards, whereby they are no longer discretionary but are now based upon the Company’s achievement of performance parameters using book value of the common stock as the appropriate benchmark. See Note 17 for a description of awards made under the Manager Plan.

NOTE 14 - EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings (losses) per common share for the periods presented (dollars in thousands, except per share amounts):

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net (loss) income	$	(4,928	)	$	8,159		$	21,767		$	(221,762	)
Net income allocated to preferred shares		(4,877	)		(2,588	)		(11,033	)		(7,763	)
Net (loss) income allocable to common shares	$	(9,805	)	$	5,571		$	10,734		$	(229,525	)
Weighted average number of common shares outstanding:
Weighted average number of common shares outstanding - basic		9,086,751			10,650,112			9,351,477			10,587,147
Weighted average number of warrants outstanding (1)		466,661			314,492			466,661			105,596
Total weighted average number of common shares outstanding - basic		9,553,412			10,964,604			9,818,138			10,692,743
Effect of dilutive securities - unvested restricted stock		—			1,682			18,465			—
Weighted average number of common shares outstanding - diluted		9,553,412			10,966,286			9,836,603			10,692,743
Net (loss) income per common share - basic	$	(1.03	)	$	0.51		$	1.09		$	(21.47	)
Net (loss) income per common share - diluted	$	(1.03	)	$	0.51		$	1.09		$	(21.47	)

(1) See Note 12 for further details regarding the warrants.

31

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

For the 4.50% Convertible Senior Notes, the Company has the intent and ability to settle the principal amount in cash and intends to settle the conversion feature for the amount above the conversion price, or the conversion spread, if any, in common stock. The Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted EPS, if applicable. The conversion spread will have a dilutive impact on diluted EPS when the average market price of the Company’s common stock for a given period exceeds the conversion price of the 4.50% Convertible Senior Notes. For the nine months ended September 30, 2021, the average market price of the Company’s common stock did not exceed the conversion price of the 4.50% Convertible Senior Notes and for the nine months ended September 30, 2020 the average market price of the Company’s common stock did not exceed the conversion price of the 4.50% Convertible Senior Notes and 8.00% Convertible Senior Notes and as such the convertible senior notes have been excluded from the computation of diluted EPS. The conversion rate and conversion price for the 4.50% Convertible Senior Notes are described further in Note 11.

NOTE 15 - DISTRIBUTIONS

In order to qualify as a REIT, the Company must currently distribute at least 90% of its taxable income. In addition, the Company must distribute 100% of its taxable income not to be subject to corporate federal income taxes on retained income. The Company anticipates it will distribute substantially all of its taxable income, if any, to its stockholders. Because taxable income differs from cash flow from operations due to non-cash revenues or expenses (such as provisions for credit losses and depreciation), in certain circumstances the Company may generate operating cash flow in excess of its distributions or, alternatively, may be required to borrow funds or sell assets to make sufficient distribution payments. In October 2021, the Company finalized its 2020 tax return, which determined that it received net operating loss and net capital loss carryforwards that may reduce its taxable income in the 2021 tax year and in future tax years, subject to carryforward restrictions.

The Company’s 2021 distributions are, and will be, determined by the Board, which will also consider the composition of any distributions declared, including the option of paying a portion in cash and the balance in additional shares of common stock.

For the three months ended September 30, 2021, the Company declared and subsequently paid its Series C Preferred Stock and Series D Preferred Stock distributions, or $0.54 per share and $0.49 per share, respectively. It did not pay any common share distributions for the three months ended September 30, 2021. For the three months ended September 30, 2020, the Company declared and subsequently paid its Series C Preferred Stock distributions, including all distributions in arrears, of $1.62 per share. The Company did not pay distributions on its common shares during three months ended September 30, 2020.

The following tables present distributions declared (on a per share basis) for the nine months ended September 30, 2021 and the year ended December 31, 2020:

	Series C Preferred Stock					Series D Preferred Stock
	Date Paid	Total Distributions Paid		Distributions Per Share		Date Paid	Total Distributions Paid		Distributions Per Share
	(in thousands)					(in thousands)
2021
September 30	November 1	$	2,588	$	0.5390625	November 1	$	2,264	$	0.4921875
June 30	July 30	$	2,588	$	0.5390625	July 30	$	1,736	$	0.377344
March 31	April 30	$	2,588	$	0.5390625	N/A	N/A		N/A
2020
December 31	February 1, 2021	$	2,587	$	0.5390625	N/A	N/A		N/A
March 31, June 30 and September 30	October 30	$	7,763	$	1.6171875	N/A	N/A		N/A

32

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in net unrealized loss on derivatives, the sole component of accumulated other comprehensive loss, for the nine months ended September 30, 2021 (in thousands):

	Accumulated Other Comprehensive Loss - Net Unrealized Loss on Derivatives
Balance at January 1, 2021	$	(9,978	)
Amounts reclassified from accumulated other comprehensive loss (1)		1,384
Balance at September 30, 2021	$	(8,594	)

(1) Amounts reclassified from accumulated other comprehensive loss are reclassified to interest expense on the Company’s consolidated statements of operations.

NOTE 17 - RELATED PARTY TRANSACTIONS

Relationship with ACRES Capital Corp. and certain of its Subsidiaries

Relationship with ACRES Capital Corp. and certain of its Subsidiaries. The Manager is a subsidiary of ACRES Capital Corp., of which Andrew Fentress, the Company’s Chairman, serves as Managing Partner and Mark Fogel, the Company’s President, Chief Executive Officer and Director, serves as Chief Executive Officer and President. Mr. Fentress and Mr. Fogel are also shareholders and board members of ACRES Capital Corp.

Effective on July 31, 2020, the Company has a Management Agreement with the Manager pursuant to which the Manager provides the day-to-day management of the Company’s operations and receives management fees. For the three and nine months ended September 30, 2021, the Manager earned base management fees of approximately $1.7 million and $4.4 million, respectively. No incentive compensation was earned for the three and nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, the Manager earned base management fees of approximately $898,000. No incentive compensation was earned for the three and nine months ended September 30, 2020. At September 30, 2021 and December 31, 2020, $1.1 million and $442,000, respectively, of base management fees were payable by the Company to the Manager. There was no incentive compensation payable at September 30, 2021 and December 31, 2020. The Manager and its affiliates provide the Company with a Chief Financial Officer and a sufficient number of additional accounting, finance, tax and investor relations professionals. The Company reimburses the Manager’s expenses for (a) the wages, salaries and benefits of the Chief Financial Officer, and (b) a portion of the wages, salaries and benefits of accounting, finance, tax and investor relations professionals, in proportion to such personnel’s percentage of time allocated to the Company’s operations. The Company reimburses out-of-pocket expenses and certain other costs incurred by the Manager that related directly to the Company’s operations. For the three and nine months ended September 30, 2021, the Company reimbursed the Manager $899,000 and $3.5 million, respectively, for all such compensation and costs. For the three and nine months ended September 30, 2020, the Company reimbursed the Manager $432,000 for all such compensation and costs. At September 30, 2021 and December 31, 2020, the Company had payables to the Manager pursuant to the Management Agreement totaling approximately $819,000 and $380,000, respectively, related to such compensation and costs. The Company’s base management fee payable and expense reimbursements payable were recorded in management fee payable - related party and accounts payable and other liabilities on the consolidated balance sheet, respectively.

On July 31, 2020, ACRES RF, then known as RCC Real Estate, Inc. (“RCC RE”), a direct, wholly owned subsidiary of the Company, provided a $12.0 million loan (the “ACRES Loan”) to ACRES Capital Corp. evidenced by the promissory note from ACRES Capital Corp.

The ACRES Loan accrues interest at 3.00% per annum payable monthly. The monthly amortization payment is $25,000. The ACRES Loan matures in July 2026, subject to two one-year extensions (at ACRES Capital Corp.’s option) subject to the payment of a 0.5% extension fee to ACRES RF on the outstanding principal amount of the ACRES Loan.

During the three and nine months ended September 30, 2021, the Company recorded interest income of $90,000 and $268,000, respectively, on the ACRES Loan in other income (expense) on the consolidated statements of operations. During the three and nine months ended September 30, 2020, the Company recorded interest income of $62,000 on the ACRES Loan. At September 30, 2021, the ACRES Loan had a principal balance and accrued interest receivable of $11.7 million and $29,000, respectively, recorded in loan receivable - related party and accrued interest receivable, respectively, on the consolidated balance sheet. At December 31, 2020, the ACRES Loan had a principal balance of $11.9 million, recorded in loan receivable - related party on the consolidated balance sheet, and no accrued interest receivable.

33

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

At September 30, 2021, the Company retained equity in two securitization entities that were structured for the Company by the Manager. Under the Management Agreement, the Manager was not separately compensated by the Company for executing this transaction and was not separately compensated for managing the securitization entities and their assets.

Relationship with ACRES Capital Servicing LLC. Under the Loan and Servicing Agreement (the “MassMutual Loan Agreement”) with MassMutual and the other lenders party thereto, ACRES Capital Servicing LLC (“ACRES Capital Servicing”), an affiliate of ACRES Capital Corp. and the Manager, serves as the portfolio servicer. Additionally, ACRES Capital Servicing served as the special servicer of XAN 2019-RSO7 and serves as special servicer of XAN 2020-RSO8, XAN 2020-RSO9 and ACR 2021-FL1. During the three and nine months ended September 30, 2021, ACRES Capital Servicing received no portfolio servicing fees. During the nine months ended September 30, 2021, ACRES Capital Servicing received $14,000 in special servicing fees recorded as a reduction to interest income in the consolidated statements of operations. There were no special servicing fees received during the three months ended September 30, 2021. During the three and nine months ended September 30, 2020, ACRES Capital Servicing received no portfolio servicing fees or special servicing fees.

Relationship with ACRES Collateral Manager, LLC. ACRES Collateral Manager, LLC, an affiliate of ACRES Capital Corp. and the Manager, serves as the collateral manager of ACR 2021-FL1, a role for which it waived its fee.

Relationship with ACRES Realty Funding, Inc. ACRES RF, an affiliate of ACRES Capital Corp. and the Manager, serves as the advancing agent of ACR 2021-FL1, a role for which it waived its fee.

Relationship with ACRES Share Holdings, LLC. In June 2021, the Company’s Manager Incentive Plan was approved by its shareholders, which authorized up to 1,100,000 shares of common stock for issuance to the Manager (less shares of common stock issued or subject to awards under the Omnibus Plan). ACRES Share Holdings, LLC, an affiliate of ACRES Capital Corp. and the Manager, was granted 299,999 shares during the nine months ended September 30, 2021, which will vest 25% for four years, on each anniversary of the issuance date. There were no shares issued under this plan during the three months ended September 30, 2021. See Note 13 for additional details.

Relationship with C-III and certain of its Subsidiaries

Relationship with C-III and Certain of its Subsidiaries. The Prior Manager was a wholly-owned subsidiary of Resource America, Inc. (“Resource America”), which is a wholly-owned subsidiary of C-III. C-III is indirectly controlled and partially owned by Island Capital Group LLC (“Island Capital”). Effective July 31, 2020, in connection with the ACRES acquisition, Andrew L. Farkas, the managing member of Island Capital and the chairman and chief executive officer of C-III, resigned his position as the Company’s Chairman. In addition, Robert C. Lieber and Matthew J. Stern, each executive managing directors of both C-III and Island Capital, resigned their positions as the Company’s Chief Executive Officer and President, respectively. Lastly, Jeffrey P. Cohen, president of C-III and Island Capital, resigned his position as a member of the Board. Those officers and the Company’s other executive officers were also officers of the Company’s Prior Manager, Resource America, C-III and/or affiliates of those companies. Prior to September 8, 2020, a non-employee director of the Company held the position of Executive Vice President at Resource America.

Prior to July 31, 2020, the Company had a management agreement with the Prior Manager pursuant to which the Prior Manager provided the day-to-day management of the Company’s operations and received substantial fees. For the three and nine months ended September 30, 2020, the Prior Manager earned base management fees of approximately $385,000 and $3.8 million, respectively. No incentive compensation was earned for the three and nine months ended September 30, 2020. The Prior Manager and its affiliates provided the Company with a Chief Financial Officer and a sufficient number of additional accounting, finance, tax and investor relations professionals. The Company reimbursed the Prior Manager’s and its affiliates’ expenses for (a) the wages, salaries and benefits of the Chief Financial Officer, (b) a portion of the wages, salaries and benefits of accounting, finance, tax and investor relations professionals, in proportion to such personnel’s percentage of time allocated to the Company’s operations, and (c) personnel principally devoted to the Company’s ancillary operating subsidiaries. The Company reimbursed out-of-pocket expenses and certain other costs incurred by the Prior Manager and its affiliates that related directly to the Company’s operations. For the three and nine months ended September 30, 2020, the Company reimbursed the Prior Manager $727,000 and $4.0 million, respectively, for all such compensation and costs.

At September 30, 2021, the Company retained equity in four securitization entities that were structured for the Company by the Prior Manager, although three of the securitization entities had been substantially liquidated as of September 30, 2021. Under the management agreement, the Prior Manager was not separately compensated by the Company for executing these transactions and was not separately compensated for managing the securitization entities and their assets.

34

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

Relationship with Resource Real Estate, LLC. Resource Real Estate, LLC (“Resource Real Estate”), an indirect wholly-owned subsidiary of Resource America and C-III, originated, financed and managed the Company’s CRE loan portfolio until the ACRES acquisition on July 31, 2020. The Company reimbursed Resource Real Estate for loan origination costs associated with all loans originated.

Resource Real Estate served as special servicer for the following liquidated real estate securitization transactions, which provided financing for CRE loans: (i) Resource Capital Corp. 2014-CRE2, Ltd., a $353.9 million securitization that closed in July 2014 and liquidated in August 2017; (ii) Resource Capital Corp. 2015-CRE3, Ltd., a $346.2 million securitization that closed in February 2015 and liquidated in August 2018; (iii) Resource Capital Corp. 2015-CRE4, Ltd., a $312.9 million securitization that closed in August 2015 and liquidated in July 2018; and (iv) Resource Capital Corp. 2017-CRE5, Ltd., a $376.7 million securitization that closed in July 2017 and liquidated in July 2019. Resource Real Estate also served as special servicer for XAN 2020-RSO8, a $522.6 million securitization that closed in March 2020. In January 2021, ACRES Capital Servicing replaced Resource Real Estate as special servicer of XAN 2020-RSO8. Resource Real Estate did not earn any special servicing fees during the three and nine months ended September 30, 2020.

Relationship with C-III Commercial Mortgage. In May 2019, ACRES RF, then known as RCC RE, entered into a Mortgage Loan Sale and Purchase Agreement (the “May 2019 Loan Acquisition Agreement”) with C-III Commercial Mortgage LLC (“C-III Commercial Mortgage”), a wholly-owned subsidiary of C-III, that provided for the acquisition by ACRES RF of certain CRE loans on a servicing-released basis at par, plus accrued and unpaid interest on each loan for an aggregate purchase price of $197.6 million. In accordance with the terms of the May 2019 Loan Acquisition Agreement, C-III Commercial Mortgage retains its title to all exit fees in excess of 0.50% of the outstanding principal balance and certain deferred fees conditioned upon the terms of the loans’ particular agreements. During the three and nine months ended September 30, 2021, C-III Commercial Mortgage earned fees of $227,000 and $361,000, respectively. During the nine months ended September 30, 2020, C-III Commercial Mortgage earned fees of $32,000. The Company had no outstanding payables to C-III Commercial Mortgage at September 30, 2021 and outstanding payables of $48,000 at December 31, 2020.

Relationship with Resource Real Estate Opportunity REIT

In July 2020, ACRES and the Company entered into agreements with Resource America pursuant to which Resource America provided office space and other office-related services as well as performed an internal audit program. In September 2020, the sublease was assigned from Resource America to Resource Real Estate Opportunity REIT and the internal audit engagement letter was assigned from Resource America to Resource NewCo LLC, a subsidiary of Resource Real Estate Opportunity REIT. A former non-employee director of the Company is an executive at, and a director of, Resource Real Estate Opportunity REIT. During the nine months ended September 30, 2021, the Company incurred $67,000 of expenses in connection with these agreements. During the three and nine months ended September 30, 2020, the Company incurred $21,000 of expenses in connection with these agreements. The Company had no payables to Resource Real Estate Opportunity REIT at September 30, 2021. These agreements were terminated as of March 31, 2021.

NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the Company’s financial instruments carried at fair value on a recurring basis based upon the fair value hierarchy (in thousands):

	Level 1		Level 2		Level 3		Total
At December 31, 2020:
Assets:
Investment securities available-for-sale	$	—	$	—	$	2,080	$	2,080

In accordance with guidance on fair value measurements and disclosures, the Company is not required to disclose quantitative information with respect to unobservable inputs contained in fair value measurements that are not developed by the Company. As a consequence, the Company has not disclosed such information associated with fair values obtained for investment securities available-for-sale from third-party pricing sources.

35

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The following table presents additional information about the Company’s assets that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs (in thousands):

	CMBS
Balance, January 1, 2021	$	2,080
Included in earnings		878
Sales		(2,958	)
Balance, September 30, 2021	$	—

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of the Company’s short-term financial instruments such as cash and cash equivalents, restricted cash, accrued interest receivable, principal paydowns receivable, accrued interest payable and distributions payable approximate their carrying values on the consolidated balance sheets. The fair values of the Company’s investment securities available-for-sale are reported in Note 9.

The fair values of the Company’s loans held for investment are measured by discounting the expected future cash flows using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Par values of loans with variable interest rates are expected to approximate fair value unless evidence of credit deterioration exists, in which case the fair value approximates the par value less the loan’s allowance estimated through individual evaluation. Fair values of loans with fixed rates are calculated using the net present values of future cash flows, discounted at market rates. The Company’s floating-rate CRE loans had interest rates from 3.00% to 9.75% and 4.10% to 9.75% at September 30, 2021 and December 31, 2020, respectively.

The fair value of the Company’s mezzanine loan is measured by discounting the remaining contractual cash flows using the current interest rates at which similar instruments would be originated for the same remaining maturity. The Company’s mezzanine loan is discounted at a rate of 10.00%.

The fair value of the Company’s preferred equity investments were measured by discounting the instrument’s remaining contractual cash flows using current interest rates at which similar instruments would be originated for the same remaining maturities. The Company’s preferred equity investments were discounted at rates of 12.08% and 11.54% at December 31, 2020. The Company’s two preferred equity investments paid off in March 2021 and April 2021, respectively.

The Company’s fixed-rate CRE loans were valued using third-party pricing sources. In March 2021, the fixed-rate CRE loans were sold at par for cash proceeds of $4.8 million.

The Company’s loan receivable - related party is estimated using a discounted cash flow model.

Senior notes in CRE securitizations are estimated using a discounted cash flow model with implied yields based on trades for similar securities.

The fair value of the senior secured financing facility is measured by discounting the facility’s remaining contractual cash flows using the current interest rate at which a similar debt instrument would be issued for the same remaining maturity. The fair value of the senior secured financing facility is estimated using a discounted cash flow model that discounts the expected future cash flows at a rate of 5.75%.

Warehouse financing facilities are variable-rate debt instruments indexed to LIBOR that reset periodically and, as a result, their carrying value approximates their fair value, excluding deferred debt issuance costs.

The fair value of the 4.50% Convertible Senior Notes is determined using a discounted cash flow model that discounts the issuance’s contractual future cash flows using the current interest rate on similar debt issuances with similar terms and similar remaining maturities that do not have a conversion option.

The Company’s 5.75% Senior Unsecured Notes are estimated and 12.00% Senior Unsecured Notes were estimated by using a discounted cash flow model.

The fair values of the junior subordinated notes RCT I and RCT II are estimated by using a discounted cash flow model.

36

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The fair values of the Company’s remaining financial and non-financial assets that are not reported at fair value on the consolidated balance sheets are reported in the following table (in thousands):

			Fair Value Measurements
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At September 30, 2021:
Assets:
CRE whole loans	$	1,822,410	$	1,849,066	$	—	$	—	$	1,849,066
CRE mezzanine loan	$	4,415	$	4,700	$	—	$	—	$	4,700
Loan receivable - related party	$	11,675	$	10,473	$	—	$	—	$	10,473
Liabilities:
Senior notes in CRE securitizations	$	960,709	$	970,552	$	—	$	—	$	970,552
Senior secured financing facility	$	37,596	$	41,182	$	—	$	—	$	41,182
Warehouse financing facilities	$	320,465	$	320,516	$	—	$	—	$	320,516
4.50% Convertible Senior Notes	$	85,810	$	87,935	$	—	$	—	$	87,935
5.75% Senior Unsecured Notes (1)	$	146,474	$	149,670	$	—	$	—	$	149,670
Junior subordinated notes	$	51,548	$	43,519	$	—	$	—	$	43,519
At December 31, 2020:
Assets:
CRE whole loans	$	1,477,295	$	1,513,822	$	—	$	—	$	1,513,822
CRE mezzanine loan	$	4,399	$	4,700	$	—	$	—	$	4,700
CRE preferred equity investments	$	25,988	$	27,650	$	—	$	—	$	27,650
CRE whole loans, fixed-rate (2)	$	4,809	$	4,809	$	—	$	—	$	4,809
Loan receivable - related party	$	11,875	$	10,184	$	—	$	—	$	10,184
Liabilities:
Senior notes in CRE securitizations	$	1,027,929	$	1,030,854	$	—	$	—	$	1,030,854
Senior secured financing facility	$	29,314	$	33,360	$	—	$	—	$	33,360
Warehouse financing facility	$	12,258	$	13,516	$	—	$	—	$	13,516
4.50% Convertible Senior Notes	$	137,252	$	132,437	$	—	$	—	$	132,437
12.00% Senior Unsecured Notes	$	46,426	$	58,910	$	—	$	—	$	58,910
Junior subordinated notes	$	51,548	$	31,955	$	—	$	—	$	31,955

(1) Carrying value includes deferred debt issuance costs of $320,000 from the redeemed 12.00% Senior Unsecured Notes.

(2) Classified as other assets on the consolidated balance sheet.

NOTE 19 - MARKET RISK AND DERIVATIVE INSTRUMENTS

The Company is affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as “market risks.” When deemed appropriate, the Company used derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments were interest rate risk and market price risk.

The Company also managed its interest rate risk with interest rate swaps. Interest rate swaps are contracts between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices.

The Company seeks to manage the extent to which net income changes as a function of changes in interest rates by matching adjustable-rate assets with variable-rate borrowings.

The Company classified its interest rate swap contracts as cash flow hedges, which are hedges that eliminate the risk of changes in the cash flows of a financial asset or liability.

37

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

The Company terminated all of its interest rate swap positions associated with its prior financed CMBS portfolio in April 2020. At termination, the Company realized a loss of $11.8 million. At September 30, 2021 and December 31, 2020, the Company had a loss of $9.0 million and $10.4 million, respectively, recorded in accumulated other comprehensive (loss) income, which will be amortized into earnings over the remaining life of the debt. During the three and nine months ended September 30, 2021, the Company recorded amortization expense, reported in interest expense on the consolidated statements of operations, of $489,000 and $1.5 million, respectively. During the three and nine months ended September 30, 2020, the Company recorded amortization expense of $489,000 and $857,000, respectively.

At September 30, 2021 and December 31, 2020, the Company had an unrealized gain of $370,000 and $438,000, respectively, attributable to two terminated interest rate swaps, in accumulated other comprehensive (loss) income on the consolidated balance sheets, to be accreted into earnings over the remaining life of the debt. During the three and nine months ended September 30, 2021, the Company recorded accretion income, reported in interest expense on the consolidated statements of operations, of $23,000 and $68,000, respectively, to accrete the accumulated other comprehensive income on the terminated swap agreements. During the three and nine months ended September 30, 2020, the Company recorded accretion income of $23,000 and $69,000, respectively.

The Company’s prior origination of fixed-rate CRE whole loans exposed it to market pricing risk in connection with the fluctuations of market interest rates. In order to mitigate this market price risk, the Company entered into interest rate swap contracts in which it paid a fixed rate of interest in exchange for a variable rate of interest, usually three-month LIBOR. Unrealized gains and losses on the value of these swap contracts were recorded in other income (expense) on the consolidated statements of operations. In December 2020, these interest rate swap contracts were terminated.

The following tables present the effect of the derivative instruments on the consolidated statements of operations for the nine months ended September 30, 2021 and 2020 (in thousands):

	Derivatives
Nine Months Ended September 30, 2021	Consolidated Statements of Operations Location	Realized and Unrealized Gain (Loss) (1)
Interest rate swap contracts, hedging	Interest expense	$	(1,384	)

	Derivatives
Nine Months Ended September 30, 2020	Consolidated Statements of Operations Location	Realized and Unrealized Gain (Loss) (1)
Interest rate swap contracts	Other income (expense)	$	(67	)
Interest rate swap contracts, hedging	Interest expense	$	(1,095	)

(1) Negative values indicate a decrease to the associated consolidated statement of operations line items.

NOTE 20 - OFFSETTING OF FINANCIAL LIABILITIES

The following table presents a summary of the Company’s offsetting of financial liabilities (in thousands, except amounts in footnotes):

							(iv) Gross Amounts Not Offset on the Consolidated Balance Sheets
	(i) Gross Amounts of Recognized Liabilities		(ii) Gross Amounts Offset on the Consolidated Balance Sheets		(iii) = (i) - (ii) Net Amounts of Liabilities Included on the Consolidated Balance Sheets		Financial Instruments (1)		Cash Collateral Pledged		(v) = (iii) - (iv) Net Amount
At September 30, 2021:
Warehouse financing facilities (2)	$	320,465	$	—	$	320,465	$	320,465	$	—	$	—
At December 31, 2020:
Warehouse financing facilities (2)	$	12,258	$	—	$	12,258	$	12,258	$	—	$	—

(1) Amounts represent financial instruments pledged that are available to be offset against liability balances associated with term warehouse financing facilities.

(2) The combined fair values of loans pledged against the Company’s various term warehouse financing facilities was $421.6 million and $20.0 million at September 30, 2021 and December 31, 2020, respectively.

38

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

All balances associated with warehouse financing facilities are presented on a gross basis on the Company’s consolidated balance sheets.

Certain of the Company’s warehouse financing facilities are governed by underlying agreements that generally provide for a right of offset in the event of default or in the event of a bankruptcy of either party to the transaction.

NOTE 21 - COMMITMENTS AND CONTINGENCIES

The Company may become involved in litigation on various matters due to the nature of the Company’s business activities. The resolution of these matters may result in adverse judgments, fines, penalties, injunctions and other relief against the Company as well as monetary payments or other agreements and obligations. In addition, the Company may enter into settlements on certain matters in order to avoid the additional costs of engaging in litigation. Except as discussed below, the Company is unaware of any contingencies arising from such litigation that would require accrual or disclosure in the consolidated financial statements at September 30, 2021.

The Company’s subsidiary, Primary Capital Mortgage, LLC (“PCM”), is subject to potential litigation related to claims for repurchases or indemnifications on loans that PCM has sold to third parties. At September 30, 2021 and December 31, 2020, no such litigation demand was outstanding. Reserves for such litigation demands are included in the reserve for mortgage repurchases and indemnifications that totaled $1.4 million and $1.5 million at September 30, 2021 and December 31, 2020, respectively. The reserves for mortgage repurchases and indemnifications are included in liabilities held for sale on the consolidated balance sheets.

The Company did not have any pending litigation matters or general litigation reserve at September 30, 2021 or December 31, 2020.

Impact of COVID-19

As discussed in Note 2, the impact of the COVID-19 pandemic in the U.S. and globally has adversely impacted, and may continue to adversely impact, the Company, its borrowers and their tenants, the properties securing its investments and the economy as a whole. The magnitude and duration of the COVID-19 pandemic could be significant and will depend on future developments, which are uncertain and cannot be predicted, including new virus variants that may exacerbate the severity of the pandemic, the extension of quarantines and restrictions on travel, the discovery of successful treatments and the ensuing reactions by consumers, companies, governmental entities and global markets. The Company had no contingent liabilities at September 30, 2021 recorded in connection with the COVID-19 pandemic, however the prolonged duration and impact of the COVID-19 pandemic has had, and may continue to have, a long-term and material impact on its results of operations, financial condition and cash flows.

Other Contingencies

As part of the May 2017 sale of its equity interest in Pearlmark Mezzanine Realty Partners IV, L.P., the Company entered into an indemnification agreement pursuant to which the Company agreed to indemnify the purchaser against realized losses of up to $4.3 million on one mezzanine loan until its final maturity date in 2020. As a result of the indemnified party’s partial sale of the mezzanine loan, the maximum exposure was reduced to $536,000 in 2019. In October 2020, the mezzanine loan paid off its balance to the indemnified party, resulting in the extinguishment of the Company’s liability.

PCM is subject to additional claims for repurchases or indemnifications on loans that PCM has sold to investors. At both September 30, 2021 and December 31, 2020, outstanding demands for indemnification, repurchase or make whole payments totaled $3.3 million. The Company’s estimated exposure for such outstanding claims, as well as unasserted claims, is included in its reserve for mortgage repurchases and indemnifications.

Unfunded Commitments

Unfunded commitments on the Company’s originated CRE loans generally fall into two categories: (1) pre-approved capital improvement projects and (2) new or additional construction costs subject, in each case, to the borrower meeting specified criteria. Upon completion of the improvements or construction, the Company would receive additional interest income on the advanced amount. Whole loans had $140.6 million and $67.2 million in unfunded loan commitments at September 30, 2021 and December 31, 2020, respectively. Preferred equity investments had $2.5 million in unfunded investment commitments at December 31, 2020. The preferred equity investments paid off during the nine months ended September 30, 2021.

At closing, XAN 2020-RSO9 included a future advances reserve account, with $7.7 million outstanding at September 30, 2021, included in restricted cash on the consolidated balance sheet, to fund unfunded commitments.

39

ACRES COMMERCIAL REALTY CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2021

(unaudited)

NOTE 22 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this report and determined that there have not been any events, other than those in Note 11 or as discussed below, that have occurred that would require adjustments to or disclosures in the consolidated financial statements.

On October 4, 2021, the Company and the Manager entered into an Equity Distribution Agreement with JonesTrading Institutional Services LLC, as placement agent (“JonesTrading”), pursuant to which the Company may issue and sell from time to time up to 2.2 million shares of the Series D Preferred Stock. Sales of the Series D Preferred Stock may be made in transactions that are deemed to be “at the market” offerings, as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation, sales made directly on the New York Stock Exchange, on any other existing trading market for the shares or to or through a market maker. Subject to the terms of the Company’s notice, JonesTrading may also sell the shares by any other method permitted by law, including but not limited to in privately negotiated transactions. The Company will pay JonesTrading a commission up to 3.0% of the gross proceeds from the sales of the Series D Preferred Stock pursuant to the agreement. The terms and conditions of the agreement include various representations and warranties, conditions to closing, indemnification rights and obligations of the parties and termination provisions.

On November 5, 2021, the Board authorized and approved the continued use of its existing share repurchase program, originally authorized by the Board in March 2016, in order to repurchase up to $20.0 million of the Company’s currently outstanding shares of common stock. Under the share repurchase program, the Company intends to repurchase shares through open market purchases, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 and 10b5-1 of the Exchange Act.

40

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes appearing elsewhere in this report. This discussion contains forward-looking statements. Actual results could differ materially from those expressed in or implied by those forward-looking statements. Additionally, please see the sections “Forward-Looking Statements” and “Risk Factors” for a discussion of risks, uncertainties and assumptions associated with those statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Overview

We are a Maryland corporation and an externally managed real estate investment trust (“REIT”) that is primarily focused on originating, holding and managing commercial real estate (“CRE”) mortgage loans and other commercial real estate-related debt investments. On July 31, 2020, our management contract was acquired from Exantas Capital Manager Inc. (the “Prior Manager”), a subsidiary of C-III Capital Partners LLC, by ACRES Capital, LLC (the “Manager”), a subsidiary of ACRES Capital Corp. (collectively, “ACRES”), a private commercial real estate lender exclusively dedicated to nationwide middle market CRE lending with a focus on multifamily, student housing, hospitality, office and industrial property in top United States (“U.S.”) markets (the “ACRES acquisition”), and amended and restated. Our Manager draws upon the management team of ACRES and its collective investment experience to provide its services. Our objective is to provide our stockholders with total returns over time, including quarterly distributions and capital appreciation, while seeking to manage the risks associated with our investment strategies as well as to maximize long-term stockholder value by maintaining stability through our available liquidity and diversified CRE loan portfolio.

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified. The resulting spread of COVID-19 throughout the globe led the World Health Organization to designate COVID-19 as a pandemic and numerous countries, including the U.S., to declare national emergencies. Many countries responded to the outbreak by instituting quarantines and restrictions on travel and limiting operations of non-essential offices and retail centers, which resulted in the closure or remote operation of non-essential businesses and increased rates of unemployment beginning in the second quarter of 2020 through the second quarter of 2021. While the U.S. and certain countries around the world have eased restrictions and financial markets have stabilized to some degree, the pandemic, exacerbated by virus variants, continues to cause uncertainty on the U.S. and global economies, generally, and the CRE business in particular. We continue to actively and responsibly manage corporate liquidity and operations in light of the market disruptions caused by COVID-19. Additionally, the reinstatement of nationwide restrictions placed on businesses in response to COVID-19 may cause significant cash flow disruptions across the economy that may impact our borrowers and their ability to stay current with their debt obligations. During the height of the pandemic, we used a variety of legal and structural options to manage credit risk effectively, including through forbearance and extension provisions or agreements. It is inherently difficult to accurately assess the impact of COVID-19 on our revenues, profitability and financial position due to uncertainty of the severity and duration of the pandemic. In response we are focused on maintaining sufficient liquidity while growing our loan origination business. The negative impact of the pandemic on our 2020 results created net operating loss (“NOL”) carryforwards and net capital loss carryforwards. Our 2020 tax return, completed in October 2021, resulted in NOL carryforwards of $47.7 million and net capital loss carryforwards estimated of $136.9 million, including net capital loss carryforwards from prior years, at our qualified REIT subsidiaries. Additionally, we estimate that we will receive additional NOL carryforwards totaling $18.7 million from activities in 2021 and 2022. Therefore, we have not paid distributions on our common shares in 2021 nor 2020. We continuously monitor the effects of COVID-19 on our operations and financial position to ensure that we remain responsive and adaptable to the dynamic environment that has been created by the pandemic. For additional discussion with respect to the potential impact of COVID-19 on our liquidity and capital resources, see “Liquidity and Capital Resources.”

An important aspect of the ACRES acquisition was that it delivered operational liquidity in order to mitigate additional potential margin call risk as a result of the market volatility that was created by the COVID-19 pandemic, which allowed us to focus on asset management within the portfolio in efforts to restart loan originations and underwriting. Our Manager has and expects to continue to leverage the complementary nature of our lending platforms, its experience and its network of relationships to enhance its new business loan pipeline. Additionally, our Manager continuously monitors for new capital opportunities and executes on agreements that enhance our returns.

During the nine months ended September 30, 2021, we issued 4,600,000 shares of new 7.875% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) for net proceeds of $110.5 million, which includes the underwriting discounts and offering costs. In October 2021, we and our Manager entered into an Equity Distribution Agreement (the “Preferred ATM Agreement”) with JonesTrading Institutional Services LLC, as placement agent (“JonesTrading”), pursuant to which we may issue and sell from time to time up to 2.2 million shares of the Series D Preferred Stock.

41

During the three and nine months ended September 30, 2021, we sold $150.0 million of principal of new 5.75% senior unsecured notes due 2026 (“5.75% Senior Unsecured Notes”) for net proceeds of $146.7 million, which includes debt issuance costs. Using the proceeds, we fully redeemed our $50.0 million of principal of 12.00% senior unsecured notes due 2027 (“12.00% Senior Unsecured Notes”) for $55.3 million, which included a $5.0 million make-whole amount, and partially repurchased $55.7 million of principal of 4.50% convertible senior notes due 2022 (“4.50% Convertible Senior Notes”) during the three and nine months ended September 30, 2021. We incurred a loss on extinguishment of $9.0 million, which comprised a $5.0 million make-whole amount on the 12.00% Senior Unsecured Notes and $4.0 million of acceleration of the unamortized market discounts. We also accelerated the amortization of debt issuance costs of $522,000, which are reflected in interest expense during the three and nine months ended September 30, 2021.

The remaining proceeds from each of these transactions are intended to be used for loan originations and for general corporate purposes in order to improve and grow book value and earnings.

We target originating transitional floating-rate CRE loans between $10.0 million and $100.0 million. In March 2020, due to the market disruptions caused by the COVID-19 pandemic, we halted loan originations to manage our liquidity. In conjunction with the capital commitments secured through the ACRES acquisition, we resumed originating floating-rate CRE loans in November 2020. During the three and nine months ended September 30, 2021, we originated 17 and 41 floating-rate CRE whole loans, respectively, with total commitments of $468.2 million and $1.1 billion, respectively.

We anticipate that our CRE loan originations and other CRE-related investments for the year ended December 31, 2021 will be between $1.2 billion and $1.4 billion. During the year ended December 31, 2022, we anticipate that our CRE loan originations and other CRE-related investments will be between $600.0 million and $1.0 billion.

Our CRE loan portfolio, which had a $1.8 billion and $1.5 billion carrying value at September 30, 2021 and December 31, 2020, respectively, comprised:

• First mortgage loans, which we refer to as whole loans. These loans are typically secured by first liens on CRE property, including the following property types: multifamily, office, hotel, self-storage, retail, student housing, manufactured housing, industrial, healthcare and mixed-use. At September 30, 2021 and December 31, 2020, our whole loans had a carrying value of $1.8 billion and $1.5 billion, respectively, or 99.8% and 98.0%, respectively, of the CRE loan portfolio.

• Mezzanine debt that is senior to borrower’s equity but is subordinated to other third-party debt. These loans are subordinated CRE loans, usually secured by a pledge of the borrower’s equity ownership in the entity that owns the property or by a second lien mortgage on the property. At September 30, 2021 and December 31, 2020, our mezzanine loan had a carrying value of $4.4 million, or 0.2% and 0.3%, respectively, of the CRE loan portfolio.

• Preferred equity investments that are subordinate to first mortgage loans and mezzanine debt. These investments may be subject to more credit risk than subordinated debt but provide the potential for higher returns upon a liquidation of the underlying property and are typically structured to provide some credit enhancement differentiating it from the common equity in such investments. At December 31, 2020, our preferred equity investments had a carrying value of $26.0 million, or 1.7% respectively, of the CRE loan portfolio. During the nine months ended September 30, 2021, our preferred equity investments paid off, generating $28.8 million of proceeds.

We generate our income primarily from the spread between the revenues we receive from our assets and the cost to finance our ownership of those assets, including corporate debt.

While the CRE whole loans included in the CRE loan portfolio are substantially composed of floating-rate loans benchmarked to the London Interbank Offered Rate (“LIBOR”), asset yields are protected through the use of LIBOR floors and minimum interest periods that typically range from 12 to 18 months at the time of a loan’s origination. In a lower interest rate environment, our LIBOR floors provide asset yield protection when LIBOR falls below an in-place LIBOR floor. In addition, our net investment returns are enhanced by a decline in the cost of our floating-rate liabilities that do not have LIBOR floors. At September 30, 2021, our $1.9 billion floating-rate CRE loan portfolio, at par, which includes one whole loan that was modified to a fixed interest rate from June 2021 through December 2021 and one whole loan without a LIBOR floor, had a weighted average LIBOR floor of 1.03%. At December 31, 2020, our $1.5 billion CRE loan portfolio, at par, had a weighted average LIBOR floor of 1.88%. The decrease in the weighted average LIBOR floor was a result of older CRE floating-rate loans with higher floors paying off and being replaced with newer loans with lower floors. However, the decline in the weighted average LIBOR floor has reduced the potential for negative volatility on net interest income in a higher interest rate environment. We expect to see a benefit to interest income as the forward LIBOR curve projects to remain low in the near term in 2021.

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Our portfolio comprised loans with a diverse array of collateral types and locations. At September 30, 2021 and December 31, 2020, 87.5% and 83.3%, respectively, of our CRE loans were collateralized by multifamily, office, self-storage, manufactured housing and industrial properties, with the remaining 12.5% and 16.7%, respectively, collateralized by hotel and retail properties. These properties are located throughout the U.S., with one individual National Council of Real Estate Investment Fiduciaries (“NCREIF”) region making up more than 20% of the total CRE loan portfolio (Southeast at 22.0%) at September 30, 2021 and one region in excess of 20% of the total CRE loan portfolio (Mountain at 21.4%) at December 31, 2020.

Except for four loans, all of our loans were current on contractual payments at September 30, 2021. One of the four loans, with a carrying value of $17.6 million at September 30, 2021, completed the receipt of the deed-in-lieu of foreclosure in October 2021 on the collateral, which had a $17.6 million as-is appraised value based on an October 2021 appraisal. Two of the four loans are on non-accrual, while one is making current interest payments. Additionally, we have provided relief in the form of term extensions on 13 loans, at a weighted average of 11 months, in exchange for $461,000 of fees during the nine months ended September 30, 2021.

Our CRE mezzanine loan earns interest at a fixed rate.

We use leverage to enhance our returns. The cost of borrowings to finance our investments is a significant part of our expenses. Our net interest income depends on our ability to control these expenses relative to our revenue. Our CRE loans may initially be financed with term facilities, such as CRE loan warehouse financing facilities, in anticipation of their ultimate securitization. We ultimately seek to finance our CRE loans through the use of non-recourse long-term, match-funded CRE debt securitizations.

Our asset-specific borrowings comprised term warehouse financing facilities, CRE debt securitizations and our senior secured financing facility. In May 2021, we closed ACRES Commercial Realty 2021-FL1 Issuer, Ltd. (“ACR 2021-FL1”), a new CRE debt securitization financing $802.6 million of CRE loans with $675.2 million of non-recourse, floating-rate notes at a weighted average cost of one-month LIBOR plus 1.49%. Simultaneously, we executed the optional redemption on Exantas Capital Corp. 2019-RSO7, Ltd. (“XAN 2019-RSO7”) and paid off the remaining notes. At September 30, 2021 and December 31, 2020, we had outstanding balances on our CRE loan term warehouse financing facilities of $320.5 million and $12.3 million, respectively, or 20.0% and 0.9%, respectively, of total outstanding borrowings. At September 30, 2021 and December 31, 2020, we had outstanding balances of $960.7 million and $1.0 billion, respectively, on CRE debt securitizations, or 59.9% and 78.8%, respectively, of total outstanding borrowings. At September 30, 2021 and December 31, 2020, we had outstanding borrowings on our senior secured financing facility of $37.6 million and $29.3 million, respectively, or approximately 2.3% of total outstanding borrowings.

In January 2020, we adopted updated accounting guidance that replaced the incurred loss approach with the current expected credit losses (“CECL”) model for the determination of our allowance for loan losses. We reevaluate our CECL allowance quarterly, incorporating our current expectations of macroeconomic factors considered in the determination of our CECL reserves. At September 30, 2021, the CECL allowance on our CRE loan portfolio was $18.9 million or 1.0% of our $1.9 billion loan portfolio. At December 31, 2020, the CECL allowance on our CRE loan portfolio was $34.3 million, or 2.2% of our $1.5 billion of our loan portfolio. We recorded a provision of credit losses during the three months ended September 30, 2021 in connection with the growth of our CRE loan portfolio, partially offset by an improvement in macroeconomic conditions. We recorded a reversal of credit losses during the nine months ended September 30, 2021, which reflected loan paydowns, improved collateral operating performance, declines in expected unemployment and improvements in macroeconomic conditions.

We historically used derivative financial instruments, including interest rate swaps, to hedge a portion of the interest rate risk associated with our borrowings. In April 2020 we terminated all interest rate hedges in conjunction with the disposition of our financed commercial mortgage-backed securities (“CMBS”) portfolio. At September 30, 2021 and December 31, 2020, we had unrealized losses in connection with the terminated hedges of $9.0 million and $10.4 million, respectively, which will be amortized into interest expense over the remaining life of the debt. During the three and nine months ended September 30, 2021, we recognized amortization expense on these terminated contracts of $489,000 and $1.5 million, respectively.

Common stock book value was $22.68 per share at September 30, 2021, a $2.11 per share increase from December 31, 2020.

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Impact of COVID-19

As discussed in the “Overview” section above, the impact of the COVID-19 pandemic in the U.S. and globally has adversely impacted, and may continue to adversely impact, us, our borrowers and their tenants, the properties securing our investments and the economy as a whole. The COVID-19 pandemic could have a continued and prolonged adverse impact on economic and market conditions and the fluidity of this situation precludes any prediction as to the ultimate adverse impact of the pandemic on economic and market conditions. While the discovery and distribution of vaccines has had a positive impact on projected macroeconomic indicators, the full extent and impact of the COVID-19 pandemic on companies continues to evolve rapidly and will depend on future developments, which are uncertain and cannot be predicted, including the duration and spread of the outbreak exacerbated by virus variants, the extension of quarantines and restrictions on travel, the further discovery of successful treatments and the ensuing reactions by consumers, companies, governmental entities and global markets. The impact of the pandemic has had, and may continue to have, a long-term and material impact on our results of operations, financial condition and our liquidity and capital resources in the third quarter of 2021 and in future quarters. Further discussion of the potential impacts on our business from the COVID-19 pandemic is provided in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Impact of Reference Rate Reform

As discussed in the “Overview” section above, our CRE whole loans and our asset-specific borrowings are primarily benchmarked to one-month LIBOR. In March 2021, the Financial Conduct Authority announced that it would cease publication of the one-week and two-month USD LIBOR immediately after December 31, 2021 and cease publication of the remaining tenors immediately after June 30, 2023. Additionally, the U.S. Federal Reserve encouraged companies to cease using LIBOR as a benchmark rate by December 31, 2021.

While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprising large U.S. financial institutions, has identified the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements backed by U.S. Treasury securities, as its preferred alternative rate for LIBOR. In June 2021, Exantas Capital Corp. 2020-RSO8, Ltd.’s (“XAN 2020-RSO8”) and Exantas Capital Corp. 2020-RSO9, Ltd.’s (“XAN 2020-RSO9”) benchmark rate, formerly one-month LIBOR, on the notes payable was replaced with the compounded SOFR (“Compounded SOFR”), plus a benchmark adjustment. Additionally, all of our underwritten loans contain terms that allow for a change to an alternative benchmark rate upon the discontinuation of LIBOR.

The transition from LIBOR to SOFR or to another alternative rate may result in financial market disruptions and significant increases in benchmark rates, resulting in increased financing costs to us, any of which could have an adverse effect on our business, results of operations, financial condition, and the market price of our common stock. See “Part II. Item 1A. Risk Factors - Changes in the method for determining the LIBOR or a replacement of LIBOR may adversely affect the value of our loans, investments and borrowings and could affect our results of operations” for additional discussion on the risk related to ongoing reference rate reform.

Results of Operations

Our net loss allocable to common shares for the three months ended September 30, 2021 was $9.8 million, or $(1.03) per share-basic ($(1.03) per share-diluted) and our net income allocable to common shares for the nine months ended September 30, 2021 was $10.7 million, or $1.09 per share-basic ($1.09 per share-diluted), as compared to net income allocable to common shares for the three months ended September 30, 2020 of $5.6 million, or $0.51 per share-basic ($0.51 per share-diluted) and net loss allocable to common shares for the nine months ended September 30, 2020 of $229.5 million, or $(21.47) per share-basic ($(21.47) per share-diluted), respectively.

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Net Interest Income

The following tables analyze the change in interest income and interest expense for the comparative three and nine months ended September 30, 2021 and 2020 by changes in volume and changes in rates. The changes attributable to the combined changes in volume and rate have been allocated proportionately, based on absolute values, to the changes due to volume and changes due to rates (dollars in thousands, except amounts in footnotes):

	Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
							Due to Changes in
	Net Change			Percent Change (1)			Volume			Rate
Increase (decrease) in interest income:
CRE whole loans (2)	$	276			1	%	$	1,284		$	(1,008	)
Legacy CRE loan (2)(3)		5			3	%		18			(13	)
CRE mezzanine loan		—			—	%		—			—
CRE preferred equity investments (2)		(817	)		(100	)%		(817	)		—
CMBS		(100	)		(100	)%		(100	)		—
Other		(16	)		(29	)%		(16	)		—
Total decrease in interest income		(652	)		(3	)%		369			(1,021	)
Increase (decrease) in interest expense:
Securitized borrowings: (4)
XAN 2018-RSO6 Senior Notes		(1,015	)		(100	)%		(1,015	)		—
XAN 2019-RSO7 Senior Notes		(2,509	)		(100	)%		(2,509	)		—
XAN 2020-RSO8 Senior Notes		(1,021	)		(45	)%		(1,364	)		343
XAN 2020-RSO9 Senior Notes		1,864			986	%		1,835			29
ACR 2021-FL1 Senior Notes		3,249			100	%		3,249			—
Senior secured financing facility (4)		209			36	%		209			—
CRE - term warehouse financing facilities (4)		(445	)		(23	)%		(420	)		(25	)
4.50% Convertible Senior Notes (4)		(4	)		(0	)%		(4	)		—
5.75% Senior Unsecured Notes (4)		1,148			100	%		1,148			—
12.00% Senior Unsecured Notes (4)		56			5	%		56			—
Unsecured junior subordinated debentures		(31	)		(5	)%		—			(31	)
Hedging		—			0	%		—			—
Total increase in interest expense		1,501			12	%		1,185			316
Net (decrease) increase in net interest income	$	(2,153	)				$	(816	)	$	(1,337	)

(1) Percent change is calculated as the net change divided by the respective interest income or interest expense for the three months ended September 30, 2020.

(2) Includes increases in fee income of approximately $261,000 and $18,000 recognized on our CRE whole loans and legacy CRE loan, respectively, and a decrease in fee income of approximately $39,000 on our CRE preferred equity investments, that were due to changes in volume.

(3) Includes the change in interest income recognized on one legacy CRE loan with an amortized cost of $11.5 million and $11.4 million at September 30, 2021 and December 31, 2020, respectively, classified as a CRE loan on the consolidated balance sheets.

(4) Includes increases in amortization expense of approximately $82,000, $52,000, $233,000, $70,000 and $266,000 on our securitized borrowings, senior secured financing facility, 4.50% Convertible Senior Notes, 5.75% Senior Unsecured Notes and 12.00% Senior Unsecured Notes, respectively, and a decrease in amortization expense of approximately $199,000 on our CRE - term warehouse financing facilities, that were due to changes in volume. The increases in amortization expense of the 4.50% Convertible Senior Notes and 12.00% Senior Unsecured Notes included $304,000 and $218,000, respectively, of acceleration of deferred debt issuance costs in connection with the repurchase of $55.7 million principal amount of 4.50% Convertible Senior Notes and redemption of all $50.0 million principal amount of 12.00% Senior Unsecured Notes during the three months ended September 30, 2021.

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	Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
							Due to Changes in
	Net Change			Percent Change (1)			Volume			Rate
Increase (decrease) in interest income:
CRE whole loans (2)	$	(3,172	)		(4	)%	$	(1,575	)	$	(1,597	)
Legacy CRE loan (2)(3)		8			2	%		45			(37	)
CRE mezzanine loan		(1	)		(0	)%		(1	)		—
CRE preferred equity investments (2)		(1,023	)		(43	)%		(1,023	)		—
CMBS (4)		(6,360	)		(98	)%		(6,290	)		(70	)
Other		(95	)		(57	)%		(95	)		—
Total decrease in interest income		(10,643	)		(12	)%		(8,939	)		(1,704	)
Increase (decrease) in interest expense:
Securitized borrowings: (5)
XAN 2018-RSO6 Senior Notes		(3,842	)		(100	)%		(3,842	)		—
XAN 2019-RSO7 Senior Notes		(5,164	)		(50	)%		(3,402	)		(1,762	)
XAN 2020-RSO8 Senior Notes		1,472			28	%		1,407			65
XAN 2020-RSO9 Senior Notes		7,284			3854	%		7,255			29
ACR 2021-FL1 Senior Notes		4,985			100	%		4,985			—
Senior secured financing facility (5)		2,514			436	%		2,514			—
CRE - term warehouse financing facilities (5)		(6,065	)		(64	)%		(5,649	)		(416	)
CMBS - short term repurchase agreements		(2,491	)		(100	)%		(2,491	)		—
Convertible senior notes: (5)
4.50% Convertible Senior Notes		123			2	%		123			—
8.00% Convertible Senior Notes		(80	)		(100	)%		(80	)		—
5.75% Senior Unsecured Notes (5)		1,148			100	%		1,148			—
12.00% Senior Unsecured Notes (5)		3,202			313	%		3,202			—
Unsecured junior subordinated debentures		(389	)		(19	)%		—			(389	)
Hedging		289			26	%		289			—
Total increase in interest expense		2,986			7	%		5,459			(2,473	)
Net (decrease) increase in net interest income	$	(13,629	)				$	(14,398	)	$	769

(1) Percent change is calculated as the net change divided by the respective interest income or interest expense for the nine months ended September 30, 2020.

(2) Includes increases in fee income of approximately $3.3 million and $42,000 recognized on our CRE whole loans and legacy CRE loan, respectively, and a decrease in fee income of $175,000 on our CRE preferred equity investments, that were due to changes in volume.

(3) Includes the change in interest income recognized on one legacy CRE loan with an amortized cost of $11.5 million and $11.4 million at September 30, 2021 and December 31, 2020, respectively, classified as a CRE loan on the consolidated balance sheets.

(4) Includes a decrease in net accretion income of approximately $616,000 that was due to changes in volume.

(5) Includes increases in amortization expense of approximately $5.4 million, $357,000, $352,000, $70,000 and $437,000 on our securitized borrowings, senior secured financing facility, convertible senior notes, 5.75% Senior Unsecured Notes and 12.00% Senior Unsecured Notes, respectively, and a decrease in amortization expense of approximately $532,000 on our CRE - term warehouse financing facilities, that were due to changes in volume. The increases in amortization expense of the 4.50% Convertible Senior Notes and 12.00% Senior Unsecured Notes included $304,000 and $218,000, respectively, of acceleration of deferred debt issuance costs in connection with the repurchase of $55.7 million principal amount of 4.50% Convertible Senior Notes and redemption of all $50.0 million principal amount of 12.00% Senior Unsecured Notes during the nine months ended September 30, 2021.

Net Change in Interest Income for the Comparative Three and Nine Months Ended September 30, 2021 and 2020:

Aggregate interest income decreased by $652,000 and $10.6 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively. We attribute the changes to the following:

CRE whole loans. The increase of $276,000 for the comparative three months ended September 30, 2021 and 2020 was primarily attributable to an increase in the outstanding balance of CRE whole loans in connection with loan originations net of loan repayments of $285.0 million for the three months ended September 30, 2021. The average outstanding balance of CRE whole loans for the three months ended September 30, 2020 was lower in connection with a pause in our loan originations from March 2020 to November 2020, during which time we continued to receive loan payoff and paydown proceeds. The increase was partially offset by a decrease in rates over the comparative periods.

The decrease of $3.2 million for the comparative nine months ended September 30, 2021 and 2020 was primarily attributable to a lower average outstanding balance of our CRE loan portfolio over the comparative periods due to the aforementioned pause in loan originations from March 2020 to November 2020 offset by the increases in loan originations of $1.8 million and exit fee income of $1.6 million over the comparative periods primarily related to loan payoffs and paydowns. The decrease was also attributable to a decline in one-month LIBOR over the comparative periods, which resulted in lower one-month LIBOR floors on new CRE loans originated.

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CRE preferred equity investments. The decreases of $817,000 and $1.0 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were primarily attributable to the payoffs of the preferred equity investments in March 2021 and April 2021.

Securities. The decreases of $100,000 and $6.4 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were primarily attributable to the disposition of our entire CMBS portfolio as of April 2020, except for two CMBS securities retained. In March 2021, the two remaining CMBS securities were sold for cash proceeds of $3.0 million.

Net Change in Interest Expense for the Comparative Three and Nine Months Ended September 30, 2021 and 2020:

Aggregate interest expense increased by $1.5 million and $3.0 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively. We attribute the changes to the following:

Securitized borrowings. The net increases of $568,000 and $4.7 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were primarily attributable to the issuances of XAN 2020-RSO8, XAN 2020-RSO9 and ACR 2021-FL1 and the acceleration of deferred debt issuance costs of $393,000 and $5.2 million for the three and nine months ended September 30, 2021, respectively, of which $1.9 million pertained to the liquidation of XAN 2019-RSO7 in May 2021 and $393,000 and $3.3 million, respectively, pertained to paydowns of notes on the existing securitizations. The increases were offset by the liquidation of Exantas Capital Corp. 2018-RSO6, Ltd. (“XAN 2018-RSO6”) and XAN 2019-RSO7.

Senior secured financing facility. The increases of $209,000 and $2.5 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were attributable to the July 2020 execution and subsequent utilization of the senior secured financing facility.

CRE - term warehouse financing facilities. The decreases of $445,000 and $6.1 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were primarily attributable to net payoffs of our CRE term warehouse financing facilities compounded by a decrease in the weighted average one-month LIBOR over the comparative periods, offset by new originations in the three and nine months ended September 30, 2021. The net payoffs of our CRE term warehouse facilities were funded by the issuance of our XAN 2020-RSO8, XAN 2020-RSO9 and ACR 2021-FL1 securitizations and the utilization of the senior secured financing facility.

CMBS - short term repurchase agreements. The decrease of $2.5 million for the comparative nine months ended September 30, 2021 and 2020 was attributable to the payoff of our CMBS - short term repurchase agreements in full as of April 2020 upon sale of our CMBS due to the impact of the COVID-19 pandemic on commercial real estate securities markets in March 2020.

5.75% Senior Unsecured Notes. The increase of $1.1 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were attributable to the issuance of the 5.75% Senior Unsecured Notes in August 2021.

12.00% Senior Unsecured Notes due 2027. The increase of $3.2 million for the comparative nine months ended September 30, 2021 and 2020 was attributable to the execution and concurrent utilization of a portion of the 12.00% Senior Unsecured Notes in July 2020.

Unsecured junior subordinated debentures. The decrease of $389,000 for the comparative nine months ended September 30, 2021 and 2020 was attributable to a decrease in three-month LIBOR, the benchmark interest rate for our unsecured junior subordinated debentures, over the comparative periods.

Hedging. The increase of $289,000 for the comparative nine months ended September 30, 2021 and 2020 was primarily attributable to amortization expense on terminated interest rate swaps during the nine months ended September 30, 2021. In April 2020, in conjunction with the disposition of our CMBS portfolio financed with short-term repurchase agreements, we terminated all interest rate swap contracts hedging that portfolio. During the nine months ended September 30, 2021 and 2020, we recorded net amortization expense, reported in interest expense on the consolidated statements of operations, of $1.4 million and $788,000, respectively.

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Average Net Yield and Average Cost of Funds:

The following tables present the average net yield and average cost of funds for the three and nine months ended September 30, 2021 and 2020 (dollars in thousands, except amounts in footnotes):

	For the Three Months Ended September 30, 2021								For the Three Months Ended September 30, 2020
	Average Balance		Interest Income (Expense)			Average Net Yield (Cost of Funds) (1)			Average Balance		Interest Income (Expense)			Average Net Yield (Cost of Funds) (1)
Interest-earning assets
CRE whole loans (2)	$	1,724,333	$	23,667			5.45	%	$	1,682,223	$	23,391			5.52	%
Legacy CRE loan (2)		11,516		159			5.49	%		11,516		154			5.29	%
CRE mezzanine loan		4,700		120			9.96	%		4,700		120			9.97	%
CRE preferred equity investments (2)		—		—			—	%		27,065		817			11.98	%
CMBS		—		—			—	%		2,247		100			18.06	%
Other		74,564		40			0.21	%		72,058		56			0.31	%
Total interest income/average net yield		1,815,113		23,986			5.25	%		1,799,809		24,638			5.43	%
Interest-bearing liabilities
Collateralized by:
CRE whole loans (3)(4)		1,186,301		(8,764	)		(2.75	)%		1,278,588		(8,432	)		(2.62	)%
General corporate debt:
Unsecured junior subordinated debentures		51,548		(540	)		(4.10	)%		51,548		(571	)		(4.33	)%
4.50% Convertible Senior Notes (5)		119,159		(2,536	)		(8.33	)%		135,853		(2,540	)		(7.32	)%
5.75% Senior Unsecured Notes (6)		73,379		(1,148	)		(6.21	)%		—		—			—	%
12.00% Senior Unsecured Notes (7)		26,047		(1,080	)		(16.44	)%		31,253		(1,024	)		(13.00	)%
Hedging (8)		—		(466	)		—	%		—		(466	)		—	%
Total interest expense/average cost of funds	$	1,456,434		(14,534	)		(3.67	)%	$	1,497,242		(13,033	)		(3.32	)%
Total net interest income			$	9,452							$	11,605

(1) Average net yield includes net amortization/accretion and fee income and is computed based on average amortized cost.

(2) Includes fee income of approximately $2.0 million and $18,000 recognized on our floating-rate CRE whole loans and legacy CRE loan, respectively, for the three months ended September 30, 2021 and approximately $1.7 million and $39,000 on our floating-rate CRE whole loans and our CRE preferred equity investments, respectively, for the three months ended September 30, 2020.

(3) Includes amortization expense of approximately $2.1 million for the three months ended September 30, 2021 and 2020 on our interest-bearing liabilities collateralized by CRE whole loans.

(4) The average cost of funds for the three months ended September 30, 2021 excludes the impact of amortization of deferred debt issuance costs and unused fees incurred on a CRE term warehouse facility that was unused during the period.

(5) Includes amortization expense of approximately $1.2 million and $923,000 for the three months ended September 30, 2021 and 2020, respectively, on our 4.50% Convertible Senior Notes. The amortization expense for the three months ended September 30, 2021 included $304,000 of acceleration of deferred debt issuance costs in connection with the repurchase of $55.7 million principal amount of 4.50% Convertible Senior Notes during the period.

(6) Includes amortization expense of approximately $70,000 for the three months ended September 30, 2021 on our 5.75% Senior Unsecured Notes.

(7) Includes amortization expense of approximately $274,000 and $8,000 for the three months ended September 30, 2021 and 2020 on our 12.00% Senior Unsecured Notes. The amortization expense for the three months ended September 30, 2021 included $218,000 of acceleration of deferred debt issuance costs in connection with the redemption of all $50.0 million principal amount of 12.00% Senior Unsecured Notes during the period.

(8) Includes net amortization expense of $466,000 for the three months ended September 30, 2021 and 2020 on 22 terminated interest rate swap agreements that were in net loss positions at the time of termination. The remaining losses, reported in accumulated other comprehensive (loss) income on the consolidated balance sheets, will be accreted over the remaining life of the debt.

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	For the Nine Months Ended September 30, 2021								For the Nine Months Ended September 30, 2020
	Average Balance		Interest Income (Expense)			Average Net Yield (Cost of Funds) (1)			Average Balance		Interest Income (Expense)			Average Net Yield (Cost of Funds) (1)
Interest-earning assets
CRE whole loans (2)	$	1,616,398	$	72,083			5.96	%	$	1,756,936	$	75,255			5.71	%
Legacy CRE loan (2)		11,516		478			5.55	%		11,516		470			5.44	%
CRE mezzanine loan		4,700		355			9.96	%		4,700		356			9.97	%
CRE preferred equity investments (2)		10,967		1,378			16.80	%		26,679		2,401			11.99	%
CMBS (3)		5,610		161			3.89	%		165,168		6,521			5.29	%
Other		73,031		73			0.13	%		37,529		168			0.59	%
Total interest income/average net yield		1,722,222		74,528			5.78	%		2,002,528		85,171			5.67	%
Interest-bearing liabilities
Collateralized by:
CRE whole loans (4)		1,153,709		(30,910	)		(3.48	)%		1,320,797		(29,726	)		(3.00	)%
CMBS		—		—			—	%		123,899		(2,491	)		(2.68	)%
General corporate debt:
Unsecured junior subordinated debentures		51,548		(1,618	)		(4.14	)%		51,548		(2,007	)		(5.12	)%
4.50% Convertible Senior Notes (5)		131,785		(7,674	)		(7.68	)%		134,954		(7,551	)		(7.35	)%
8.00% Convertible Senior Notes (5)		—		—			—	%		1,159		(80	)		(9.07	)%
5.75% Senior Unsecured Notes (6)		24,729		(1,148	)		(6.21	)%		—		—			—	%
12.00% Senior Unsecured Notes (7)		39,615		(4,226	)		(14.26	)%		10,494		(1,024	)		(13.00	)%
Hedging (8)		—		(1,384	)		—	%		35,217		(1,095	)		(4.14	)%
Total interest expense/average cost of funds	$	1,401,386		(46,960	)		(4.25	)%	$	1,678,068		(43,974	)		(3.48	)%
Total net interest income			$	27,568							$	41,197

(1) Average net yield includes net amortization/accretion and fee income and is computed based on average amortized cost.

(2) Includes fee income of approximately $8.1 million and $55,000 recognized on our floating-rate CRE whole loans and legacy CRE loan, respectively, for the nine months ended September 30, 2021 and approximately $4.8 million, $12,000 and $112,000 on our floating-rate CRE whole loans, legacy CRE loan and our CRE preferred equity investments, respectively, for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, net amortization expense of $64,000 was recorded on the preferred equity investments in connection with their payoffs.

(3) Includes net accretion income of approximately $616,000 for the nine months ended September 30, 2020 on our CMBS securities.

(4) Includes amortization expense of approximately $11.0 million and $5.9 million for the nine months ended September 30, 2021 and 2020, respectively, on our interest-bearing liabilities collateralized by CRE whole loans.

(5) Includes aggregated amortization expense of approximately $3.1 million and $2.7 million for the nine months ended September 30, 2021 and 2020, respectively, on our convertible senior notes. The amortization expense for the nine months ended September 30, 2021 included $304,000 of acceleration of deferred debt issuance costs in connection with the repurchase of $55.7 million principal amount of 4.50% Convertible Senior Notes during the period.

(6) Includes amortization expense of approximately $70,000 for the nine months ended September 30, 2021 on our 5.75% Senior Unsecured Notes.

(7) Includes amortization expense of approximately $445,000 and $8,000 for the nine months ended September 30, 2021 and 2020, respectively, on our 12.00% Senior Unsecured Notes. The amortization expense for the nine months ended September 30, 2021 included $218,000 of acceleration of deferred debt issuance costs in connection with the redemption of all $50.0 million principal amount of 12.00% Senior Unsecured Notes during the period.

(8) Includes net amortization expense of $1.4 million and $788,000 for the nine months ended September 30, 2021 and 2020, respectively, on 22 terminated interest rate swap agreements that were in net loss positions at the time of termination. The remaining losses, reported in accumulated other comprehensive (loss) income on the consolidated balance sheets, will be accreted over the remaining life of the debt.

Real Estate Income and Other Revenue

Three and Nine Months Ended September 30, 2021 as compared to Three and Nine Months Ended September 30, 2020

The following tables set forth information relating to our real estate income and other revenue for the periods presented (dollars in thousands):

	For the Three Months Ended
	September 30,
	2021		2020		Dollar Change			Percent Change
Real estate income and other revenue:
Real estate income	$	2,627	$	—	$	2,627			100	%
Other revenue		17		19		(2	)		(11	)%
Total	$	2,644	$	19	$	2,625			13,816	%

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	For the Nine Months Ended
	September 30,
	2021		2020		Dollar Change			Percent Change
Real estate income and other revenue:
Real estate income	$	7,013	$	—	$	7,013			100	%
Other revenue		49		62		(13	)		(21	)%
Total	$	7,062	$	62	$	7,000			11,290	%

Aggregate real estate income and other revenue increased by $2.6 million and $7.0 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively. We attribute the changes to the following:

Real estate income. The increases of $2.6 million and $7.0 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were attributable to sales revenue earned on a hotel property acquired in a deed in lieu of foreclosure transaction in November 2020. The property reopened during the first quarter of 2021 and initially earned a significant amount of its revenue from a contact with the U.S. federal government that provided lodging for a group of employees until May 2021. Late in the second quarter and into the third quarter, revenue was driven by increases in occupancy as the economy reopened following the distribution of COVID-19 vaccines.

Operating Expenses

Three and Nine Months Ended September 30, 2021 as compared to Three and Nine Months Ended September 30, 2020

The following tables set forth information relating to our operating expenses for the periods presented (dollars in thousands):

	For the Three Months Ended
	September 30,
	2021		2020			Dollar Change			Percent Change
Operating expenses:
Management fees	$	1,700	$	1,284		$	416			32	%
Equity compensation		771		1,905			(1,134	)		(60	)%
Real estate operating expenses		2,401		—			2,401			100	%
General and administrative		2,664		5,295			(2,631	)		(50	)%
Depreciation and amortization		16		12			4			33	%
Provision for (reversal of) credit losses, net		537		(8,172	)		8,709			107	%
Total	$	8,089	$	324		$	7,765			2,397	%

	For the Nine Months Ended
	September 30,
	2021			2020		Dollar Change			Percent Change
Operating expenses:
Management fees	$	4,405		$	4,728	$	(323	)		(7	)%
Equity compensation		961			3,118		(2,157	)		(69	)%
Real estate operating expenses		6,713			—		6,713			100	%
General and administrative		8,533			11,552		(3,019	)		(26	)%
Depreciation and amortization		75			34		41			121	%
Provision for credit losses		(15,447	)		49,449		(64,896	)		(131	)%
Total	$	5,240		$	68,881	$	(63,641	)		(92	)%

Aggregate operating expenses increased by $7.8 million and decreased by $63.6 million for the comparative three and nine months ended September 30, 2021 and 2020. We attribute the changes to the following:

Management fees. The increase of $416,000 for the comparative three months ended September 30, 2021 and 2020 was primarily attributable to an increase in our base management fees during the three months ended September 30, 2021. As of July 31, 2020, as part of the Fourth Amended and Restated Management Agreement, as amended (“Management Agreement”), the monthly base management fee payable to our Manager was amended to be the greater of 1/12th of the amount of our equity multiplied by 1.50% or $442,000 through July 31, 2022. In June 2021, the base management fee calculation exceeded the $442,000 for the first time since the execution of the new Management Agreement in connection with the issuance of the Series D Preferred Stock in the second quarter of 2021. As a result, the management fees were greater than those incurred in the third quarter of 2020.

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The decrease of $323,000 for the comparative nine months ended September 30, 2021 and 2020 was primarily attributable to a decrease in our equity in March 2020. Our monthly base management fee payable to our Prior Manager was equal to 1/12th of the amount of our equity multiplied by 1.50% in accordance with our prior management agreement. In March 2020, our equity decreased in connection with the losses incurred on the disposition of our financed CMBS portfolio

Equity compensation. The decreases of $1.1 million and $2.2 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were primarily attributable to the acceleration of all unvested stock awards at July 31, 2020 upon the close of the ACRES acquisition.

Real estate operating expenses. The increases of $2.4 million and $6.7 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively, were primarily attributable to expenses incurred on a hotel property acquired in a deed in lieu of foreclosure transaction in November 2020. The property reopened during the first quarter of 2021.

General and administrative. General and administrative expenses decreased by $2.6 million and $3.0 million for the comparative three and nine months ended September 30, 2021 and 2020, respectively. The following table summarizes the information relating to our general and administrative expenses for the periods presented (dollars in thousands):

	For the Three Months Ended
	September 30,
	2021		2020		Dollar Change			Percent Change
General and administrative:
Professional services	$	1,240	$	3,976	$	(2,736	)		(69	)%
Wages and benefits		339		362		(23	)		(6	)%
D&O insurance		366		297		69			23	%
Operating expenses		300		311		(11	)		(4	)%
Dues and subscriptions		177		131		46			35	%
Director fees		207		121		86			71	%
Rent and utilities		30		92		(62	)		(67	)%
Tax penalties, interest and franchise tax		1		1		—			—	%
Travel		4		4		—			—	%
Total	$	2,664	$	5,295	$	(2,631	)		(50	)%

	For the Nine Months Ended
	September 30,
	2021		2020			Dollar Change			Percent Change
General and administrative:
Professional services	$	4,280	$	7,031		$	(2,751	)		(39	)%
Wages and benefits		1,157		1,006			151			15	%
D&O insurance		1,031		876			155			18	%
Operating expenses		837		1,015			(178	)		(18	)%
Dues and subscriptions		545		645			(100	)		(16	)%
Director fees		502		386			116			30	%
Rent and utilities		92		483			(391	)		(81	)%
Tax penalties, interest and franchise tax		69		(27	)		96			356	%
Travel		20		137			(117	)		(85	)%
Total	$	8,533	$	11,552		$	(3,019	)		(26	)%

The decreases in general and administrative expenses for the comparative three and nine months ended September 30, 2021 and 2020 were primarily attributable to an increase in professional services during the three and nine months ended September 30, 2020 in connection with legal fees and advisory fees for services rendered as part of the ACRES acquisition. The decrease for the comparative nine months ended September 30, 2021 and 2020 was also attributable to a decrease in rent and utilities as reimbursable expenses under our Management Agreement in conjunction with the ACRES acquisition.

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(Reversal of) provision for credit losses, net. The provision for credit losses of $537,000 and reversal of credit losses of $15.4 million for the three and nine months ended September 30, 2021 as compared to the reversal of credit losses of $8.2 million and provision for credit losses of $49.4 million for the three and nine months ended September 30, 2020, respectively, were each attributable to the updated estimates of our CECL model. The CECL model, adopted on January 1, 2020, provides the framework for developing an estimate of the allowance for credit losses using an expected credit losses approach. During the first and second quarters of 2020, CECL losses in the CRE loan portfolio were negatively impacted by higher expected unemployment and increased volatility in CRE asset pricing and liquidity in connection with the initial outbreak of the COVID-19 pandemic. From the three months ended September 30, 2020 through the second quarter of 2021, our estimated current expected credit losses improved due as a result of loan paydowns, improved collateral performance, expected lower unemployment and continued projected recoveries in future CRE asset pricing as the economic effect of the COVID-19 pandemic waned. During the three months ended September 30, 2021, a provision was recorded in connection with an increase in the size of the CRE loan portfolio.

Other Income (Expense)

Three and Nine Months Ended September 30, 2021 as compared to Three and Nine Months Ended September 30, 2020

The following tables set forth information relating to our other income (expense) incurred for the periods presented (dollars in thousands):

	For the Three Months Ended
	September 30,
	2021			2020			Dollar Change			Percent Change
Other income (expense):
Net realized and unrealized gain on investment securities available-for-sale and loans and derivatives	$	—		$	96		$	(96	)		(100	)%
Fair value and other adjustments on asset held for sale		—			(3,371	)		3,371			100	%
Loss on extinguishment of debt		(9,006	)		—			(9,006	)		(100	)%
Other income		71			134			(63	)		(47	)%
Total	$	(8,935	)	$	(3,141	)	$	(5,794	)		(184	)%

	For the Nine Months Ended
	September 30,
	2021			2020			Dollar Change			Percent Change
Other income (expense):
Net realized and unrealized (loss) gain on investment securities available-for-sale and loans and derivatives	$	878		$	(186,243	)	$	187,121			100	%
Fair value and other adjustments on asset held for sale		—			(8,089	)		8,089			100	%
Loss on extinguishment of debt		(9,006	)		—			(9,006	)		(100	)%
Other income		505			192			313			163	%
Total	$	(7,623	)	$	(194,140	)	$	186,517			96	%

Aggregate other expenses increased $5.8 million and decreased $186.5 million for the comparative three months ended September 30, 2021 and 2020, respectively, from $3.1 million and $194.1 million during the three and nine months ended September 30, 2020, respectively. We attribute the changes to the following:

Net realized and unrealized (loss) gain on investment securities available-for-sale and loans and derivatives. The decrease of $187.1 million of losses for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily attributable to the disposition of our CMBS portfolio that was financed with CMBS short-term repurchase facilities during the nine months ended September 30, 2020, which resulted in a loss of $180.3 million. We recorded unrealized losses of $5.8 million during the nine months ended September 30, 2020 on two retained securities. During the nine months ended September 30, 2021, we sold the two securities for cash proceeds of $3.0 million and recorded gains of $878,000.

Fair value and other adjustments on asset held for sale. The decreases of $3.4 million and $8.1 million during the comparative three and nine months ended September 30, 2021 and 2020, respectively, were primarily attributable to charges incurred on a CRE asset held for sale of $3.4 million and $8.1 million recorded during the three and nine months ended September 30, 2020, respectively. In December 2020, we sold the asset previously held for sale for proceeds of $10.3 million.

Loss on extinguishment of debt. The increase of $9.0 million during the comparative three and nine months ended September 30, 2021 and 2020 was primarily attributable to the full redemption of our 12.00% Senior Unsecured Notes, which resulted in $7.8 million of losses, and the partial repurchase of our 4.50% Convertible Senior Notes, which resulted in $1.2 million of losses, during the three months ended September 30, 2021.

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Financial Condition

Summary

Our total assets were $2.1 billion and $1.7 billion at September 30, 2021 and December 31, 2020, respectively.

Investment Portfolio

The tables below summarize the amortized cost and net carrying amount of our investment portfolio, classified by asset type, at September 30, 2021 and December 31, 2020 as follows (dollars in thousands, except amounts in footnotes):

At September 30, 2021	Amortized Cost		Net Carrying Amount		Percent of Portfolio			Weighted Average Coupon
Loans held for investment:
CRE whole loans (1)(2)	$	1,840,988	$	1,822,410		97.63	%	4.74%
CRE mezzanine loan (1)		4,700		4,415		0.24	%	10.00%
		1,845,688		1,826,825		97.87	%
Other investments:
Investments in unconsolidated entities		1,548		1,548		0.08	%	N/A (4)
Investments in real estate (3)		38,297		38,297		2.05	%	N/A (4)
		39,845		39,845		2.13	%
Total investment portfolio	$	1,885,533	$	1,866,670		100.00	%
At December 31, 2020	Amortized Cost		Net Carrying Amount		Percent of Portfolio			Weighted Average Coupon
Loans held for investment:
CRE whole loans, floating-rate (1)	$	1,509,578	$	1,477,295		94.97	%	5.44%
CRE mezzanine loan (1)		4,700		4,399		0.28	%	10.00%
CRE preferred equity investments (1)		27,714		25,988		1.67	%	11.38%
		1,541,992		1,507,682		96.92	%
Investment securities available-for-sale:
CMBS, fixed-rate		2,080		2,080		0.13	%	2.70%
Other investments:
Investments in unconsolidated entities		1,548		1,548		0.10	%	N/A (4)
Investment in real estate (3)		39,585		39,585		2.54	%	N/A (4)
CRE whole loans, fixed-rate (5)		4,809		4,809		0.31	%	4.44%
		45,942		45,942		2.95	%
Total investment portfolio	$	1,590,014	$	1,555,704		100.00	%

(1) Net carrying amount includes an allowance for credit losses of $18.9 million and $34.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Includes one CRE whole loan with a par value of $20.8 million that has a fixed interest rate from June 2021 through December 2021 in connection with a modification.

(3) Includes real estate-related right of use assets of $5.5 million and $5.6 million, a lease liability of $3.1 million and intangible assets of $3.0 million and $3.3 million at September 30, 2021 and December 31, 2020, respectively.

(4) There are no stated rates associated with these investments.

(5) Classified as other assets on the consolidated balance sheet.

CRE loans. During the nine months ended September 30, 2021, we originated $1,082.7 million of floating-rate CRE whole loan commitments (of which $127.5 million was unfunded loan commitments), funded $20.1 million of previously unfunded loan commitments and received $670.6 million in proceeds from loan payoffs and paydowns. In October 2021, we received an additional $25.0 million of proceeds from the collection of our principal paydown receivable balance.

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The following is a summary of our loans (dollars in thousands, except amounts in footnotes):

Description	Quantity		Principal		Unamortized (Discount) Premium, net (1)			Amortized Cost		Allowance for Credit Losses			Carrying Value		Contractual Interest Rates (2)(3)	Maturity Dates (4)(5)
At September 30, 2021:
CRE loans held for investment:
Whole loans (6)(7)		95	$	1,853,168	$	(12,180	)	$	1,840,988	$	(18,578	)	$	1,822,410	1M LIBOR plus 2.70% to 1M LIBOR plus 9.00%	November 2021 to September 2025
Mezzanine loan (6)		1		4,700		—			4,700		(285	)		4,415	10.00%	June 2028
Total CRE loans held for investment			$	1,857,868	$	(12,180	)	$	1,845,688	$	(18,863	)	$	1,826,825
At December 31, 2020:
CRE loans held for investment:
Whole loans (6)(7)		95	$	1,515,722	$	(6,144	)	$	1,509,578	$	(32,283	)	$	1,477,295	1M LIBOR plus 2.70% to 1M LIBOR plus 9.00%	January 2021 to January 2024
Mezzanine loan (6)		1		4,700		—			4,700		(301	)		4,399	10.00%	June 2028
Preferred equity investments (8)		2		27,650		64			27,714		(1,726	)		25,988	11.00% to 11.50%	June 2022 to April 2023
Total CRE loans held for investment			$	1,548,072	$	(6,080	)	$	1,541,992	$	(34,310	)	$	1,507,682

(1) Amounts include unamortized loan origination fees of $11.7 million and $5.7 million and deferred amendment fees of $469,000 and $495,000 at September 30, 2021 and December 31, 2020, respectively. Additionally, the amounts include unamortized loan acquisition costs of $29,000 and $118,000 at September 30, 2021 and December 31, 2020, respectively. At September 30, 2021, all but one of our floating-rate whole loans had one-month LIBOR floors. At December 31, 2020, all whole loans had one-month LIBOR floors.

(2) Our whole loan portfolio of $1.9 billion and $1.5 billion had a weighted-average one-month LIBOR floor of 1.03% and 1.88% at September 30, 2021 and December 31, 2020, respectively.

(3) Excludes one whole loan that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

(4) Maturity dates exclude contractual extension options, subject to the satisfaction of certain terms that may be available to the borrowers.

(5) Maturity dates exclude four and three whole loans, with amortized costs of $49.1 million and $39.7 million, in maturity default at September 30, 2021 and December 31, 2020, respectively.

(6) Substantially all loans are pledged as collateral under various borrowings at September 30, 2021 and December 31, 2020.

(7) CRE whole loans had $140.6 million and $67.2 million in unfunded loan commitments at September 30, 2021 and December 31, 2020, respectively. These unfunded loan commitments are advanced as the borrowers formally request additional funding and meet certain benchmarks, as permitted under the loan agreement, and any necessary approvals have been obtained.

(8) The interest rate on our preferred equity investments paid at 8.00%. The remaining interest was deferred until payoff, which occurred in March 2021 and April 2021.

At September 30, 2021, approximately, 22.0%, 18.4% and 15.7% of our CRE loan portfolio was concentrated in the Southeast, Southwest and Mountains regions, respectively, based on carrying value, as defined by the NCREIF. At December 31, 2020, approximately 21.4%, 17.9% and 16.1% of our CRE loan portfolio was concentrated in the Mountain, Southwest and Southeast regions respectively, based on carrying value. No single loan or investment represented more than 10% of our total assets and no single investment group generated over 10% of our revenue.

CMBS. Beginning in the first quarter of 2020, the COVID-19 pandemic produced material and previously unforeseeable liquidity shocks to credit markets. As a result of the receipt of default notices with respect to some of our CMBS and the uncertainty caused by the COVID-19 pandemic, we disposed of substantially all of our CMBS portfolio as of April 2020. In March 2021, we sold two CMBS securities with an amortized cost and fair value of $2.1 million at December 31, 2020, for cash proceeds of $3.0 million.

Investment in unconsolidated entities. Our investments in unconsolidated entities at September 30, 2021 and December 31, 2020 comprised a 100% interest in the common shares of Resource Capital Trust I (“RCT I”) and RCC Trust II (“RCT II”), respectively, with a value of $1.5 million in the aggregate, or 3.0% of each trust. We record our investments in RCT I’s and RCT II’s common shares as investments in unconsolidated entities using the cost method, recording dividend income when declared by RCT I and RCT II. During the three and nine months ended September 30, 2021, we recorded dividends from our investments in RCT I’s and RCT II’s common shares, reported in other revenue on the consolidated statement of operations, of $16,000 and $49,000, respectively. During the three and nine months ended September 30, 2020, we recorded dividends of $19,000 and $62,000, respectively.

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Financing Receivables

The following tables show the activity in the allowance for credit losses for the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands, except amount in the footnote):

	Nine Months Ended September 30, 2021			Year Ended December 31, 2020
	CRE Loans			CRE Loans
Allowance for credit losses:
Allowance for credit losses at beginning of period	$	34,310		$	1,460
Adoption of the new accounting guidance		—			3,032
(Reversal of) provision for credit losses		(15,447	)		30,815
Realized loss on sale of loan (1)		—			(997	)
Allowance for credit losses at end of period	$	18,863		$	34,310

(1) The allowance for credit losses included a realized loss of $997,000 that was charged to the allowance related to one CRE loan sale that occurred during the year ended December 31, 2020. There was no such charge off during the nine months ended September 30, 2021.

During the three months ended September 30, 2021, we recorded a provision for expected credit losses of $537,000 in connection with an increase in the size of the CRE loan portfolio, offset by an improvement in macroeconomic conditions. During the nine months ended September 30, 2021, reversals of expected credit losses in the first and second quarters of 2021 outpaced the provision during the third quarter of 2021, resulting in a net reversal of expected credit losses of $15.4 million. Overall, the reversal of expected credit losses was attributable to declines in expected unemployment and continued improvement in macroeconomic conditions, loan paydowns and improved collateral operating performance.

Beginning in the first quarter through the second quarter of 2020, expected credit losses on our CRE loan portfolio were negatively impacted by higher than expected unemployment and increased volatility in CRE asset pricing and liquidity in connection with the COVID-19 pandemic. While projections of declining unemployment and recoveries in CRE asset pricing began to improve during the three months ended September 30, 2020, resulting in a reversal of expected credit losses of $8.1 million, the impact of COVID-19 in the first two quarters of 2020 resulted in a provision for expected credit losses of $48.5 million during the nine months ended September 30, 2020.

During the three and nine months ended September 30, 2021, we individually evaluated an office loan in the East North Central region with a $19.9 million principal balance, two hotel loans in the Northeast region with $23.3 million of total principal balances and a hotel loan in the East North Central region with a $8.4 million principal balance for which sale or foreclosure was determined to be probable. We obtained an updated appraisal in October 2021 on the office loan, which indicated an as-is appraised value of $17.6 million. We consequently recorded a provision for credit losses of $400,000 during the three months ended September 30, 2021 to increase the current expected credit losses (“CECL”) allowance to $2.3 million on the loan, which was based on the new appraised value of the collateral. Additionally, we received a bid to sell the note on one hotel loan in the Northeast region with a $9.3 million principal balance. Using the bid less estimated costs to sell, we individually evaluated the loan and recorded a reversal of credit losses of $465,000 during the three months ended September 30, 2021. The loan had a CECL allowance of $1.8 million at September 30, 2021. The hotel loan in the East North Central region and other hotel loan in the Northeast region were determined to have no CECL allowance as the as-is appraised values on the properties were in excess of the principal and interest balances.

Credit quality indicators

Commercial Real Estate Loans

CRE loans are collateralized by a diversified mix of real estate properties and are assessed for credit quality based on the collective evaluation of several factors, including but not limited to: collateral performance relative to underwritten plan, time since origination, current implied and/or reunderwritten loan-to-collateral value (“LTV”) ratios, loan structure and exit plan. Depending on the loan’s performance against these various factors, loans are rated on a scale from 1 to 5, with loans rated 1 representing loans with the highest credit quality and loans rated 5 representing loans with the lowest credit quality. Loans are rated a 2 at origination. The factors evaluated provide general criteria to monitor credit migration in our loan portfolio; as such, a loan’s rating may improve or worsen, depending on new information received.

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The criteria set forth below should be used as general guidelines and, therefore, not every loan will have all of the characteristics described in each category below.

Risk Rating	Risk Characteristics
1	• Property performance has surpassed underwritten expectations.
	• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.
2	• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded.
	• Occupancy is stabilized, near stabilized or is on track with underwriting.
3	• Property performance lags behind underwritten expectations.
	• Occupancy is not stabilized and the property has some tenancy rollover.
4	• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers.
	• Occupancy is not stabilized and the property has a large amount of tenancy rollover.
5	• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Expected sale proceeds would not be sufficient to pay off the loan at maturity.
	• The property has a material vacancy rate and significant rollover of remaining tenants.
	• An updated appraisal is required upon designation and updated on an as-needed basis.

All CRE loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Mezzanine loans and preferred equity investments may experience greater credit risks due to their nature as subordinated investments.

For the purpose of calculating the quarterly provision for credit losses under CECL, we pool CRE loans based on the underlying collateral property type and utilize a probability of default and loss given default methodology for approximately one year after which we immediately revert to a historical mean loss ratio. In order to calculate the historical mean loss ratio, we utilize our full, 15 year underwriting history in the determination of historical losses, along with the market loss history from a selected population from an engaged third-party provider’s database that were similar to our loan types, loan sizes, durations, interest rate structure and general LTV profiles.

Credit risk profiles of CRE loans at amortized cost were as follows (in thousands, except amounts in the footnotes):

	Rating 1		Rating 2		Rating 3		Rating 4		Rating 5		Total (1)
At September 30, 2021:
Whole loans, floating-rate (2)	$	—	$	1,310,042	$	353,430	$	123,647	$	53,869	$	1,840,988
Mezzanine loan		—		—		4,700		—		—		4,700
Total	$	—	$	1,310,042	$	358,130	$	123,647	$	53,869	$	1,845,688
At December 31, 2020:
Whole loans, floating-rate	$	—	$	611,838	$	599,208	$	262,398	$	36,134	$	1,509,578
Mezzanine loan		—		—		4,700		—		—		4,700
Preferred equity investments		—		—		6,452		21,262		—		27,714
Total	$	—	$	611,838	$	610,360	$	283,660	$	36,134	$	1,541,992

(1) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Includes one $20.8 million whole loan, risk rated a 3, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

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Credit risk profiles of CRE loans by origination year at amortized cost were as follows (in thousands, except amounts in footnotes):

	2021		2020		2019		2018		2017		Prior		Total (1)
At September 30, 2021:
Whole loans, floating-rate: (2)
Rating 2	$	944,534	$	197,627	$	114,859	$	53,022	$	—	$	—	$	1,310,042
Rating 3 (3)		10,315		10,084		190,708		108,327		16,496		17,500		353,430
Rating 4		—		—		28,420		86,025		—		9,202		123,647
Rating 5		—		—		22,373		9,300		19,900		2,296		53,869
Total whole loans, floating-rate		954,849		207,711		356,360		256,674		36,396		28,998		1,840,988
Mezzanine loan (rating 3)		—		—		—		4,700		—		—		4,700
Total	$	954,849	$	207,711	$	356,360	$	261,374	$	36,396	$	28,998	$	1,845,688
	2020		2019		2018		2017		2016		Prior		Total (1)
At December 31, 2020:
Whole loans, floating-rate: (2)
Rating 2	$	221,364	$	279,077	$	111,397	$	—	$	—	$	—	$	611,838
Rating 3		43,579		246,073		246,944		45,142		—		17,470		599,208
Rating 4		—		77,495		129,536		46,220		—		9,147		262,398
Rating 5		—		13,938		—		19,900		—		2,296		36,134
Total whole loans, floating-rate		264,943		616,583		487,877		111,262		—		28,913		1,509,578
Mezzanine loan (rating 3)		—		—		4,700		—		—		—		4,700
Preferred equity investments
Rating 3		—		6,452		—		—		—		—		6,452
Rating 4		—		—		21,262		—		—		—		21,262
Total preferred equity investments		—		6,452		21,262		—		—		—		27,714
Total	$	264,943	$	623,035	$	513,839	$	111,262	$	—	$	28,913	$	1,541,992

(1) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Acquired CRE whole loans are grouped within each loan’s year of issuance.

(3) Includes one $20.8 million whole loan, originated in 2018, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

At September 30, 2021 and December 31, 2020, we had one mezzanine loan included in assets held for sale that had no fair value.

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Loan Portfolio Aging Analysis

The following table presents the CRE loan portfolio aging analysis as of the dates indicated for CRE loans at amortized cost (in thousands, except amounts in footnotes):

	30-59 Days		60-89 Days		Greater than 90 Days (1)		Total Past Due		Current (2)		Total Loans Receivable (3)		Total Loans > 90 Days and Accruing
At September 30, 2021:
Whole loans, floating-rate (4)	$	—	$	—	$	39,798	$	39,798	$	1,801,190	$	1,840,988	$	19,898
Mezzanine loan		—		—		—		—		4,700		4,700		—
Total	$	—	$	—	$	39,798	$	39,798	$	1,805,890	$	1,845,688	$	19,898
At December 31, 2020:
Whole loans, floating-rate	$	—	$	—	$	11,443	$	11,443	$	1,498,135	$	1,509,578	$	11,443
Mezzanine loan		—		—		—		—		4,700		4,700		—
Preferred equity investments		—		—		—		—		27,714		27,714		—
Total	$	—	$	—	$	11,443	$	11,443	$	1,530,549	$	1,541,992	$	11,443

(1) During the three and nine months ended September 30, 2021, we recognized interest income of $480,000 and $1.7 million, respectively, on the three loans with principal payments past due greater than 90 days at September 30, 2021. During the three and nine months ended September 30, 2020, we recognized interest income of $605,000 and $1.8 million, respectively, on these loans.

(2) Includes two whole loans, with amortized costs of $28.3 million, in maturity default at December 31, 2020.

(3) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(4) Includes one $20.8 million whole loan, which is current, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

At September 30, 2021 and December 31, 2020, we had four and three CRE loans in maturity default, respectively, with total amortized costs of $49.1 million and $39.7 million, respectively. One of the four loans in maturity default, with a carrying value of $17.6 million at September 30, 2021, completed the receipt of the deed-in-lieu of foreclosure in October 2021 on the collateral, based on an as-is appraised value. Two of the four loans in maturity default at September 30, 2021 are making current interest payments, while one of the loans was on non-accrual status.

We received proceeds of $28.8 million relating to the payoffs of our preferred equity investments during the nine months ended September 30, 2021.

Troubled Debt Restructurings (“TDRs”)

There were no TDRs for the three months ended September 30, 2021 and 2020.

During the nine months ended September 30, 2021, we entered into 13 agreements that extended loans by a weighted average period of 11 months and, in certain cases, modified certain other loan terms. Three formerly forborne borrowers and one borrower performing in accordance with a forbearance agreement were in maturity default at September 30, 2021. No loan modifications during the three and nine months ended September 30, 2021 resulted in TDRs.

Restricted Cash

At September 30, 2021, we had restricted cash of $32.4 million, which consisted of $32.4 million of restricted cash held within all six of our consolidated securitization entities and $21,000 held in various reserve accounts. At December 31, 2020, we had restricted cash of $38.4 million, which consisted of $38.4 million held within our six consolidated securitization entities and $33,000 held in various reserve accounts. The decrease of $6.0 million was primarily attributable to paydowns on our CRE securitization senior notes as well as the liquidation of XAN 2019-RSO7, partially offset by the timing of receipt of principal payments on the assets held at our CRE securitizations.

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Accrued Interest Receivable

The following table summarizes our accrued interest receivable at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021		December 31, 2020		Net Change
Accrued interest receivable from loans	$	6,643	$	7,310	$	(667	)
Accrued interest receivable from securities		—		56		(56	)
Accrued interest receivable from promissory note, escrow, sweep and reserve accounts		35		6		29
Total	$	6,678	$	7,372	$	(694	)

The decrease of $694,000 in accrued interest receivable was primarily attributable to the decrease of $667,000 in accrued interest receivable from loans, which was primarily attributable to declines in the coupon rates of our CRE floating-rate loans, and the decrease of $56,000 in accrued interest receivable from securities, which was attributable to the sale of our remaining CMBS during the first quarter of 2021.

Other Assets

The following table summarizes our other assets at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021		December 31, 2020		Net Change
Tax receivables and prepaid taxes	$	2,120	$	2,244	$	(124	)
Other receivables		1,133		804		329
Other prepaid expenses		2,305		568		1,737
Fixed assets - non-real estate		259		177		82
Unsettled trades receivable		—		181		(181	)
Other assets, miscellaneous		18		—		18
CRE fixed-rate whole loans, held for sale		—		4,809		(4,809	)
Total	$	5,835	$	8,783	$	(2,948	)

The decrease of $2.9 million in other assets was primarily attributable to the sale of two fixed-rate CRE whole loans during the nine months ended September 30, 2021 for cash proceeds of $4.8 million. The decrease in other assets was offset by a $329,000 increase in other receivables in connection with accounts receivable on the operations of the hotel property that we acquired in November 2020 as a result of a deed in lieu of foreclosure transaction and a $1.7 million increase in other prepaid expenses, resulting from the prepayment of property taxes on the hotel property.

Core and Non-Core Asset Classes

Our investment strategy targets the following core asset class:

Core Asset Class	Principal Investments
Commercial real estate-related assets	• First mortgage loans, which we refer to as whole loans;
	• First priority interests in first mortgage loans, which we refer to as A notes;
	• Subordinated interests in first mortgage loans, which we refer to as B notes;
	• Mezzanine debt related to CRE that is senior to the borrower’s equity position but subordinated to other third-party debt;
	• Preferred equity investments related to CRE that are subordinate to first mortgage loans and are not collateralized by the property underlying the investment; and
	• CRE equity investments.

In November 2016, our Board of Directors (“Board”) approved a strategic plan (the “Plan”) to focus our strategy on CRE debt investments. The Plan contemplated disposing of certain legacy CRE debt investments, exiting underperforming non-core asset classes and businesses and maintaining a dividend policy based on sustainable earnings. Legacy CRE loans are loans underwritten prior to 2010. The non-core asset classes in which we have historically invested are described below:

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Non-Core Asset Classes	Principal Investments
Residential real estate-related assets	• Residential mortgage loans; and
	• Residential mortgage-backed securities, which comprise our available-for-sale portfolio.
Commercial finance assets	• Middle market secured corporate loans and preferred equity investments;
	• Asset-backed securities, backed by senior secured corporate loans;
	• Debt tranches of collateralized debt obligations, which we refer to as CDOs, and collateralized loan obligations, respectively, and sometimes, collectively, as CDOs;
	• Structured note investments, which comprise our trading securities portfolio;
	• Syndicated corporate loans; and
	• Preferred equity investment in a commercial leasing enterprise that originates and holds small- and middle-ticket commercial direct financing leases and notes.

Derivative Instruments

Historically, a significant market risk to us was interest rate risk. We had sought to manage the extent to which net income changes as a result of fluctuation of changes in interest rates by matching adjustable-rate assets with variable-rate borrowings. We sought to mitigate the potential impact on net income (loss) of adverse fluctuations in interest rates incurred on our borrowings by entering into hedging agreements. We classified our interest rate hedges as cash flow hedges, which are hedges that eliminate the risk of changes in the cash flows of a financial asset or liability.

We terminated all of our interest rate swap positions associated with our prior financed CMBS portfolio in April 2020. At termination, we realized a loss of $11.8 million. At September 30, 2021 and December 31, 2020, we had a loss of $9.0 million and $10.4 million, respectively, recorded in accumulated other comprehensive (loss) income, which will be amortized into earnings over the remaining life of the debt. During the three and nine months ended September 30, 2021, we recorded amortization expense, reported in interest expense on the consolidated statements of operations, of $489,000 and $1.5 million, respectively. During the three and nine months ended September 30, 2020, we recorded amortization expense, reported in interest expense on the consolidated statements of operations, of $489,000.

At September 30, 2021 and December 31, 2020, we had an unrealized gain of $370,000 and $438,000, respectively, attributable to two terminated interest rate swaps, in accumulated other comprehensive (loss) income on the consolidated balance sheets, to be accreted into earnings over the remaining life of the debt. During the three and nine months ended September 30, 2021, we recorded accretion income, reported in interest expense on the consolidated statements of operations, of $23,000 and $68,000, respectively, to accrete the accumulated other comprehensive income on the terminated swap agreements. During the three and nine months ended September 30, 2020, we recorded accretion income of $23,000 and $69,000, respectively.

We were exposed to market pricing risks in connection with our fixed-rate CRE whole loans. The increase or decrease of market interest rates caused the fair value of the fixed-rate CRE whole loans to decrease or increase. In order to mitigate this market price risk, we entered into interest rate swap contracts in which we paid a fixed rate of interest in exchange for a variable rate benchmark, usually three-month LIBOR. In December 2020, these interest rate swap contracts were terminated.

The following tables present the effect of derivative instruments on our consolidated statements of operations for the nine months ended September 30, 2021 and 2020 (in thousands):

	Derivatives
Nine Months Ended September 30, 2021	Consolidated Statements of Operations Location	Realized and Unrealized Gain (Loss) (1)
Interest rate swap contracts, hedging	Interest expense	$	(1,384	)

	Derivatives
Nine Months Ended September 30, 2020	Consolidated Statements of Operations Location	Realized and Unrealized Gain (Loss) (1)
Interest rate swap contracts	Other income (expense)	$	(67	)
Interest rate swap contracts, hedging	Interest expense	$	(1,095	)

(1) Negative values indicate a decrease to the associated consolidated statement of operations line items.

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Senior Secured Financing Facility and Term Warehouse Financing Facilities

Borrowings under our senior secured financing facility and term warehouse financing facilities are guaranteed by us or one or more of our subsidiaries. The following table sets forth certain information with respect to our senior secured financing and term warehouse financing facilities (dollars in thousands, except amounts in footnotes):

	September 30, 2021									December 31, 2020
	Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate			Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate
Senior Secured Financing Facility
Massachusetts Mutual Life Insurance Company (1)	$	37,596	$	217,835		12		5.75	%	$	29,314	$	239,385		15		5.75	%
CRE - Term Warehouse Financing Facilities
Barclays Bank PLC		109,471		138,422		6		1.95	%		—		—		—		—	%
JPMorgan Chase Bank, N.A. (2)(3)		210,994		283,222		14		2.10	%		12,258		20,000		1		2.66	%
Total	$	358,061	$	639,479						$	41,572	$	259,385

(1) Includes $3.6 million and $4.0 million of deferred debt issuance costs at September 30, 2021 and December 31, 2020, respectively.

(2) Outstanding borrowings include accrued interest payable.

(3) Includes $50,000 and $1.3 million of deferred debt issuance costs at September 30, 2021 and December 31, 2020, respectively, which includes $678,000 of deferred debt issuance costs at December 31, 2020 from other term warehouse financing facilities with no balance.

We were in compliance with all covenants in the respective agreements at September 30, 2021 and December 31, 2020.

CRE - Term Warehouse Financing Facilities

In February 2012, our indirect wholly-owned subsidiary entered into a master repurchase and securities agreement, which was subsequently replaced with an amended and restated master repurchase agreement in July 2018, (the “Wells Fargo Facility”) with Wells Fargo Bank, N.A. (“Wells Fargo”) to finance the origination of CRE loans. In October 2021, the Wells Fargo Facility matured.

In April 2018, our indirect wholly-owned subsidiary entered into a master repurchase agreement (the “Barclays Facility”) with Barclays Bank PLC (“Barclays”) to finance the origination of CRE loans. In connection with the Barclays Facility, we fully guaranteed all payments and performance under the Barclays Facility pursuant to a guaranty agreement (the “Barclays Guaranty”). In October 2021, the Barclays Facility and the Barclays Guaranty were each amended to extend the revolving period of the facility to October 2022 and to modify the guaranty to limit financial covenants to be applicable when there are outstanding transactions.

In October 2018, our indirect wholly-owned subsidiary entered into a master repurchase agreement (the “JPMorgan Chase Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) to finance the origination of CRE loans. In September and October 2021, the JPMorgan Chase Facility was amended twice, resulting in: (i) the extension of the JPMorgan Chase Facility’s maturity date to October 2024, (ii) an update to our tangible net worth requirement and minimum liquidity covenant as set forth in the guarantee agreement and (iii) a modification of market terms regarding the replacement of LIBOR upon determination of a benchmark transition event.

In November 2021, our indirect, wholly-owned subsidiary (the “Subsidiary”) entered into a $250.0 million Master Repurchase and Securities Contract Agreement with Morgan Stanley Mortgage Capital Holdings LLC (“Morgan Stanley”), to be used to finance our core commercial real estate lending business (the “Morgan Stanley Facility”). Each repurchase transaction will specify its own terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate. The financing provided by the Morgan Stanley Facility matures in November 2022, with two one-year automatic extensions unless the Subsidiary provides notice of its intent not to extend the facility. The Subsidiary also has the right to request an extension for an additional one-year period after the second automatic extension to the extent it is utilized. We paid a structuring fee to Morgan Stanley as well as other reasonable closing costs.

The Morgan Stanley Facility contains margin call provisions that provide Morgan Stanley with certain rights if the value of purchased assets declines (“Margin Deficit”). Under these circumstances, Morgan Stanley may require the Subsidiary to transfer cash in an amount necessary to eliminate such Margin Deficit or repurchase the asset(s) that resulted in such Margin Deficit.

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We guaranteed the Subsidiary’s payment and performance under the Morgan Stanley Facility pursuant to a guaranty agreement (the “Morgan Stanley Guaranty”), subject to a limit of 25% of the then currently unpaid aggregate repurchase price of all purchased assets. The Morgan Stanley Guaranty includes certain financial covenants required of us, including required liquidity, required capital, ratios of total intendedness to equity and EBITDA requirements. Also, the Subsidiary’s direct parent, ACRES Realty Funding, Inc. (“Pledgor”), executed a Pledge Agreement with Morgan Stanley pursuant to which Pledgor pledged and granted to Morgan Stanley a continuing security interest in any and all of Pledgor’s right, title and interest in and to the Subsidiary, including all distributions, proceeds, payments, income and profits from Pledgor’s interests in the Subsidiary.

The Morgan Stanley Facility specifies events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement. The remedies for such events of default are also customary for this type of financing arrangement and include acceleration of the principal amount outstanding under the Morgan Stanley Facility and liquidation by Morgan Stanley of purchased assets then subject to the Morgan Stanley Facility.

Securitizations

At September 30, 2021, we retained equity in six of the securitization entities we have executed, of which three have been substantially liquidated.

XAN 2019-RSO7

In April 2019, we closed XAN 2019-RSO7, a $687.2 million CRE debt securitization transaction that provided financing for CRE loans. In May 2021, we exercised the optional redemption on XAN 2019-RSO7 in conjunction with the closing of ACR 2021-FL1 (see below).

XAN 2020-RSO8

In March 2020, we closed XAN 2020-RSO8, a $522.6 million CRE debt securitization transaction that provided financing for CRE loans. In June 2021, the benchmark rate on XAN 2020-RSO8’s senior notes, previously one-month LIBOR, was replaced with Compounded SOFR plus a benchmark adjustment.

XAN 2020-RSO9

In September 2020, we closed XAN 2020-RSO9, a $297.0 million CRE debt securitization transaction that provided financing for CRE loans. In June 2021, the benchmark rate on XAN 2020-RSO9’s senior notes, previously one-month LIBOR, was replaced with Compounded SOFR plus a benchmark adjustment.

ACR 2021-FL1

In May 2021, we closed ACR 2021-FL1, a $802.6 million CRE debt securitization transaction that provided financing for CRE loans. ACR 2021-FL1 includes a reinvestment period, which ends in May 2023, that allows it to acquire CRE loans for reinvestment into the securitization using uninvested principal proceeds. ACR 2021-FL1 issued a total of $675.2 million of non-recourse, floating-rate notes to third parties at par. Additionally, ACRES Realty Funding, Inc. (“ACRES RF”) retained 100% of the Class F and Class G notes and a subsidiary of ACRES RF retained 100% of the outstanding preference shares. The preference shares are subordinated in right of payment to all other securities issued by ACR 2021-FL1.

At closing, the senior notes issued to investors consisted of the following classes: (i) $431.4 million of Class A notes bearing interest at one-month LIBOR plus 1.20%; (ii) $100.3 million of Class A-S notes bearing interest at one-month LIBOR plus 1.60%; (iii) $37.1 million of Class B notes bearing interest at one-month LIBOR plus 1.80%; (iv) $43.1 million of Class C notes bearing interest at one-month LIBOR plus 2.00%; (v) $50.2 million of Class D notes bearing interest at one-month LIBOR plus 2.65%; and (vi) $13.0 million of Class E notes bearing interest at one-month LIBOR plus 3.10%.

All of the notes issued mature in June 2036, although we have the right to call the notes anytime after May 2023.

Corporate Debt

4.50% Convertible Senior Notes and 8.00% Convertible Senior Notes

We issued $100.0 million aggregate principal of our 8.00% convertible senior notes due 2020 (“8.00% Convertible Senior Notes”) and $143.8 million aggregate principal of our 4.50% Convertible Senior Notes in January 2015 and August 2017, respectively. In conjunction with the issuance of the 4.50% Convertible Senior Notes, we extinguished $78.8 million of aggregate principal of our 8.00% Convertible Senior Notes. In January 2020, the remaining 8.00% Convertible Senior Notes were paid off upon maturity.

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During the three months ended September 30, 2021, we repurchased $55.7 million of our 4.50% Convertible Senior Notes, resulting in a charge to earnings of $1.5 million, comprising an extinguishment of debt charge of $1.2 million in connection with the acceleration of the market discount and interest expense of $304,000 in connection with the acceleration of deferred debt issuance costs.

The following table summarizes the 4.50% Convertible Senior Notes at September 30, 2021 (dollars in thousands, except the conversion price and amounts in the footnotes):

	Principal Outstanding		Borrowing Rate			Effective Rate (1)(2)			Conversion Rate (3)(4)	Conversion Price (4)		Maturity Date
4.50% Convertible Senior Notes	$	88,014		4.50	%		7.43	%	27.7222	$	36.06	August 15, 2022

(1) Includes the amortization of the market discounts and deferred debt issuance costs, if any, for the 4.50% Convertible Senior Notes recorded in interest expense on the consolidated statements of operations.

(2) During the three and nine months ended September 30, 2021 and 2020 the effective interest rate for the 4.50% Convertible Senior Notes was 7.43%.

(3) Represents the number of shares of common stock per $1,000 principal amount of the 4.50% Convertible Senior Notes’ principal outstanding, subject to adjustment as provided in the Third Supplemental Indenture (the “4.50% Convertible Senior Notes Indenture”).

(4) The conversion rate and conversion price of the 4.50% Convertible Senior Notes at September 30, 2021 are adjusted to reflect quarterly cash distributions in excess of a $0.30 distribution threshold, as defined in the 4.50% Convertible Senior Notes Indenture.

The 4.50% Convertible Senior Notes are convertible at the option of the holder at any time up until one business day before the maturity date and may be settled in cash, our common stock or a combination of cash and our common stock, at our election. The closing price of our common stock was $16.17 on September 30, 2021, which did not exceed the conversion price of our 4.50% Convertible Senior Notes at September 30, 2021.

Senior Unsecured Notes

5.75% Senior Unsecured Notes Due 2026

On August 16, 2021, we issued $150.0 million of our 5.75% Senior Unsecured Notes pursuant to our Indenture, dated August 16, 2021 (the “Base Indenture”), between Wells Fargo, now Computershare Trust Company, N.A. (“CTC”), as trustee (the “Trustee”), and us as supplemented by the First Supplemental Indenture, dated August 16, 2021, between Wells Fargo, now CTC, and us (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). Prior to May 15, 2026, we may at our option redeem the 5.75% Senior Unsecured Notes, in whole or in part, at a redemption price equal to the sum of (i) 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date, and (ii) a make-whole premium. On or after May 15, 2026, we may at our option redeem the 5.75% Senior Unsecured Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the 5.75% Senior Unsecured Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.

The Indenture contains restrictive covenants that, among other things, require us to maintain certain financial ratios. The foregoing limitations are subject to exceptions as set forth in the Supplemental Indenture. At September 30, 2021, we were in compliance with these covenants. The Indenture provides for customary events of default that include, among other things (subject in certain cases to customary grace and cure periods): (i) non-payment of principal or interest, (ii) breach of certain covenants contained in the Indenture or the 5.75% Senior Unsecured Notes, (iii) an event of default or acceleration of certain other indebtedness of the Company or a subsidiary in which the Company has invested at least $75 million in capital within the applicable grace period and (iv) certain events of bankruptcy or insolvency. Generally, if an event of default occurs (subject to certain exceptions), CTC or the holders of at least 25% in aggregate principal amount of the then outstanding 5.75% Senior Unsecured Notes may declare all of the notes to be due and payable.

12.00% Senior Unsecured Notes Due 2027

On July 31, 2020, we entered into the Note and Warrant Purchase Agreement with Oaktree Capital Management, L.P. (“Oaktree”) and Massachusetts Mutual Life Insurance Company (“MassMutual”) pursuant to which we may issue to Oaktree and MassMutual from time to time up to $125.0 million aggregate principal amount of 12.00% Senior Unsecured Notes. The 12.00% Senior Unsecured Notes had an annual interest rate of 12.00%, payable up to 3.25% (at our election) as pay-in-kind interest and the remainder as cash interest. On July 31, 2020, we issued to Oaktree and MassMutual $42.0 million and $8.0 million aggregate principal amount, respectively, of the 12.00% Senior Unsecured Notes.

On August 18, 2021, we entered into an agreement with Oaktree and MassMutual that provided for the redemption in full of the 12.00% Senior Unsecured Notes, including a waiver of certain sections of the Note and Warrant Purchase Agreement. On August 20, 2021, the redemption was consummated and a payment to Oaktree and MassMutual was made for an aggregate $55.3 million, which consisted of (i) principal in the amount of $50.0 million, (ii) interest in the amount of approximately $329,000 and (iii) a make-whole amount of approximately $5.0 million. In connection with the redemption, we recorded a charge to earnings of $8.0 million, comprising an extinguishment of debt charge of $7.8 million in connection with (i) the $5.0 million net make-whole amount and (ii) the $2.8 million acceleration of the remaining market discount; and interest expense of $218,000 in connection with the acceleration of deferred debt issuance costs.

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Stockholders’ Equity

Total stockholders’ equity at September 30, 2021 was $443.3 million and gave effect to $8.6 million of net realized losses on our terminated cash flow hedges, shown as a component of accumulated other comprehensive loss. Stockholders’ equity at December 31, 2020 was $334.4 million and gave effect to $10.0 million of net unrealized losses on our terminated cash flow hedges shown as a component of accumulated other comprehensive loss. The increase in stockholders’ equity during the nine months ended September 30, 2021 was primarily attributable to proceeds of $110.5 million pertaining to the completion of the Series D Preferred Stock offering, net of offering costs of $4.5 million, as well as an increase in retained earnings in connection with an increase in net income offset by common stock repurchases.

Balance Sheet - Book Value Reconciliation

The following table rolls forward our common stock book value for the three and nine months ended September 30, 2021 (in thousands, except per share data and amounts in footnotes):

	For the Three Months Ended September 30, 2021						For the Nine Months Ended September 30, 2021
	Total Amount			Per Share Amount			Total Amount			Per Share Amount
Common stock book value at beginning of period (1)(2)	$	226,238		$	23.56		$	218,427		$	20.57
Net (loss) income allocable to common shares (3)		(9,805	)		(1.03	)		10,734			1.12
Change in other comprehensive income on derivatives		466			0.05			1,384			0.15
Repurchase of common stock (4)		(889	)		0.04			(14,725	)		0.77
Impact to equity of share-based compensation		755			0.06			945			0.07
Total net (decrease) increase		(9,473	)		(0.88	)		(1,662	)		2.11
Common stock book value at end of period (1)(5)	$	216,765		$	22.68		$	216,765		$	22.68

(1) Per share calculations and share amounts in the above table and the following tabular footnotes retrospectively reflect the three-for-one reverse stock split effective February 16, 2021.

(2) Per share calculations exclude unvested restricted stock, as disclosed on our consolidated balance sheets, of 333,329, 339,708 and 11,610 shares at September 30, 2021, June 30, 2021 and December 31, 2020, respectively, and include warrants to purchase up to 466,661 shares of common stock at September 30, 2021, June 30, 2021 and December 31, 2020. The denominators for the calculations were 9,556,940, 9,604,004 and 10,617,340 shares at September 30, 2021, June 30, 2021 and December 31, 2020, respectively.

(3) The per share amounts are calculated with the denominator referenced in footnote (2) at September 30, 2021. We calculated net income per common share-diluted of $(1.03) and $1.09 using the weighted average diluted shares outstanding during the three and nine months ended September 30, 2021, respectively.

(4) Our Board authorized and approved the continued use of the share repurchase program to repurchase up to $20.0 million of outstanding common stock through June 30, 2021 or until the $20.0 million is fully deployed. We completed the share repurchase program in July 2021. In November 2021, our Board authorized and approved the continued use of our existing share repurchase program to repurchase up to $20.0 million of our outstanding common stock.

(5) We calculated common stock book value as total stockholders’ equity of $443.3 million less preferred stock equity of $226.5 million at September 30, 2021.

Management Agreement Equity

Our monthly base management fee, as defined in our Management Agreement, is equal to the greater of (i) 1/12 of the amount of our equity multiplied by 1.50% or (ii) $442,000 through July 31, 2022 and is calculated and paid monthly in arrears.

The following table summarizes the calculation of equity, as defined in the Management Agreement (in thousands):

	Amount
At September 30, 2021:
Proceeds from capital stock issuances, net (1)	$	1,330,524
Retained earnings, net (2)		(656,225	)
Payments for repurchases of capital stock, net		(227,103	)
Total	$	447,196

(1) Deducts underwriting discounts and commissions and other expenses and costs relating to such issuances.

(2) Excludes non-cash equity compensation expense incurred to date.

Core Earnings

Core Earnings is a non-GAAP financial measure that we use to evaluate our operating performance.

Core Earnings exclude the effects of certain transactions and adjustments in accordance with accounting principles generally accepted in the United States of America (“GAAP”) that we believe are not necessarily indicative of our current CRE loan portfolio and other CRE-related investments and operations. Core Earnings exclude income (loss) from all non-core assets such as commercial finance, middle market lending, residential mortgage lending, certain legacy CRE loans and other non-CRE assets designated as assets held for sale at the initial measurement date of December 31, 2016.

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Core Earnings, for reporting purposes, is defined as GAAP net income (loss) allocable to common shares, excluding (i) non-cash equity compensation expense, (ii) unrealized gains and losses, (iii) non-cash provisions for credit losses, (iv) non-cash impairments on securities, (v) non-cash amortization of discounts or premiums associated with borrowings, (vi) net income or loss from a limited partnership interest owned at the initial measurement date, (vii) net income or loss from non-core assets, ⁽¹⁾ (viii) real estate depreciation and amortization, (ix) foreign currency gains or losses and (x) income or loss from discontinued operations. Core Earnings may also be adjusted periodically to exclude certain one-time events pursuant to changes in GAAP and certain non-cash items.

Although pursuant to the Management Agreement we calculate incentive compensation using Core Earnings that exclude incentive compensation payable to our Manager, we include incentive compensation payable to our Manager in calculating Core Earnings for reporting purposes.

Core Earnings does not represent net income or cash generated from operating activities and should not be considered as alternatives to GAAP net income or as measures of liquidity under GAAP. Our methodology for calculating Core Earnings may differ from methodologies used by other companies to calculate similar supplemental performance measures, and, accordingly, our reported Core Earnings may not be comparable to similar performance measures used by other companies.

The following table provides a reconciliation from GAAP net income (loss) allocable to common shares to Core Earnings allocable to common shares for the periods presented (in thousands, except per share data and amounts in the footnotes):

	For the Three Months Ended												For the Nine Months Ended
	September 30,												September 30,
	2021			Per Share Data			2020			Per Share Data			2021			Per Share Data			2020			Per Share Data
Net (loss) income allocable to common shares - GAAP	$	(9,805	)	$	(1.03	)	$	5,571		$	0.51		$	10,734		$	1.09		$	(229,525	)	$	(21.47	)
Reconciling items from continuing operations:
Non-cash equity compensation expense		771			0.08			1,905			0.17			961			0.10			3,118			0.29
Non-cash provision for (reversal of) CRE credit losses		537			0.06			(8,172	)		(0.75	)		(15,447	)		(1.57	)		48,427			4.53
Realized loss on core activities (2)		—			—			—			—			(5,246	)		(0.54	)		—			—
Unrealized (gain) loss on core activities (2)		—			—			(220	)		(0.02	)		(878	)		(0.09	)		5,816			0.54
Real estate depreciation and amortization		467			0.05			—			—			1,464			0.15			—			—
Non-cash amortization of discounts or premiums associated with borrowings		4,769			0.50			740			0.07			6,439			0.66			2,170			0.20
Net loss (income) from non-core assets (1)(3)		24			—			25			—			(95	)		(0.01	)		50			0.01
Reconciling items from CRE assets:
Net interest income on legacy CRE assets		(159	)		(0.02	)		(157	)		(0.01	)		(478	)		(0.05	)		(475	)		(0.04	)
Fair value and other adjustments on legacy CRE assets		—			—			3,371			0.31			—			—			8,089			0.76
Core Earnings allocable to common shares	$	(3,396	)	$	(0.36	)	$	3,063		$	0.28		$	(2,546	)	$	(0.26	)	$	(162,330	)	$	(15.18	)
Weighted average common shares - diluted on Core Earnings allocable to common shares		9,553						10,966						9,818						10,693
Core Earnings per common share - diluted	$	(0.36	)				$	0.28					$	(0.26	)				$	(15.18	)

(1) Non-core assets are investments and securities owned by us at the initial measurement date in (i) commercial finance, (ii) middle market lending, (iii) residential mortgage lending, (iv) legacy CRE loans designated as held for sale and (v) other non-CRE assets included in assets held for sale.

(2) In March 2021, the CMBS portfolio was sold for $3.0 million, representing a total realized loss of $5.2 million that was included in Core Earnings during the nine months ended September 30, 2021. Unrealized (gain) loss on core activities includes the unrealized gains and losses on the residual CMBS portfolio, which were previously excluded from Core Earnings.

(3) Loss from discontinued operations, net of tax, reported during the three and nine months ended September 30, 2020 was reclassified into net loss (income) from non-core assets to conform to the 2021 presentation.

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Core Earnings in accordance with the Management Agreement, which excludes incentive compensation payable, was $3.4 million, or $(0.36) per common share outstanding, for the three months ended September 30, 2021. There was no incentive compensation payable for the three months ended September 30, 2021.

Incentive Compensation Hurdle

In accordance with the Management Agreement, incentive compensation is earned by our Manager when our Core Earnings per common share (as defined in the Management Agreement) for such quarter exceeds an amount equal to: (1) the weighted average of (a) book value (as defined in the Management Agreement) as of the end of such quarter divided by 10,293,783 shares and (b) the price per share (including the conversion price, if applicable) paid for common shares in each offering (or issuance, upon the conversion of convertible securities) by us subsequent to September 30, 2017, in each case at the time of issuance, multiplied by (2) the greater of (a) 1.75% and (b) 0.4375% plus one-fourth of the ten year treasury rate, as defined in the Management Agreement, for such quarter (the “Incentive Compensation Hurdle”).

For the three months ended September 30, 2021, our Core Earnings, as defined in the Management Agreement, did not exceed the Incentive Compensation Hurdle.

Commencing with the quarter ending December 31, 2022, incentive compensation will be calculated and payable in arrears in an amount, not less than zero, equal to:

(i) for the first full calendar quarter ending December 31, 2022, the product of (a) 20% and (b) the excess of (i) our Core Earnings (as defined in the Management Agreement) for such calendar quarter, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) as of the end of such calendar quarter, and (B) 7% per annum;

(ii) for each of the second, third and fourth full calendar quarters following the calendar quarter ending December 31, 2022, the excess of (1) the product of (a) 20% and (b) the excess of (i) our Core Earnings (as defined in the Management Agreement) for the calendar quarter(s) following September 30, 2022, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) in the calendar quarter(s) following September 30, 2022, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to our Manager with respect to the prior calendar quarter(s) following September 30, 2022 (other than the most recent calendar quarter); and

(iii) for each calendar quarter thereafter, the excess of (1) the product of (a) 20% and (b) the excess of (i) our Core Earnings (as defined in the Management Agreement) for the previous 12-month period, over (ii) the product of (A) our book value equity (as defined in the Management Agreement) in the previous 12-month period, and (B) 7% per annum, over (2) the sum of any incentive compensation paid to our Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive compensation shall be payable with respect to any calendar quarter unless Core Earnings (as defined in the Management Agreement) for the 12 most recently completed calendar quarters (or such lesser number of completed calendar quarters from September 30, 2022) in the aggregate is greater than zero.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, repay borrowings and provide for other general business needs, including payment of our base management fee and incentive compensation. Our ability to meet our on-going liquidity needs is subject to our ability to generate cash from operating activities and our ability to maintain and/or obtain additional debt financing and equity capital together with the funds referred to below.

During the nine months ended September 30, 2021, our principal sources of liquidity were: (i) proceeds of $591.2 million from our CRE - term warehouse financing facilities, (ii) net proceeds of $147.0 million from the issuance of the 5.75% Senior Unsecured Notes, (iii) proceeds of $121.7 million from CRE whole loan purchases by our managed CRE securitization ACR 2021-FL1, (iv) net proceeds of $117.4 million from repayments on our CRE portfolio, (v) net proceeds of $110.5 million from the completion of the Series D Preferred Stock offering, (vi) net proceeds of $43.3 million at the close of ACR 2021-FL1, (vii) net proceeds of $18.3 million from our senior secured financing facility, (viii) combined proceeds of $7.8 million from the sale of our fixed-rate CRE whole loans and investment securities available-for-sale, and (ix) proceeds of $6.7 million from our CRE securitizations that used principal paydowns to purchase CRE loan future funding commitments. These sources of liquidity were offset by our deployments in CRE whole loans, the partial repurchase and extinguishment of our 4.50% Convertible Senior Notes, the redemption of our 12.00% Senior Unsecured Notes, repurchases of common stock, distributions on our preferred stock and ongoing operating expenses and substantially resulted in the $109.9 million of unrestricted cash we held at September 30, 2021.

In October 2021, we entered into the Preferred ATM Agreement with our Manager and with JonesTrading Institutional Services LLC, as placement agent, pursuant to which we may issue and sell from time to time up to 2.2 million shares of the Series D Preferred Stock.

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In November 2021, our Board authorized and approved the continued use of our existing share repurchase program to repurchase up to $20.0 million of our outstanding common stock.

We utilize a variety of financing arrangements to finance certain assets. We generally utilize the following three types of financing arrangements:

1. Senior Secured Financing Facility: Our senior secured financing facility allows us to borrow against loans that we own. During an initial revolving period, additional loans may be financed on the senior secured financing facility. After the revolving period, the senior secured financing facility transitions to a term period over the remaining life of the facility. We pay a fixed rate of interest on the senior secured financing facility as well as an unfunded commitment fee when the facility has borrowings below a certain threshold as a percentage of the total commitment.

2. Term Warehouse Financing Facilities: Term warehouse financing facilities effectively allow us to borrow against loans that we own. Under these agreements, we transfer loans to a counterparty and agree to purchase the same loans from the counterparty at a price equal to the transfer price plus interest. The counterparty retains the sole discretion over both whether to purchase the loan from us and, subject to certain conditions, the collateral value of such loan for purposes of determining whether we are required to pay margin to the counterparty. Generally, if the lender determines (subject to certain conditions) that the value of the collateral in a repurchase transaction has decreased by more than a defined minimum amount, we would be required to repay any amounts borrowed in excess of the product of (i) the revised collateral or market value multiplied by (ii) the applicable advance rate. During the term of these agreements, we receive the principal and interest on the related loans and pay interest to the counterparty.

3. Securitizations: We seek non-recourse long-term financing from securitizations of our investments in CRE loans. The securitizations generally involve a senior portion of our loan but may involve the entire loan. Securitization generally involves transferring notes to a special purpose vehicle (or the issuing entity), which then issues one or more classes of non-recourse notes pursuant to the terms of an indenture. The notes are secured by the pool of assets. In exchange for the transfer of assets to the issuing entity, we receive cash proceeds from the sale of non-recourse notes. Securitizations of our portfolio investments might magnify our exposure to losses on those portfolio investments because the retained subordinate interest in any particular overall loan would be subordinate to the loan components sold and we would, therefore, absorb all losses sustained with respect to the overall loan before the owners of the senior notes experience any losses with respect to the loan in question.

The issuance of ACR 2021-FL1 includes a 24 month reinvestment period ending in May 2023 that allows us to reinvest CRE loans into the securitization upon the satisfaction of certain eligibility and reinvestment criteria along with rating agency approval. The reinvestment feature of the securitization will allow us to extend the useful life of the securitization financing by extending the life of the senior notes and return liquidity to fund our forward loan pipeline that would otherwise pay down the senior notes of the securitization. We are also able to acquire future funding participations of the collateral in the securitization during the reinvestment period.

We were in compliance with all of our covenants at September 30, 2021 in accordance with the terms provided in agreements with our lenders.

We are continuing to monitor the COVID-19 pandemic and its impact on us, the borrowers underlying our CRE loans (and their tenants), our financing sources, and the economy as a whole. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our operations and liquidity remains uncertain and difficult to predict. Further discussion of the potential impacts on us from the COVID-19 pandemic is provided in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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At September 30, 2021, we had a senior secured financing facility and term warehouse financing facilities as summarized below (in thousands, except amounts in footnotes):

	Execution Date	Maturity Date	Maximum Capacity		Facility Principal Outstanding		Availability
Senior Secured Financing Facility (1)
Massachusetts Mutual Life Insurance Company	July 2020	July 2027	$	250,000	$	41,182	$	208,818
CRE - Term Warehouse Financing Facilities (2)(3)
Barclays Bank PLC	April 2018	October 2021	$	250,000		109,412	$	140,588
JPMorgan Chase Bank, N.A.	October 2018	October 2021	$	250,000		210,783	$	39,217
Total					$	361,377

(1) Facility principal outstanding excludes deferred debt issuance costs of $3.6 million at September 30, 2021.

(2) Facility principal outstanding excludes accrued interest payable of $320,000 and deferred debt issuance costs and discounts of $50,000 at September 30, 2021.

(3) In October 2021, we extended our JPMorgan Chase term warehouse financing facility to October 2024, amended the revolving period on the Barclays term warehouse financing facility to October 2022 and allowed our Wells Fargo term warehouse facility to mature. In November 2021, we executed a new term warehouse financing facility with Morgan Stanley to finance CRE loans, which matures in November 2022 and contains extension options.

The following table summarizes the average principal outstanding on our senior secured financing facility and term warehouse financing facilities during the three months ended September 30, 2021 and December 31, 2020 and the principal outstanding on our senior secured financing facility and term warehouse financing facilities at September 30, 2021 and December 31, 2020 (in thousands, except amounts in footnotes):

	Three Months Ended September 30, 2021		September 30, 2021		Three Months Ended December 31, 2020		December 31, 2020
	Average Principal Outstanding		Principal Outstanding (1)(2)		Average Principal Outstanding		Principal Outstanding (1)(2)
Financing Arrangement
Senior secured financing facility - CRE loans	$	22,322	$	41,182	$	68,403	$	33,360
Term warehouse financing facilities - CRE loans		181,583		320,195		3,228		13,500
Total	$	203,905	$	361,377	$	71,631	$	46,860

(1) Excludes accrued interest payable on the senior secured financing facility collateralized by CRE loans of $77,000 and $75,000 and deferred debt issuance costs of $3.6 million and $4.0 million at September 30, 2021 and December 31, 2020, respectively.

(2) Excludes accrued interest payable on term warehouse financing facilities collateralized by CRE loans of $320,000 and $16,000 and deferred debt issuance costs and discounts of $50,000 and $1.3 million at September 30, 2021 and December 31, 2020, respectively.

The following table summarizes the maximum month-end principal outstanding on our senior secured financing facility and term warehouse financing facilities during the periods presented (in thousands):

	Maximum Month-End Principal Outstanding During the
	Nine Months Ended		Years Ended December 31,
	September 30, 2021		2020		2019
Financing Arrangement (1)
Senior secured financing facility - CRE loans	$	77,407	$	128,495	$	—
Term warehouse financing facilities - CRE loans	$	320,195	$	598,635	$	665,294

(1) Increases in the maximum month-end outstanding principal balances for the periods presented resulted from the originations and acquisitions of CRE loans.

Historically, we have financed the acquisition of our investments through CDOs and securitizations that essentially match the maturity and repricing dates of these financing vehicles with the maturities and repricing dates of our investments. In the past, we have derived substantial operating cash from our equity investments in our CDOs and securitizations, which will cease if the CDOs and securitizations fail to meet certain tests. Through September 30, 2021, we did not experience difficulty in maintaining our existing CDO and securitization financing and passed all of the critical tests required by these financings.

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The following table sets forth the distributions received by us and coverage test summaries for our active securitizations for the periods presented (in thousands, except amount in the footnotes):

	Cash Distributions				Overcollateralization Cushion (1)
Name	For the Nine Months Ended September 30, 2021		For the Year Ended December 31, 2020		At September 30, 2021		At the Initial Measurement Date		Permitted Funded Companion Participation Acquisition Period End	Reinvestment Period End (2)
XAN 2020-RSO8 (3)	$	11,435	$	13,851	$	62,688	$	26,146	March 2023	N/A
XAN 2020-RSO9 (4)	$	6,927	$	1,469	$	30,363	$	11,887	N/A	N/A
ACR 2021-FL1	$	8,451	$	—	$	6,758	$	6,758	N/A	May 2023

(1) Overcollateralization cushion represents the amount by which the collateral held by the securitization issuer exceeds the minimum amount required.

(2) The reinvestment period is the period in which principal proceeds received before the end of the period may be used to acquire CRE loans for reinvestment into the securitization.

(3) The designated principal reinvestment period for XAN 2020-RSO8 is the period in which principal repayments can be utilized to purchase loans held outside of the securitization that represent the funded commitments of existing collateral in the securitization that were not funded as of the date the securitization was closed. Additionally, the indenture for each securitization does not contain any interest coverage test provisions.

(4) XAN 2020-RSO9 includes a future advances reserve account, which had a balance of $7.7 million at September 30, 2021, to fund commitments that were not funded as of the closing date. Additionally, the indenture does not contain any interest coverage test provisions.

The following table sets forth the distributions received by us and liquidation details for our liquidated securitizations for the periods presented (in thousands):

	Cash Distributions				Liquidation Details
Name	For the Nine Months Ended September 30, 2021		For the Year Ended December 31, 2020		Liquidation Date	Remaining Assets at the Liquidation Date (1)
XAN 2018-RSO6	$	—	$	6,748	September 2020	$	201,327
XAN 2019-RSO7	$	9,339	$	22,126	May 2021	$	391,168

(1) The remaining assets at the liquidation date were distributed to us in exchange for our notes owned and preference shares in the respective securitization.

At October 31, 2021, our liquidity consisted of $117.9 million of unrestricted cash and cash equivalents, $47.9 million of unlevered financeable CRE loans and $75.0 million of availability under the Oaktree and MassMutual 12.00% Senior Unsecured Notes.

Our leverage ratio, defined as the ratio of borrowings to stockholders’ equity, may vary as a result of the various funding strategies we use. At September 30, 2021 and December 31, 2020, our leverage ratio was 3.6 and 3.9 times, respectively. Our net debt to equity ratio, defined as the ratio of borrowings less cash and cash equivalents to stockholders’ equity was 3.4 and 3.8 times at September 30, 2021 and December 31, 2020, respectively. The leverage ratio decrease through September 30, 2021, was primarily attributable to the issuance of the Series D Preferred Stock during the second quarter of 2021, which was the primary driver of a net increase in our stockholders’ equity of $108.9 million. The impact of the issuance was offset by net increases in asset-specific borrowings and common stock repurchases.

Net Operating Losses and Loss Carryforwards

We generated net operating losses (“NOL”) during the tax year ended December 31, 2020 and finalized our 2020 tax return in October 2021. We have approximately $47.7 million of NOL carryforwards in our 2020 tax return that generally can be used to offset both ordinary taxable income and capital gains in future years. Additionally, we estimate that we will receive a total of approximately $18.7 million of NOL carryforwards from activities in 2021 and 2022. The Tax Cuts and Jobs Act (“TCJA”) along with revisions made by the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) reduced the deduction for NOLs to 80% of taxable income and granted an indefinite carryforward period.

In addition to NOLs, we estimate we generated approximately $136.9 million of net capital losses as of December 31, 2020. A net capital loss may be carried forward up to five years to offset future capital gains.

We also generate tax assets in our taxable REIT subsidiaries (“TRS”). These tax assets are analyzed and disclosed quarterly in our financial statements. As of December 31, 2020, our TRSs have approximately $39.9 million of pre-TCJA NOLs, some of which are set to expire beginning in 2044. The TRSs also have approximately $19.5 million of NOLs with an indefinite carryforward period and net capital losses of approximately $900,000.

We are exploring a range of assets and options in which to invest, including investments in commercial real estate equity, with the objective of creating capital gains to take advantage of all or a portion of our collective capital loss carryforwards.

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Distributions

We did not pay distributions on our common shares during the nine months ended September 30, 2021 nor the year ended December 31, 2020 as we were focused on prudently retaining and managing sufficient excess liquidity in connection with the economic impact of the COVID-19 pandemic. As we continue to take steps necessary to stabilize our financial condition and capital position in light of the COVID-19 pandemic, our Board will establish a plan for the prudent resumption of the payment of common share distributions. We intend to continue to make regular quarterly distributions to holders of our preferred stock.

U.S. federal income tax law generally requires that a REIT distribute at least 90% of its REIT taxable income, after consideration of utilizable NOL carryforwards, annually, determined without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating and debt service requirements on our repurchase agreements and other debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets or borrow funds to make cash distributions, or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

Contractual Obligations and Commitments

	Contractual Commitments
	(dollars in thousands, except amounts in footnotes)
	Payments due by Period
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
At September 30, 2021:
CRE securitizations	$	968,647	$	—	$	—	$	—	$	968,647
Senior secured financing facility (1)		41,182		—		—		—		41,182
CRE - term warehouse financing facilities (2)(3)		320,515		320,515		—		—		—
4.50% Convertible Senior Notes (4)		88,014		88,014		—		—		—
5.75% Senior Unsecured Notes (5)		150,000		—		—		150,000		—
Unsecured junior subordinated debentures (6)		51,548		—		—		—		51,548
Unfunded commitments on CRE loans (7)		140,607		25,141		115,466		—		—
Base management fees (8)		6,708		6,708		—		—		—
Total	$	1,767,221	$	440,378	$	115,466	$	150,000	$	1,061,377

(1) Contractual commitments exclude $77,000 of accrued interest payable at September 30, 2021 on our senior secured financing facility.

(2) Contractual commitments include $320,000 of accrued interest payable at September 30, 2021 on our term warehouse financing facilities.

(3) In October 2021, we extended our JPMorgan Chase term warehouse financing facility to October 2024, amended the revolving period on the Barclays term warehouse financing facility to October 2022 and allowed our Wells Fargo term warehouse financing facility to mature. In November 2021, we executed a new term warehouse financing facility with Morgan Stanley to finance CRE loans, which matures in November 2022 and contains extension options.

(4) Contractual commitments exclude $3.6 million of interest expense payable through maturity, in August 2022, on our 4.50% Convertible Senior Notes.

(5) Contractual commitments exclude $42.0 million of interest expense payable through maturity, in August 2026, on our 5.75% Senior Unsecured Notes.

(6) Contractual commitments exclude $22.3 million and $23.0 million of estimated interest expense payable through maturity, in June 2036 and October 2036, respectively, on our trust preferred securities.

(7) Unfunded commitments on our originated CRE loans generally fall into two categories: (i) pre-approved capital improvement projects and (ii) new or additional construction costs subject, in each case, to the borrower meeting specified criteria. Upon completion of the improvements or construction, we would receive additional interest income on the advanced amount. At September 30, 2021, we had unfunded commitments on 60 CRE whole loans. At September 30, 2021, XAN 2020-RSO9 includes a future advances reserve account of $7.7 million to fund unfunded commitments.

(8) Base management fees presented are based on an estimate of base management fees payable to our Manager over the next 12 months. Our Management Agreement also provides for an incentive compensation arrangement that is based on operating performance. The incentive compensation is not a fixed and determinable amount, and therefore it is not included in this table.

Off-Balance Sheet Arrangements

General

At September 30, 2021, we did not maintain any relationships with unconsolidated entities or financial partnerships that were established for the purpose of facilitating off-balance sheet arrangements or contractually narrow or limited purposes, although we do have interests in unconsolidated entities not established for those purposes. Except as set forth below, at September 30, 2021, we had not guaranteed obligations of any unconsolidated entities or entered into any commitment or letter of intent to provide additional funding to any such entities.

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Unfunded CRE Loan Commitments

In the ordinary course of business, we make commitments to borrowers whose loans are in our CRE loan portfolio to provide additional loan funding in the future. Disbursement of funds pursuant to these commitments is subject to the borrower meeting pre-specified criteria. These commitments are subject to the same underwriting requirements and ongoing portfolio maintenance as are the on-balance sheet financial investments that we hold. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Whole loans had $140.6 million and $67.2 million in unfunded loan commitments at September 30, 2021 and December 31, 2020, respectively. At September 30, 2021, XAN 2020-RSO9 includes a future advances reserve account of $7.7 million, included in restricted cash on the consolidated balance sheet, to fund unfunded commitments. Preferred equity investments had $2.5 million in unfunded investment commitments at December 31, 2020. The preferred equity investments paid off during the nine months ended September 30, 2021. Unfunded commitments are not considered in the CECL reserve if they are unconditionally cancellable.

Guarantees and Indemnifications

In the ordinary course of business, we may provide guarantees and indemnifications that contingently obligate us to make payments to the guaranteed or indemnified party based on changes in the value of an asset, liability or equity security of the guaranteed or indemnified party. As such, we may be obligated to make payments to a guaranteed party based on another entity’s failure to perform or achieve specified performance criteria, or we may have an indirect guarantee of the indebtedness of others.

As part of our May 2017 sale of our equity interest of Pearlmark Mezzanine Realty Partners IV, L.P., we entered into an indemnification agreement whereby we indemnified the purchaser against realized losses of up to $4.3 million on one mezzanine loan until its final maturity date in 2020. As a result of the indemnified party’s partial sale of the mezzanine loan, our maximum exposure was reduced to $536,000 in 2019. In October 2020, the mezzanine loan paid off its balance to the indemnified party, resulting in the extinguishment of our liability.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2021, the primary components of our market risk were credit risk, counterparty risk, financing risk, and interest rate risk, as described below. While we do not seek to avoid risk completely, we do seek to assume risk that can be quantified from historical experience, to actively manage that risk, to earn sufficient compensation to justify assuming that risk and to maintain capital levels consistent with the risk we undertake or to which we are exposed.

Credit Risks

Our loans and investments are subject to credit risk. The performance and value of our loans and investments depend upon the sponsors’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, ACRES Capital, LLC’s asset management team reviews our investment portfolios and in certain instances is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.

In addition, we are exposed to the risks generally associated with the commercial real estate (“CRE”) market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting and asset management processes.

The COVID-19 pandemic has significantly impacted the CRE markets, causing reduced occupancy, requests from tenants for rent deferral or abatement, and delays in construction and development projects currently planned or underway. Our portfolio includes loans collateralized by multifamily, hotel, retail and other property types that are particularly negatively impacted by the pandemic. Approximately 66.2% of our portfolio is in multifamily properties. Residents that experience deteriorating financial conditions as a result of the pandemic may be unwilling or unable to pay rent in full on a timely basis. Furthermore, numerous state, local and federal regulations have also imposed restrictions at present on the borrower’s ability to enforce residents’ contractual lease obligations, and this will affect their ability to collect rent or enforce remedies for the failure to pay rent. Approximately 9.9% of our portfolio is in hotel properties. While many restrictions on hotels have eased, the industry is still experiencing a significant reduction of operations resulting in a decline in group, business and leisure travel. Travelers may continue to be wary to travel despite the easing of restrictions because of concerns of risk of contagion or curtailment of leisure travel due to the economic recession. Approximately 2.6% of our portfolio is in retail properties. While government restrictions effecting retail have eased, complete or partial closure of many retail properties have resulted from tenant action. The reduced economic activity severely impacts the tenants’ businesses, financial condition and liquidity and may result in the tenants being unwilling or unable to meet their obligations to the borrower in part or in full.

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These negative conditions may persist into the future and impair our borrowers’ ability to comply with the terms under our loan agreements. We maintain a robust asset management relationship with our borrowers and have utilized these relationships to address the potential impacts of the COVID-19 pandemic on our loans secured by properties experiencing cash flow pressure. While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain investments. In order to mitigate that risk, we have proactively engaged with our borrowers, particularly with those with near-term maturities, in order to maximize recovery.

Counterparty Risk

The nature of our business requires us to hold our cash and cash equivalents and obtain financing from various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.

Financing Risk

We finance our target assets using our CRE debt securitizations, a senior secured financing facility and warehouse financing facilities. Over time, as market conditions change, we may use other forms of leverage in addition to these methods of financing. Weakness or volatility in the financial markets, the CRE and mortgage markets or the economy generally, such as through the impact of the COVID-19 pandemic, could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing, or to decrease the amount of our available financing, or to increase the costs of that financing.

Interest Rate Risk

Our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income, subject to the impact of interest rate floors. As of September 30, 2021, 98.6% of our CRE loan portfolio by par value earned a floating rate of interest and were financed with liabilities that both pay interest at floating rates and that are fixed. Floating-rate loans financed with fixed rate liabilities have a negative correlation with declining interest rates to the extent of our financing. The remaining approximate 1.4% of our CRE loan portfolio by par value earned a fixed rate of interest. Fixed rate loans financed with floating rate liabilities have a negative correlation with rising interest rates to the extent of our financing. To the extent that interest rate floors on our floating-rate CRE loans are in the money, our net interest will have a negative correlation with rising interest rates to the extent of those interest rate floors. Our floating-rate loan portfolio of $1.8 billion had a weighted-average one-month LIBOR floor of 1.03% at September 30, 2021, which excludes one floating-rate loan without a LIBOR floor. Additionally, all interest rate floors on our CRE loan portfolio were in the money at September 30, 2021.

Our loans, securitizations and term warehouse financing facilities have historically been benchmarked to one-month LIBOR. In June 2021, two of our securitizations replaced LIBOR with compounded SOFR, plus a benchmark adjustment, as the benchmark rate on the third-party owned notes.

The following table estimates the hypothetical impact on our net interest income assuming an immediate increase or decrease of 100 basis points in the applicable interest rate benchmark (in thousands, except per share data):

		Three Months Ended September 30, 2021
At September 30, 2021		100 Basis Point Decrease (4)				100 Basis Point Increase
Net Assets Subject to Interest Rate Sensitivity (1)(2)(3)		Increase (Decrease) to Net Interest Income		Increase (Decrease) to Net Interest Income per Share		Increase (Decrease) to Net Interest Income			Increase (Decrease) to Net Interest Income per Share
$	492,027	$	261	$	0.03	$	(1,130	)	$	(0.11	)

(1) Includes our floating-rate CRE loans at September 30, 2021.

(2) Includes amounts outstanding on our securitizations, CRE term warehouse financing facilities, senior secured financing facility and unsecured junior subordinated debentures.

(3) Certain of our floating rate loans are subject to a LIBOR floor.

(4) Decrease in rates assumes the applicable benchmark rate does not fall below 0%.

Risk Management

To the extent consistent with maintaining our status as a REIT, we seek to manage our interest rate risk exposure to protect our variable rate debt against the effects of major interest rate changes. We generally seek to manage our interest rate risk by monitoring and adjusting, if necessary, the reset index and interest rate related to our borrowings.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our Chief Executive Officer and Chief Financial Officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

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

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PART II

ITEM 1. LEGAL PROCEEDINGS

We may become involved in litigation on various matters due to the nature of our business activities. The resolution of these matters may result in adverse judgments, fines, penalties, injunctions and other relief against us as well as monetary payments or other agreements and obligations. In addition, we may enter into settlements on certain matters in order to avoid the additional costs of engaging in litigation. Except as discussed below, we are unaware of any contingencies arising from such litigation that would require accrual or disclosure in the consolidated financial statements at September 30, 2021.

Our subsidiary, Primary Capital Mortgage, LLC (“PCM”), is subject to potential litigation related to claims for repurchases or indemnifications on loans that PCM has sold to third parties. At September 30, 2021 and December 31, 2020, no such litigation demand was outstanding. Reserves for such litigation demands are included in the reserve for mortgage repurchases and indemnifications that totaled $1.4 million and $1.5 million at September 30, 2021 and December 31, 2020, respectively. The reserves for mortgage repurchases and indemnifications are included in liabilities held for sale on the consolidated balance sheets. As of September 30, 2021, we have substantially completed disposing of PCM’s business.

Litigation Matters

We did not have any pending litigation matters or general litigation reserve at September 30, 2021 or December 31, 2020.

ITEM 1A. RISK FACTORS

In light of the replacement of one-month LIBOR with Compounded SOFR as the benchmark rate of XAN 2020-RSO8’s and XAN 2020-RSO9’s notes payable in June 2021, we are modifying the risk factor discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Annual Report”) with the following risk factor, which should be read in conjunction with the risk factors contained in our Annual Report.

Changes in the method for determining the LIBOR or a replacement of LIBOR may adversely affect the value of our loans, investments and borrowings and could affect our results of operations.

We utilize LIBOR as a benchmark interest rate for the pricing of our CRE loans and, historically, have been exposed to LIBOR through our issuance of notes on our securitizations and the use of term facilities and repurchase agreements. In July 2017, the U.K. Financial Conduct Authority, or “FCA,” announced that it would phase out LIBOR as a benchmark by the end of 2021. In March 2021, the FCA announced that it would cease publication of the one-week and two-month USD LIBOR immediately after December 31, 2021 and cease publication of the remaining tenors immediately after June 30, 2023. Additionally, the U.S. Federal Reserve encouraged companies to cease using LIBOR as a benchmark rate by December 31, 2021. While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprising large U.S. financial institutions, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements backed by U.S. Treasury securities, as its preferred alternative rate for LIBOR. In June 2021, one-month LIBOR was replaced with Compounded SOFR as the benchmark rate of two of our securitizations’ notes payable. When LIBOR ceases to exist, we may need to amend our remaining loan and borrowing agreements that utilize LIBOR as a factor in determining the interest rate or hedge against fluctuations in LIBOR based on a new standard that is established, if any. Any resulting differences in interest rate standards among our assets and our borrowings may result in interest rate mismatches between our assets and the borrowings used to fund such assets. The transition from LIBOR to SOFR or to another alternative rate may result in financial market disruptions and significant increases in benchmark rates, resulting in increased financing costs to us, any of which could have an adverse effect on our business, results of operations, financial condition, and the market price of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

In March 2016, our Board approved a securities repurchase program. In November 2020, our Board authorized and approved the continued use of our existing share repurchase program in order to repurchase up to $20.0 million of our outstanding shares of common stock through March 31, 2021. In March 2021, our Board authorized the extension of the previous $20.0 million authorization through the second quarter of 2021 or until the $20.0 million is fully deployed. In July 2021, the remaining $888,000 available under the plan was fully deployed.

In November 2021, our Board authorized and approved the continued use of our existing share repurchase program to repurchase up to $20.0 million of our outstanding common stock.

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The following table presents information about our common stock repurchases made during the nine months ended September 30, 2021 in accordance with our repurchase program (dollars in thousands, except per share data):

	Common Stock
Period	Total Number of Shares Purchased		Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program		Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs
January 4, 2021 - January 29, 2021		283,374	$	12.30		283,374	$	11,210
February 1, 2021 - February 26, 2021		281,912	$	12.21		281,912	$	7,784
March 1, 2021 - March 31, 2021		179,379	$	14.44		179,379	$	5,199
April 1, 2021 - April 30, 2021		140,260	$	15.41		140,260	$	3,042
May 3, 2021 - May 12, 2021		47,820	$	15.51		47,820	$	2,301
June 2, 2021 - June 30, 2021		85,709	$	16.52		85,709	$	888
July 1, 2021 - July 9, 2021		53,443	$	16.64		53,443	$	—

(1) The average price paid per share as reflected above includes broker fees and commissions.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 5.OTHER INFORMATION

Subsequent to the maturity of the master repurchase and securities agreement with Wells Fargo Bank, N.A. in October 2021, ACRES Real Estate SPE 10, LLC (“SPE 10”), an indirect, wholly-owned subsidiary of ACRES Commercial Realty Corp. (the “Company”), entered into a $250.0 million Master Repurchase and Securities Contract Agreement, dated as of November 3, 2021, with Morgan Stanley Mortgage Capital Holdings LLC (“Morgan Stanley”), to be used to finance the Company’s core commercial real estate lending business (the “Morgan Stanley Facility”). Each repurchase transaction will specify its own terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate. The financing provided by the Morgan Stanley Facility matures November 3, 2022, with two one-year automatic extensions unless SPE 10 provides notice of its intent not to extend the facility. SPE 10 also has the right to request an extension for an additional one-year period after the second automatic extension to the extent it is utilized. The Company paid a structuring fee to Morgan Stanley as well as other reasonable closing costs.

The Morgan Stanley Facility contains margin call provisions that provide Morgan Stanley with certain rights if the value of purchased assets declines (“Margin Deficit”). Under these circumstances, Morgan Stanley may require SPE 10 to transfer cash in an amount necessary to eliminate such Margin Deficit or repurchase the asset(s) that resulted in such Margin Deficit.

The Company guaranteed SPE 10’s payment and performance under the Morgan Stanley Facility pursuant to a guaranty agreement (the “Morgan Stanley Guaranty”), subject to a limit of 25% of the then currently unpaid aggregate repurchase price of all purchased assets. The Morgan Stanley Guaranty includes certain financial covenants required of the Company, including required liquidity, required capital, ratios of total intendedness to equity and EBITDA requirements. Also, SPE 10’s direct parent, ACRES Realty Funding, Inc. (“Pledgor”), executed a Pledge Agreement with Morgan Stanley pursuant to which Pledgor pledged and granted to Morgan Stanley a continuing security interest in any and all of Pledgor’s right, title and interest in and to SPE 10, including all distributions, proceeds, payments, income and profits from Pledgor’s interests in SPE 10.

The Morgan Stanley Facility specifies events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement. The remedies for such events of default are also customary for this type of financing arrangement and include acceleration of the principal amount outstanding under the Morgan Stanley Facility and liquidation by Morgan Stanley of purchased assets then subject to the Morgan Stanley Facility.

The foregoing description of the Morgan Stanley Facility does not purport to be complete and is qualified in its entirety by reference to the full text of the Morgan Stanley Facility and the Morgan Stanley Guaranty, which have been filed with this Quarterly Report on Form 10-Q as Exhibits 99.4(a) and 99.4(b), respectively.

ITEM 6. EXHIBITS

Exhibit No.	Description
2.1	Asset Purchase Agreement, dated June 6, 2017, by and among Stearns Lending, LLC, Primary Capital Mortgage, LLC, and Resource Capital Corp. (32)
2.1(b)	Mortgage Loan Sale and Purchase Agreement, dated May 29, 2019, by and between RCC Real Estate, Inc. and C-III Commercial Mortgage LLC. (44)
3.1(a)	Amended and Restated Articles of Incorporation of Resource Capital Corp. (1)
3.1(b)	Articles of Amendment to Restated Certificate of Incorporation of Resource Capital Corp. (27)

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3.1(c)	Articles Supplementary 8.50% Series A Cumulative Redeemable Preferred Stock. (15)
3.1(d)	Articles Supplementary 8.50% Series A Cumulative Redeemable Preferred Stock. (16)
3.1(e)	Articles Supplementary 8.25% Series B Cumulative Redeemable Preferred Stock. (17)
3.1(f)	Articles Supplementary 8.50% Series A Cumulative Redeemable Preferred Stock. (21)
3.1(g)	Articles Supplementary 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock. (8)
3.1(h)	Articles Supplementary 7.875% Series D Cumulative Redeemable Preferred Stock, as corrected. (59)
3.1(i)	Articles of Amendment, effective May 25, 2018. (39)
3.1(j)	Articles of Amendment, effective February 16, 2021. (56)
3.1(k)	Articles of Amendment, effective May 28, 2021. (60)
3.2	Fourth Amended and Restated Bylaws of ACRES Commercial Realty Corp. (56)
4.1(a)	Form of Certificate for Common Stock for Resource Capital Corp. (1)
4.1(b)	Form of Certificate for 8.50% Series A Cumulative Redeemable Preferred Stock. (12)
4.1(c)	Form of Certificate for 8.25% Series B Cumulative Redeemable Preferred Stock. (17)
4.1(d)	Form of Certificate for 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock. (8)
4.1(e)	Form of Certificate for 7.875% Series D Cumulative Redeemable Preferred Stock. (59)
4.2(a)	Junior Subordinated Indenture between Resource Capital Corp. and Wells Fargo Bank, N.A., dated May 25, 2006. (2)
4.2(b)	Amendment to Junior Subordinated Indenture and Junior Subordinated Note due 2036 between Resource Capital Corp. and Wells Fargo Bank, N.A., dated October 26, 2009 and effective September 30, 2009. (6)
4.3(a)	Amended and Restated Trust Agreement among Resource Capital Corp., Wells Fargo Bank, N.A., Wells Fargo Delaware Trust Company and the Administrative Trustees named therein, dated May 25, 2006. (2)
4.3(b)	Amendment to Amended and Restated Trust Agreement and Preferred Securities Certificate among Resource Capital Corp., Wells Fargo Bank, N.A. and the Administrative Trustees named therein, dated October 26, 2009 and effective September 30, 2009. (6)
4.4	Junior Subordinated Note due 2036 in the principal amount of $25,774,000, dated October 26, 2009. (6)
4.5(a)	Junior Subordinated Indenture between Resource Capital Corp. and Wells Fargo Bank, N.A., dated September 29, 2006. (3)
4.5(b)	Amendment to Junior Subordinated Indenture and Junior Subordinated Note due 2036 between Resource Capital Corp. and Wells Fargo Bank, N.A., dated October 26, 2009 and effective September 30, 2009. (6)
4.6(a)	Amended and Restated Trust Agreement among Resource Capital Corp., Wells Fargo Bank, N.A., Wells Fargo Delaware Trust Company and the Administrative Trustees named therein, dated September 29, 2006. (3)
4.6(b)	Amendment to Amended and Restated Trust Agreement and Preferred Securities Certificate among Resource Capital Corp., Wells Fargo Bank, N.A. and the Administrative Trustees named therein, dated October 26, 2009 and effective September 30, 2009. (6)
4.7	Junior Subordinated Note due 2036 in the principal amount of $25,774,000, dated October 26, 2009. (6)
4.8(a)	Third Supplemental Indenture, dated August 16, 2017, between Resource Capital Corp. and Wells Fargo Bank, National Association, as Trustee (including the form of 4.50% Convertible Senior Note due 2022). (34)
4.8(b)	Form of 4.50% Convertible Senior Note due 2022 (included in Exhibit 4.8(a)).
4.9	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. (57)
4.10(a)	Base Indenture, dated August 16, 2021, between the Company and the Trustee. (63)
4.10(b)	First Supplemental Indenture, dated August 16, 2021, between the Company and the Trustee. (63)
4.10(c)	Form of 5.75% Senior Note due 2026 (included in Exhibit 4.10(b)).
10.1(a)	Fourth Amended and Restated Management Agreement, dated as of July 31, 2020, by and among Exantas Capital Corp., ACRES Capital, LLC and ACRES Capital Corp. (51)
10.1(b)	First Amendment to Fourth Amended and Restated Management Agreement, dated as of February 16, 2021, by and among ACRES Commercial Realty Corp. f/k/a Exantas Capital Corp., ACRES Capital, LLC and ACRES Capital Corp. (57)
10.2(a)	2005 Stock Incentive Plan. (1)
10.2(b)	Form of Stock Award Agreement. (7)
10.2(c)	Form of Stock Option Agreement. (7)
10.3(a)	Second Amended and Restated Omnibus Equity Compensation Plan. (45)
10.3(b)	Amendment No. 1 to the Exantas Capital Corp. Second Amended and Restated Omnibus Equity Compensation Plan. (52)
10.3(c)	Third Amended and Restated Omnibus Equity Compensation Plan. (58)
10.3(d)	Form of Stock Award Agreement. (25)
10.3(e)	Form of Stock Award Agreement (for employees with Resource America, Inc. employment agreements). (25)
10.4	Services Agreement between Resource Capital Asset Management, LLC and Apidos Capital Management, LLC, dated February 24, 2011. (10)
10.5	Form of Indemnification Agreement. (33)
10.6(a)	Loan and Servicing Agreement, dated as of July 31, 2020, among RCC Real Estate SPE Holdings LLC, as Holdings, RCC Real Estate SPE 9 LLC, as the Borrower, Massachusetts Mutual Life Insurance Company and the other Lenders from time to time party thereto, Wells Fargo Bank, National Association, as the Administrative Agent, Massachusetts Mutual Life Insurance Company, as the Facility Servicer, ACRES Capital Servicing LLC, as the Portfolio Asset Servicer, and Wells Fargo Bank, National Association, as the Collateral Custodian. (51)
10.6(b)	First Amendment to Loan and Servicing Agreement, dated as of September 16, 2020, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, Massachusetts Mutual Life Insurance Company and Wells Fargo Bank, National Association, as the Administrative Agent. (53)
10.6(c)	Second Amendment to Loan and Servicing Agreement, dated as of May 25, 2021, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, Massachusetts Mutual Life Insurance Company and Wells Fargo Bank, National Association as the Administrative Agent. (62)

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10.6(d)	Third Amendment to Loan and Servicing Agreement, dated as of August 16, 2021, among RCC Real Estate SPE Holdings LLC, RCC Real Estate SPE 9 LLC, the Lenders party thereto and Mutual Life Insurance Company and Wells Fargo Bank, National Association as the Administrative Agent.
10.6(e)	Guaranty, dated as of July 31, 2020, by Exantas Capital Corp., and each of Exantas Real Estate Funding 2018-RSO6 Investor, LLC, Exantas Real Estate Funding 2019-RSO7 Investor, LLC, and Exantas Real Estate Funding 2020-RSO8 Investor, LLC, in favor of the Secured Parties. (51)
10.7(a)	Note and Warrant Purchase Agreement, dated as of July 31, 2020, by and among Exantas Capital Corp. and the Purchasers signatory thereto. (51)
10.7(b)	Agreement between the Company, OCM XAN Holdings PT, LLC and the Massachusetts Mutual Life Insurance Company, dated August 18, 2021. (64)
10.8	Promissory Note, dated as of July 31, 2020, issued by ACRES Capital Corp. to RCC Real Estate, Inc. (51)
10.9(a)	Manager Incentive Plan. (58)
10.9(b)	Form of Stock Award Agreement Under the Manager Incentive Plan. (61)
10.10	Equity Distribution Agreement, dated October 4, 2021, by and among ACRES Commercial Realty Corp., ACRES Capital, LLC and JonesTrading Institutional Services LLC. (66)
31.1	Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer.
32.1	Certification Pursuant to 18 U.S.C. Section 1350.
32.2	Certification Pursuant to 18 U.S.C. Section 1350.
99.1(a)	Amended and Restated Master Repurchase and Securities Contract by and between RCC Real Estate SPE 4, LLC, as Seller, and Wells Fargo Bank, National Association, as Buyer, dated as of July 19, 2018. (11)
99.1(b)	First Amendment to Amended and Restated Master Repurchase and Securities Contract by and between RCC Real Estate SPE 4, LLC, as Seller, and Wells Fargo Bank, National Association, as Buyer, dated as of May 29, 2019. (46)
99.1(c)	Second Amendment To Amended And Restated Master Repurchase and Securities Contract by and between RCC Real Estate SPE 4, LLC, as Seller and Wells Fargo Bank, National Association, as Buyer, dated October 2, 2020. (54)
99.1(d)	Amended and Restated Guaranty Agreement made by Exantas Capital Corp., as guarantor, and Wells Fargo Bank, National Association, dated as of July 19, 2018. (11)
99.2(a)	Master Repurchase Agreement between RCC Real Estate SPE 7, LLC and Barclays Bank PLC, dated as of April 10, 2018. (38)
99.2(b)	First Amendment to Master Repurchase Agreement between RCC Real Estate SPE 7, LLC and Barclays Bank PLC dated as of March 9, 2021. (57)
99.2(c)	Second Amendment to Master Repurchase Agreement and First Amendment to Fee Letter, dated October 29, 2021, between RCC Real Estate SPE 7, LLC and Barclays Bank PLC. (67)
99.2(d)	Guaranty dated as of April 10, 2018, made by Resource Capital Corp., as guarantor, in favor of Barclays Bank PLC. (38)
99.2(e)	First Amendment to Guaranty dated as of May 7, 2020, made by Exantas Capital Corp., f/k/a Resource Capital Corp., as guarantor, in favor of Barclays Bank PLC. (50)
99.2(f)	Second Amendment to Guaranty, dated October 2, 2020, made by Exantas Capital Corp. as guarantor in favor of Barclays Bank PLC. (54)
99.2(g)	Third Amendment to Guaranty, dated October 29, 2021, made by ACRES Commercial Realty Corp. as guarantor in favor of Barclays Bank PLC. (66)
99.3(a)	Master Repurchase Agreement for $250,000,000 between RCC Real Estate SPE 8, LLC, as Seller, and JPMorgan Chase Bank, National Association, as Buyer, dated October 26, 2018. (40)
99.3(b)	First Amendment to Uncommitted Master Repurchase Agreement dated as of August 14, 2020 between RCC Real Estate SPE 8, LLC and JPMorgan Chase Bank, National Association. (55)
99.3(c)	Amendment No. 2 to Master Repurchase Agreement, dated September 1, 2021 between RCC Real Estate SPE 8, LLC and JPMorgan Chase Bank, National Association. (65)
99.3(d)	Amendment No. 3 to Master Repurchase Agreement and Guarantee Agreement, dated October 26, 2021 between RCC Real Estate SPE 8, LLC, JPMorgan Chase Bank, National Association and ACRES Commercial Realty Corp., as guarantor (67)
99.3(e)	Guarantee made by Exantas Capital Corp., as guarantor, in favor of JPMorgan Chase Bank, National Association, dated October 26, 2018. (40)
99.3(f)	First Amendment to Guarantee Agreement, dated May 6, 2020, between Exantas Capital Corp. and JPMorgan Chase Bank, National Association. (50)
99.3(g)	Amendment No. 2 To Guarantee Agreement, dated October 2, 2020 between Exantas Capital Corp. and JPMorgan Chase Bank, National Association. (54)
99.4(a)	Master Repurchase and Securities Contract Agreement between ACRES Real Estate SPE 10, LLC, as Seller, and Morgan Stanley Mortgage Capital Holdings LLC, as Administrative Agent, dated November 3, 2021.
99.4(b)	Guaranty made by ACRES Commercial Realty Corp., as Guarantor, in favor of Morgan Stanley Mortgage Capital Holdings LLC, dated November 3, 2021
99.5(a)	Notice of Proposed Settlement of Shareholder Derivative Litigation. (43)
99.5(b)	Stipulation and Agreement of Settlement. (43)
99.6	Federal Income Tax Consequences of our Qualification as a REIT. (57)
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

77

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File.

(1)	Filed previously as an exhibit to the Company’s registration statement on Form S-11, Registration No. 333-126517.
(2)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
(3)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
(4)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.
(5)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on June 26, 2014.
(6)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
(7)	Filed previously as an exhibit to the Company’s Registration Statement on Form S-11 (File No. 333-132836).
(8)	Filed previously as an exhibit to the Company’s Registration Statement on Form 8-A filed on June 9, 2014.
(9)	Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
(10)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on March 2, 2011.
(11)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on July 25, 2018.
(12)	Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 18, 2013.
(13)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on March 2, 2012.
(14)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on June 13, 2012.
(15)	Filed previously as an exhibit to the Company’s registration statement on Form 8-A filed on June 8, 2012.
(16)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on June 29, 2012.
(17)	Filed previously as an exhibit to the Company’s Registration Statement on Form 8-A filed on September 28, 2012.
(18)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on September 23, 2014.
(19)	RESERVED
(20)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 1, 2012.
(21)	Filed previously as an exhibit to the Company Current Report on Form 8-K filed on November 20, 2012.
(22)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on April 8, 2013.
(23)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on July 25, 2013.
(24)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 21, 2013.
(25)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.
(26)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.
(27)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on September 1, 2015.
(28)	RESERVED
(29)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.
(30)	RESERVED
(31)	Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
(32)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on June 8, 2017.
(33)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.
(34)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 16, 2017.
(35)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.
(36)	RESERVED
(37)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.
(38)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on April 12, 2018.
(39)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on May 25, 2018.
(40)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 30, 2018.
(41)	RESERVED
(42)	Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
(43)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on March 27, 2019.
(44)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on May 30, 2019.
(45)	Filed previously as an exhibit to the Company’s Proxy Statement filed on April 18, 2019.
(46)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
(47)	RESERVED
(48)	RESERVED
(49)	Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
(50)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
(51)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 3, 2020.
(52)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
(53)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on September 22, 2020.
(54)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 7, 2020.
(55)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.
(56)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on February 18, 2021.
(57)	Filed previously as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
(58)	Filed previously as an exhibit to the Company’s Proxy Statement filed on April 12, 2021.

78

(59)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on May 21, 2021.
(60)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on June 1, 2021.
(61)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on June 9, 2021.
(62)	Filed previously as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.
(63)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2021.
(64)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on August 20, 2021.
(65)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on September 2, 2021.
(66)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 7, 2021.
(67)	Filed previously as an exhibit to the Company’s Current Report on Form 8-K filed on October 29, 2021.

79

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		ACRES COMMERCIAL REALTY CORP.
		(Registrant)
November 8, 2021	By:	/s/ Mark Fogel
		Mark Fogel
		President & Chief Executive Officer
November 8, 2021	By:	/s/ David J. Bryant
		David J. Bryant
		Senior Vice President
		Chief Financial Officer and Treasurer
November 8, 2021	By:	/s/ Eldron C. Blackwell
		Eldron C. Blackwell
		Vice President
		Chief Accounting Officer

80

EX-10.6(D)

Exhibit 10.6(d)

THIRD AMENDMENT TO LOAN AND SERVICING AGREEMENT

This Third Amendment to Loan and Servicing Agreement, dated as of August 16, 2021 (this “Amendment”), is among RCC Real Estate SPE Holdings LLC (“Holdings”), RCC Real Estate SPE 9 LLC (the “Borrower”), the Lenders party hereto, and Wells Fargo Bank, National Association, as Administrative Agent (in such capacity, the “Administrative Agent”).

PRELIMINARY STATEMENTS:

1.Reference is made to the Loan and Servicing Agreement dated as of July 31, 2020 (as amended by the First Amendment to Loan and Servicing Agreement, dated as of September 16, 2020, the Second Amendment to Loan and Servicing Agreement, dated as of May 25, 2021, and as further amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Loan and Servicing Agreement”), among Holdings, the Borrower, the lenders from time to time party thereto (the “Lenders”), the Administrative Agent, Massachusetts Mutual Life Insurance Company, as the Facility Servicer, ACRES Capital Servicing LLC, as the Portfolio Asset Servicer, and Wells Fargo Bank, National Association, as the Collateral Custodian.

2.The Borrower currently owns all of the equity interest in Exantas Phili Holdings, LLC (“HGI Sub”) and has pledged its equity interest in HGI Sub to the Administrative Agent, on behalf of the Secured Parties.  HGI Sub has guaranteed to the Secured Parties the payment of the Guaranteed Obligations (under and as defined in the Guaranty, dated as of May 25, 2021, by HGI Sub in favor of the Secured Parties).

3.The Borrower intends to enter into the Purchase and Sale Agreement, dated as of August 16, 2021, pursuant to which the Borrower will sell 74% of its equity interest in HGI Sub to Acres Real Estate TRS 9 LLC (the “Specified Transaction”).  The Specified Transaction is prohibited under the terms of the Loan and Servicing Agreement.

4.The Borrower has requested that the Lenders and the Administrative Agent (i) amend the Loan and Servicing Agreement as set forth herein and (ii) consent to the Specified Transaction and, subject to the terms and conditions set forth in this Amendment, the Lenders and the Administrative Agent agree to such request.

AGREEMENT:

In consideration of the foregoing and the mutual agreements contained in this Amendment, the receipt and sufficiency of which are acknowledged, the parties to this Amendment hereby agree as follows:

1.Definitions.  Capitalized terms used in this Amendment and not otherwise defined have the meanings set forth for such terms in the Loan and Servicing Agreement.

2.Consent.   Notwithstanding anything to the contrary in the Loan and Servicing Agreement, and in reliance on the representations and warranties, covenants and conditions set forth herein, the Lenders and the Administrative Agent hereby consent to the Specified Transaction.  The foregoing consent is limited to the Specified Transaction and shall not be deemed to be a consent to any future action, including the transfer of any other Collateral, Pledged Equity, or Portfolio Assets.  The Lenders hereby direct the Administrative Agent to execute and deliver (i) this Third Amendment and (ii) any Pledge and

Guaranty Agreement and any Subordination Agreement, each as defined in and as required under the Loan and Servicing Agreement, as amended, as determined by the Initial Lender in their sole discretion.

3.Amendments to the Loan and Servicing Agreement.

(a)Section 1.01 of the Loan and Servicing Agreement is hereby amended by adding the following definitions in proper alphabetical sequence:

“Appraised Value” means, with respect to any real estate owned real property, the appraised value of the property as set forth in the most recently conducted appraisal conducted by an independent appraiser of national reputation with experience appraising similar real estate owned real property reasonably approved by the Initial Lender.

“HGI Sub” means Exantas Phili Holdings, LLC.

“Pledge and Guaranty Agreement” means any Pledge and Guaranty Agreement between any TRS Subsidiary in favor of the Secured Parties, in form and substance similar to the Pledge and Guaranty Agreement, dated as of August 16, 2021, by Acres Real Estate TRS 9 LLC in favor of the Secured Parties.

“Subordination Agreement” means any Subordination Agreement between Acres Realty Funding Inc. (or an Affiliate thereof acceptable to the Initial Lender) and the Administrative Agent, in form and substance similar to the Subordination Agreement, dated as of August 16, 2021, by Acres Realty Funding Inc. and the Administrative Agent.

“Third Amendment Effective Date” means August 16, 2021.

“TRS” means Exantas Real Estate TRS Inc.

“TRS Subsidiary” means any wholly owned subsidiary of TRS that jointly owns with the Borrower any Permitted REO Subsidiary as permitted under Sections 4.01(n) and 5.02(b), including Acres Real Estate TRS 9 LLC.

(b)Section 1.01 of the Loan and Servicing Agreement is hereby amended by amending and restating the following definition in its entirety to read as follows:

“Borrowing Base” means, as of any date of determination, an amount equal to the sum of (a) with respect to each Eligible Portfolio Asset that is an Initial Portfolio Asset, an amount equal to the product of (i) the advance rate set forth on Schedule I for such Eligible Portfolio Asset and (ii) the most recent Value for such Eligible Portfolio Assets as of such date, (b) with respect to each Eligible Portfolio Asset that is not an Initial Portfolio Asset, an amount equal to the product of (i) the advance rate for such Eligible Portfolio Asset as determined by the Initial Lender under Section 3.04(b) and (ii) the most recent Value for such Eligible Portfolio Asset as of such date, (c) with respect to the real estate owned real property related to Hilton Garden Inn, Philadelphia, an amount equal to the lesser of (i) $10,150,000 and (ii) the product of (A) 26.8% and (ii) the Appraised Value for such Eligible Portfolio Asset as in effect at such time as determined in accordance with the Valuation Policy, and (d) with respect to any other real estate owned real property other than as described in clause (c) above, an amount equal to the product of (i) a percentage to be determined by the Initial Lender in its sole discretion and (ii) the Appraised Value

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of such Eligible Portfolio Asset as of a date determined by the Initial Lender in their sole discretion and as determined in accordance with the Valuation Policy.

“Change of Control” is deemed to have occurred if (a) the Sponsor fails to own all of the limited liability company interests in Holdings, directly or indirectly, through one or more wholly owned subsidiaries, (b) the Sponsor fails to own all of the equity interest in each TRS Subsidiary, (c) Holdings fails to own all of the limited liability company interests in the Borrower, directly, (d) ACRES Capital Corp., a Delaware corporation, or a wholly owned Subsidiary thereof, fails to be engaged as the manager for the Sponsor or (e) the Borrower, either directly or collectively with a TRS Subsidiary, fails to own all of the Equity Interest in each Permitted REO Subsidiary, as applicable.

“Permitted REO Subsidiary” means (i) any wholly owned Subsidiary of Borrower or (ii) any subsidiary owned jointly by the Borrower and a TRS Subsidiary, in each case as permitted under Sections 4.01(n) and 5.02(b), as applicable.

“Pledged Equity” (i) with respect to the equity of the Borrower, has the meaning assigned to that term in Section 2.09(b) and (ii) with respect to the equity of any Permitted REO Subsidiary, (a) all investment property and general intangibles consisting of the ownership, equity or other similar interests in the such entity, including such entity’s limited liability company interests; (b) all certificates, instruments, writings and securities evidencing the foregoing; (c) the operating agreement and other organizational documents of such entity and all options or other rights to acquire any membership or other interests under such operating agreement or other organizational documents; (d) all dividends, distributions, capital, profits and surplus and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing; (e) all books, records and other written, electronic or other documentation in whatever form maintained now or hereafter by or for the Borrower or any TRS Subsidiary, as applicable in connection with, and relating to, the ownership of, or evidencing or containing information relating to, the foregoing; and (f) all proceeds, supporting obligations and products of any of the foregoing.

“Sponsor” means Acres Capital Corp.

“Transaction Documents” means this Agreement, any Note, the Account Control Agreement, the Fee Letters, each Assignment and Assumption Agreement, each Participation Agreement, the Custodial and Account Control Agreements, the Guaranty Agreement, each Permitted REO Sub Guaranty Agreement, each Pledge and Guaranty Agreement, each Subordination Agreement and each agreement, instrument, certificate or other document related to any of the foregoing.

(c)Section 4.01(n) of the Loan and Servicing Agreement is hereby amended and restated in its entirety to read as follows:

(n) No Subsidiaries.  

(i) The Borrower does not own or hold the equity interests in any other Person other than any wholly owned Subsidiary (or any subsidiary jointly owned with any TRS Subsidiary permitted by Section 5.02) that (A) has been approved in writing by the Initial Lender in its sole discretion, (B) has delivered to the Initial Lender (1) a Permitted

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REO Sub Guaranty Agreement executed by such Subsidiary and (2) such Subsidiary’s limited liability company agreement, which is substantially in the form of HGI Sub’s limited liability company agreement, (C) Borrower has delivered to the Administrative Agent the certificated Pledged Equity of such Subsidiary and the related assignment, duly executed in blank and (D) has agreed (which agreement will be set forth in the applicable Permitted REO Sub Guaranty Agreement) that if the Borrower or such Subsidiary elects to exercise remedies with respect to any Portfolio Asset that is a loan interest or loan participation interest, then (unless otherwise agreed by the Initial Lender) no later than the earlier to occur of (1) the date of any foreclosure sale or the date on which the Borrower or such Subsidiary accepts a deed-in-lieu of foreclosure with respect to any such Portfolio Asset and (2) the date that is 60 days after the date the Borrower or such Subsidiary commences enforcement remedies for such Portfolio Asset, such Subsidiary shall, at its expense, execute and deliver to the Administrative Agent mortgage documents in a form and substance reasonably acceptable to the Initial Lender, in its sole discretion, and sufficient to document a first priority mortgage lien in favor of the Administrative Agent, for the benefit of the Secured Parties, on the real property subject to such foreclosure sale, deed-in-lieu of foreclosure or enforcement remedies.

(ii) Holdings does not own or hold the equity interest in any other Person other than Borrower.

(d)Section 5.02(b) of the Loan and Servicing Agreement is hereby amended by adding the following sentence:

Notwithstanding the foregoing, with the prior written approval of the Initial Lender in its sole discretion, the Borrower may transfer a portion of the Pledged Equity to any TRS Subsidiary so long as (1) such TRS Subsidiary is a special purpose entity formed pursuant to limited liability company agreement substantially in the form of Acres Real Estate TRS 9 LLC’s limited liability company agreement, (2) such TRS Subsidiary enters into a Pledge and Guaranty Agreement, (3) such TRS Subsidiary has delivered to the Initial Lender financing statements describing the Collateral and the Pledged Equity and naming such TRS Subsidiary as debtor and the Administrative Agent, on behalf of the Secured Parties, as secured party and other, similar instruments or documents, as may be necessary or, in the opinion of the Administrative Agent, desirable under the UCC of all appropriate jurisdictions or any comparable law to perfect the Administrative Agent’s, on behalf of the Secured Parties, interests in the Collateral and such Pledged Equity, (4) such TRS Subsidiary has delivered to the Administrative Agent the certificated equity of the Permitted REO Subsidiary representing the membership interest of such Permitted REO Subsidiary acquired from the Borrower, and the related assignment duly executed in blank, and (5) such TRS Subsidiary has delivered to the Initial Lender any other documents as the Initial Lender or Administrative Agent may require in connection therewith, including a Subordination Agreement if applicable and opinions of counsel to the Loan Parties or such TRS Subsidiary, reasonably acceptable to the Initial Lender and the Administrative Agent.

(e)Sections 6.01(d), (e), (f), (g) and (i) of the Loan and Servicing Agreement are hereby amended and restated in their entirety to read as follows, respectively:

(d) the occurrence of a Bankruptcy Event relating to the Borrower, Holdings, any TRS Subsidiary or any Permitted REO Subsidiary;

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(e) the rendering of one or more final judgments, decrees or orders by a court or arbitrator of competent jurisdiction against the Borrower, Holdings, any TRS Subsidiary or any Permitted REO Subsidiary for the payment of money in excess of $5,000,000 in the aggregate (unless such judgment is covered by third party insurance as to which the insurer has been notified of such judgment, decree or order and has not denied or failed to acknowledge coverage) where the Borrower, Holdings, such TRS Subsidiary or such Permitted REO Subsidiary, as applicable, shall not have either (i) discharged or provided for the discharge of any such judgment, decree or order in accordance with its terms within 60 days or (ii) perfected a timely appeal, decree or order and caused the execution of the same to be stayed during the pendency of the appeal;

(f) (i) the breach by a Loan Party of the covenants set forth in Sections 5.01(c) (with respect to existence only), (d), (e), (f), (g), (h), (i), (o), (p) and (q), (ii) any failure on the part of a Loan Party to observe or perform any covenants or agreements of the Loan Parties set forth in Section 5.02, or (iii) the breach by any TRS Subsidiary or any Permitted REO Subsidiary of the covenants set forth in any Transaction Document to which such TRS Subsidiary or such Permitted REO Subsidiary is a party;

(g) (i) any Transaction Document, or any Lien or security interest granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of the Borrower, Holdings, any TRS Subsidiary or any Permitted REO Subsidiary, as applicable; provided that, there shall be no Event of Default under this clause (g)(i) to the extent such Event of Default arises solely from the action (or inaction) of the Account Bank, the Collateral Custodian, the Administrative Agent, the Facility Servicer or a Lender, (ii) the Borrower, Holdings, any TRS Subsidiary, any Permitted REO Subsidiary, the Sponsor or any of their Affiliates shall, directly or indirectly, contest in writing in any manner the effectiveness, validity, binding nature or enforceability of any Transaction Document or any Lien or security interest thereunder or (iii) any security interest securing any obligation under any Transaction Document shall, in whole or in part, cease to be a first priority perfected security interest (subject to Permitted Liens) except as otherwise expressly permitted to be released in accordance with the applicable Transaction Document; provided that there shall be no Event of Default under this clause (g)(iii) to the extent such Event of Default arises from the action (or inaction) of the Account Bank, the Collateral Custodian, the Administrative Agent, the Facility Servicer or a Lender;

(i) any representation, warranty or certification made by the Borrower, Holdings, any TRS Subsidiary or any Permitted REO Subsidiary in any Transaction Document or in any agreement, instrument, certificate or other document delivered pursuant to any Transaction Document shall prove to have been incorrect in any material respect when made;

4.Representations and Warranties.  Each Loan Party hereby represents and warrants to the Lenders as follows:

(a)Such Loan Party (i) has the power, authority and legal right to (A) execute and deliver this Amendment and the Loan and Servicing Agreement, as amended, and (B) perform and carry out the terms of this Amendment and the Loan and Servicing Agreement, as amended, and the transactions contemplated hereby and thereby and (ii) has taken all necessary action to  authorize the execution, delivery and performance of this Amendment.  This Amendment has been duly executed and delivered by such Loan Party.

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(b)This Amendment and the Loan and Servicing Agreement, as amended, each constitute the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with their respective terms, except as the enforceability hereof and thereof may be limited by Bankruptcy Laws and by general principles of equity.

(c)The representations and warranties of such Loan Party contained in the Loan and Servicing Agreement are true and correct in all material respects as of the date hereof (or, in the case of any such representation expressly stated to have been made as of a specific date, as of such specific date).

(d)As of the date hereof, after giving effect to this Amendment, no event has occurred or is continuing which constitutes an Unmatured Event of Default, Event of Default or Cash Trap Event.

5.Effectiveness.  This Amendment is effective on and as of the date when the last of the following conditions precedent has been satisfied in a manner satisfactory to the Initial Lender:

(a)This Amendment has been duly executed by, and delivered to, the parties hereto.

(b)A Pledge and Guaranty Agreement has been duly executed by Acres Real Estate TRS 9 LLC and the Administrative Agent and delivered to the Initial Lender.

(c)A Financing statement describing the Collateral and Pledged Equity naming TRS Subsidiary as debtor and the Administrative Agent, on behalf of the Secured Parties, as secured party and other, similar instruments or documents, as may be necessary or, in the opinion of the Administrative Agent, desirable under the UCC of all appropriate jurisdictions or any comparable law to perfect the Administrative Agent’s, on behalf of the Secured Parties, interests in the Collateral and the Pledged Equity have been delivered to the Initial Lender.

(d)A Subordination Agreement has been duly executed by Acres Realty Funding Inc. and the Administrative Agent and delivered to the Initial Lender and a copy of the Subordinated Promissory Note executed by Acres Real Estate TRS 9 LLC in favor of Acres Realty Funding Inc. has been delivered to the Initial Lender.

(e)The Limited Liability Company Agreement of Acres Real Estate TRS 9 LLC has been duly executed and delivered to the Initial Lender.

(f)(i) Acres Real Estate TRS 9 LLC has delivered to the Administrative Agent the certificated equity of HGI Sub, representing 74% of the membership interest of HGI Sub, and the related assignment duly executed in blank and (ii) the Borrower has delivered to the Administrative Agent the certificated equity of HGI Sub, representing 26% of the membership interest of HGI Sub, and the related assignment duly executed in blank.

(g)An opinion of counsel to the Loan Parties and Acres Real Estate TRS 9 LLC, reasonably acceptable to the Initial Lender and the Administrative Agent and addressed to the Administrative Agent, the Collateral Custodian and the Lenders, has been delivered to the Initial Lender.

(h)The representations and warranties contained in Section 4 are true and correct.

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(i)All fees that are required to be paid hereunder or under the Loan and Servicing Agreement have been paid in full.

6.Reaffirmations.  Each Loan Party reaffirms all covenants set forth in the Loan and Servicing Agreement and the other Transaction Documents.  Except as specifically provided herein, all terms and conditions of the Loan and Servicing Agreement remain in full force and effect, without waiver or modification.  This Amendment and the Loan and Servicing Agreement are to be read together as one document.  From and after the date hereof, each reference in the Loan and Servicing Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import, and each reference in the Loan and Servicing Agreement or any other Transaction Document to the Loan and Servicing Agreement or to any term, condition or provision contained “thereunder,” “thereof,” “therein” or words of like import, means and are a reference to the Loan and Servicing Agreement (or such term, condition or provision, as applicable) as amended, restated, supplemented or otherwise modified by this Amendment.

7.Successors and Assigns.  This Amendment is binding upon each party hereto and their respective successors and assign, and inures to the sole benefit of such party and its respective successors and assigns.  Neither the Borrower nor Holdings has the right to assign their respective rights or delegate their respective duties under this Amendment.

8.Costs, Expenses and Taxes.  The Borrower and Holdings affirm and acknowledge that Section 11.07 of the Loan and Servicing Agreement applies to this Amendment and the transactions and agreements and documents contemplated under this Amendment.

9.Governing Law; Severability.  This Amendment shall be governed by the laws of the State of New York.  Wherever possible, each provision of this Amendment will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment is prohibited by or invalid under such law, such provision will be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment.

10.Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Amendment by e-mail in portable document format (.pdf) or facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.

[Signature Pages Follow]

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The parties have caused this Amendment to be executed as of the date first above written.

The Borrower
RCC REAL ESTATE SPE 9 LLC
By:	/s/ Mark Fogel
Name:			Mark Fogel
Title:		President
Holdings
RCC REAL ESTATE SPE HOLDINGS LLC
By:	/s/ Mark Fogel
Name:			Mark Fogel
Title:		President

[Signature Page – Third Amendment to Loan and Servicing Agreement]

Lenders
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:	/s/ Andrew C. Dickey
Name:			Andrew C. Dickey
Title:		Head of Alternative and Private Equity

[Signature Page – Third Amendment to Loan and Servicing Agreement]

Administrative Agent
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent
By:	/s/ Linda Lopez
Name:			Linda Lopez
Title:		Assistant Vice President

Acknowledged by:
Collateral Custodian
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Collateral Custodian
By:	/s/ Melissa G. Vang
Name:			Melissa G. Vang
Title:		Assistant Vice President

[Signature Page – Third Amendment to Loan and Servicing Agreement]

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mark Fogel, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended September 30, 2021 of ACRES Commercial Realty Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 8, 2021	/s/ Mark Fogel
	Mark Fogel
	President & Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, David J. Bryant, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended September 30, 2021 of ACRES Commercial Realty Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 8, 2021	/s/ David J. Bryant
	David J. Bryant
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ACRES Commercial Realty Corp. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Fogel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 8, 2021	/s/ Mark Fogel
	Mark Fogel
	President & Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ACRES Commercial Realty Corp. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Bryant, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 8, 2021	/s/ David J. Bryant
	David J. Bryant
	Chief Financial Officer

EX-99.4(A)

Exhibit 99.4(a)

MASTER REPURCHASE AND SECURITIES CONTRACT AGREEMENT

among

MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC,

As Administrative Agent,

THE FINANCIAL INSTITUTIONS PARTY HERETO

as Buyers,

and

ACRES REAL ESTATE SPE 10, LLC
as Seller

Table of Contents

		Page
1.	APPLICABILITY	1
2.	DEFINITIONS	1
3.	INITIATION; CONFIRMATION; TERMINATION; FEES	25
4.	MANDATORY PAYMENT OR DELIVERY OF ADDITIONAL ASSETS	36
5.	INCOME PAYMENTS AND PRINCIPAL PAYMENTS	37
6.	CAUTIONARY SECURITY INTEREST	39
7.	PAYMENT, TRANSFER AND CUSTODY	41
8.	CERTAIN RIGHTS OF ADMINISTRATIVE AGENT, ON BEHALF OF BUYERS, WITH RESPECT TO THE PURCHASED ASSETS	43
9.	EXTENSION OF FACILITY TERMINATION DATE	43
10.	REPRESENTATIONS	44
11.	NEGATIVE COVENANTS OF SELLER	49
12.	AFFIRMATIVE COVENANTS OF SELLER	50
13.	SINGLE-PURPOSE ENTITY	55
14.	EVENTS OF DEFAULT; REMEDIES	57
15.	SINGLE AGREEMENT	62
16.	NOTICES AND OTHER COMMUNICATIONS	62
17.	NON-ASSIGNABILITY	62
18.	GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.	64
19.	NO RELIANCE; DISCLAIMERS	65
20.	INDEMNITY AND EXPENSES	66
21.	DUE DILIGENCE	67
22.	SERVICING	68
23.	TREATMENT FOR TAX PURPOSES	69
24.	INTENT	69
25.	DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS	70
26.	SETOFF RIGHTS	71
27.	ADMINISTRATIVE AGENT	71
28.	MISCELLANEOUS	74

i

SCHEDULES

SCHEDULE 1	Maximum Purchase Percentage
SCHEDULE 2	Purchased Asset Documents
SCHEDULE 3	Prohibited Transferees

EXHIBITS

EXHIBIT I	Form of Confirmation
EXHIBIT II-1	Form of Power of Attorney to Administrative Agent, on Behalf of Buyers,
EXHIBIT II-2	Form of Power of Attorney to Seller
EXHIBIT III	Representations and Warranties Regarding the Purchased Assets
EXHIBIT IV	Form of Bailee Agreement
EXHIBIT V	Authorized Representatives of Seller

ANNEXES

ANNEX I	Notice Instructions
ANNEX II	Wiring Instructions

MASTER REPURCHASE AND SECURITIES CONTRACT AGREEMENT

This Master Repurchase and Securities Contract Agreement (this “Agreement”) is dated as of November 3, 2021, and is made by and among MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC, a New York limited liability company (“MSMCH”), as administrative agent (in such capacity, together with its permitted successors and assigns, the “Administrative Agent”) for MORGAN STANLEY BANK, N.A. (“MSBNA”), a national banking association, and such other financial institutions from time to time party hereto as buyers (MSBNA, together with its successors and permitted assigns, and together with such other financial institutions from time to time party hereto and their respective successors and permitted assigns, collectively “Buyers” and individually, each a “Buyer”) and ACRES REAL ESTATE SPE 10, LLC, a Delaware limited liability company, as seller (“Seller”).

1.APPLICABILITY

From time to time the parties hereto may enter into transactions in which Seller agrees to transfer to Administrative Agent, on behalf of Buyers, one or more Eligible Assets, on a servicing-released basis, against the transfer of funds by Buyers with a simultaneous agreement by Administrative Agent, on behalf of Buyers, to transfer to Seller such Eligible Assets at a date certain (or such earlier date in accordance with the terms hereof) against the transfer of funds by Seller to Administrative Agent, on behalf of Buyers.  Each such transaction involving the transfer of an Eligible Asset from Seller to Administrative Agent, on behalf of Buyers, shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement.

2.DEFINITIONS

Capitalized terms in this Agreement shall have the respective meanings set forth below:

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

“AB Mortgage Loan” shall mean a Mortgage Loan evidenced by two or more senior and subordinate Mortgage Notes.

“Accelerated Repurchase Date” shall have the meaning specified in Section 14(b)(i) of this Agreement.

“Act of Insolvency” shall mean, with respect to any Person:  the filing of a decree or order for relief by a court having jurisdiction over such Person or any substantial part of its assets or property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its assets or property, or ordering the winding–up or liquidation of such Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of thirty (30) days, the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, the consent by such Person to the entry of an order for relief in an involuntary case under any Insolvency Law, the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its assets or property, the making by such Person of any general assignment for the benefit of creditors, the admission of the inability of such Person to pay its debts or discharge its obligations generally as they become due or mature, the failure by such Person generally to pay its debts as they become due, the taking of any action by any Governmental Authority or agency or any Person, agency or entity acting or purporting to act under Governmental Authority to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such Person, or shall have taken any action to displace the management

of such Person or to curtail its authority in the conduct of the business of such Person, or the taking of action by such Person in furtherance of any of the foregoing.

“Administrative Agent” shall have the meaning assigned thereto in the introductory paragraph hereto.

“Affiliate” shall mean, (i) when used with respect to any specified Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with, such Person and (ii) with respect to Seller, any “affiliate” of Seller as such term is defined in the Bankruptcy Code.

“Affiliated Hedge Counterparty” shall mean Morgan Stanley Bank, N.A., or any other Buyer, or any Affiliate of Morgan Stanley Bank, N.A., or any other Buyer, in each case, in its capacity as a party to any Hedging Transaction with Seller.

“Aggregate Repurchase Price” shall mean, as of any date of determination, the aggregate Repurchase Price (excluding any accrued and unpaid Price Differential) of all Purchased Assets outstanding as of such date.

“Agreement” shall have the meaning specified in the introductory paragraph of this Agreement.

“Applicable Spread” shall have the meaning specified in the Fee Letter.

“Appraisal” shall mean an appraisal of any Eligible Property prepared by a licensed Independent Appraiser approved by Administrative Agent, on behalf of Buyers, in its reasonable discretion, in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, in compliance with the requirements of Title 11 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and utilizing customary valuation methods, such as the income, sales/market or cost approaches, as any of the same may be updated by recertification from time to time by the appraiser performing such Appraisal.

“Asset Base Component” shall mean, as of any date of determination, with respect to each Purchased Asset, the product of (a) its Market Value, multiplied by (b) the Maximum Purchase Percentage applicable to such Purchased Asset as of such date.

“Assignment of Leases” shall mean, with respect to any Purchased Asset that is a Mortgage Loan, any assignment of leases, rents and profits or equivalent instrument, whether contained in the related Mortgage or executed separately, assigning to the holder or holders of such Mortgage all of the related Mortgagor’s interest in the leases, rents and profits derived from the ownership, operation, leasing or disposition of all or a portion of the related Mortgaged Property as security for repayment of such Purchased Asset.

“Assignment of Mortgage” shall mean, with respect to any Purchased Asset that is a Mortgage Loan, an assignment of the mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related property is located to reflect the assignment and pledge of the Mortgage, subject to the terms of this Agreement.

“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, any tenor for such Benchmark or payment period for price differential calculated with reference to such Benchmark, as applicable, that is or may be used for determining the length of a Pricing Period pursuant to this Agreement as of such date.

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“Bailee” shall mean such third party as Administrative Agent, on behalf of Buyers, and Seller shall mutually approve in their sole discretion, exercised in good faith.

“Bailee Agreement” shall mean a Bailee Agreement among Seller, Administrative Agent, on behalf of Buyers, and Bailee in the form of Exhibit IV hereto.

“Bailee Delivery Failure” shall have the meaning specified in the Bailee Agreement.

“Bankruptcy Code” shall mean Title 11 of the United States Code, as amended, modified or replaced from time to time.

“Benchmark” means, initially, LIBOR; provided that, if a Benchmark Transition Event or, as the case may be, an Early Opt-in Election and the Benchmark Replacement Date with respect thereto have occurred with respect to LIBOR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.

“Benchmark Replacement” means, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent, on behalf of Buyers, on the applicable Benchmark Replacement Date:

(1) the sum of:  (a) Term SOFR and (b) the Benchmark Replacement Adjustment with respect thereto;

(2) the sum of:  (a) either of (i) Compounded SOFR or (ii) Daily Simple SOFR, as selected by the Administrative Agent, on behalf of Buyers, to be the then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for the applicable loan market and (b) the applicable Benchmark Replacement Adjustment;

(3) the sum of:  (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (b) the Benchmark Replacement Adjustment;

(4) the sum of:  (a) the alternate rate of interest that has been selected by Administrative Agent, on behalf of Buyers, as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated secured financings or securitizations relating to the relevant asset class, as applicable at such time and (b) the Benchmark Replacement Adjustment; provided that, in the case of clause (1) of this definition, such Unadjusted Benchmark Replacement is displayed on a screen or other information service that publishes such rate from time to time as selected by Administrative Agent, on behalf of Buyers, in its reasonable discretion.

If at any time the Benchmark Replacement as determined pursuant to clause (1), (2), (3) or (4) of this definition would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement

“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by Administrative Agent, on behalf of Buyers, as of the Benchmark Replacement Date:

(1) the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected, endorsed or

3

recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;

(2) the spread adjustment (which may be a positive or negative value or zero) that has been selected by Administrative Agent, on behalf of Buyers, giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated secured financing or securitization transactions relating to the relevant asset class, as applicable at such time.

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including but not limited to changes to the definition of “Business Day,” the definition of “Pricing Period,” timing and frequency of determining rates and making payments of price differential, timing of Transaction requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that Administrative Agent, on behalf of Buyers, decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by Administrative Agent, on behalf of Buyers, in a manner substantially consistent with market practice (or, if Administrative Agent, on behalf of Buyers, decides that adoption of any portion of such market practice is not administratively feasible or if Administrative Agent, on behalf of Buyers, determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as Administrative Agent, on behalf of Buyers, determines is reasonably necessary in connection with the administration of this Agreement.

“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:

(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof);

(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein; or

(3) in the case of an Early Opt-in Election, the date set forth in the notice of such Early Opt-in Election that is provided by Administrative Agent, on behalf of Buyers, to the Seller.

For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).

“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

4

(1) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);

(2) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or

(3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are no longer representative.

For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).

“Blocked Account” shall have the meaning specified in Section 5(a) of this Agreement.

“Blocked Account Agreement” shall mean that certain Blocked Account Agreement, dated as of the date hereof, executed by Administrative Agent, on behalf of Buyers, Seller and the Depository Bank (and any successor thereto or replacement thereof executed by Administrative Agent, on behalf of Buyers, Seller and the Depository Bank), as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Business Day”shall mean(a) any day other than (i) a Saturday or Sunday and (ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New York, Custodian or Administrative Agent, on behalf of Buyers, is authorized or obligated by law or executive order to be closed, and (b) with respect to any Pricing Rate Reset Date, a day on which banks are open for dealing in foreign currency and exchange in London.

“Buyer(s)” shall have the meaning set forth in the introductory paragraph hereto.

“Capital Lease Obligations” shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

5

“Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent equity ownership interests in a Person which is not a corporation, including, without limitation, any and all membership or other equivalent interests in any limited liability company, and any and all partnership or other equivalent interests in any partnership or limited partnership, and any and all warrants or options to purchase any of the foregoing.

“Cash Equivalents” shall mean, as of any date of determination, (a) marketable securities (i) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (ii) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States and (b) time deposits, certificates of deposit, money market accounts or banker’s acceptances of any investment grade rated commercial bank, in each case maturing within ninety (90) days after such date.

“Cause” shall mean, with respect to an Independent Director, (i) acts or omissions by such Independent Director that constitute willful disregard of, or bad faith or gross negligence with respect to, the Independent Director’s duties with respect to Seller’s obligations under this Agreement, (ii) such Independent Director has engaged in or has been charged with, or has been convicted of, fraud or other acts constituting a crime under any law applicable to such Independent Director, (iii) such Independent Director is unable to perform his or her duties as Independent Director due to death, disability or incapacity, or (iv) such Independent Director no longer meets the definition of Independent Director, as that term is defined in this Section 2.

“Change of Control” shall mean the occurrence of any of the following events:  (a) any “person” or “group” (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a percentage of the total Capital Stock of Seller or Guarantor, as applicable, of (I) for all such transferees other than a Permitted Transferee, twenty percent (20%) or more, and (II) for all Permitted Transferees, more than twenty-five percent (25%) (b) Guarantor shall cease to own and Control, of record and beneficially, directly one hundred percent (100%) of each class of outstanding Capital Stock of Pledgor, (c) Pledgor shall cease to own and Control, of record and beneficially, directly one hundred percent (100%) of each class of outstanding Capital Stock of Seller, (d) the Manager is terminated as, or otherwise ceases to be, the manager of Guarantor or Pledgor.

“Closing Date” shall mean the date of this Agreement.

“Co-Buyer Agreement” shall mean, collectively, (i) any co-buyer agreements entered into among Administrative Agent and one or more Buyers in connection with the Transactions and the Transaction Documents and (ii) any participation agreements entered into among Administrative Agent, one or more Buyers and any Participants in connection with the Transactions and the Transaction Documents, as each may be amended, modified and/or restated from time to time.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Collection Period” shall mean, with respect to the Remittance Date in any month, the period beginning on the Remittance Date in the preceding month to and including the calendar day immediately preceding such Remittance Date.

“Compounded SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate (which, for example, may

6

be compounded in arrears with a lookback and/or suspension period as a mechanism to determine the interest amount payable prior to the end of each Pricing Period or compounded in advance) being established by Administrative Agent, on behalf of Buyers, in accordance with:

(1) the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded SOFR; provided that:

(2) if, and to the extent that, Administrative Agent, on behalf of Buyers, determines that Compounded SOFR cannot be determined in accordance with clause (1) above, then the rate, or methodology for this rate, and conventions for this rate that have been selected by Administrative Agent, on behalf of Buyers, giving due consideration to any industry-accepted market practice for similar U.S. dollar denominated secured financing or securitization transactions relating to the relevant asset class, as applicable at such time.

“Concentration Limit” shall mean, (a) with respect to any New Asset, the Purchase Price of such New Asset does not exceed forty percent (40%) of the Facility Amount, (b) the aggregate Purchase Prices of all Purchased Assets for which the Mortgaged Property consists of hospitality properties shall not exceed thirty-five percent (35%) of the Facility Amount, and (c) the aggregate Purchase Prices of all Purchased Assets that are non-controlling pari passu Participation Interests shall not exceed Twenty-Five Million Dollars ($25,000,000).

“Confirmation” means, a written confirmation from Administrative Agent, on behalf of Buyers, to Seller, executed by Administrative Agent, on behalf of Buyers, and acknowledged by Seller, of Buyers’ Final Approval to purchase a Purchased Asset, substantially in the form attached hereto as Exhibit I.

“Continuing Directors” means, as of any date of determination with respect to a Public Vehicle, any member of the board of directors who (a) was a member of the board of directors on the date of the initial Public Sale or (b) was nominated for election, elected or appointed to the board of directors with the approval of a majority of the then members of the board of directors of such Public Vehicle (either by a specific vote or by approval of such Public Vehicle’s proxy statement in which that member was named as a nominee for election as a director, without objection to the nomination).

“Control” shall mean, with respect to any Person, the possession of the direct or indirect power to direct or cause the direction of the management or policies of such Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling”, “Controlled” and “under common Control” have correlative meanings.

“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or a price differential payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.

“Custodial Agreement” shall mean that certain Custodial Agreement, dated as of the date hereof, entered into by and among Custodian, Seller and Administrative Agent, on behalf of Buyers, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Custodian” shall mean Wells Fargo Bank, N.A., or any successor custodian appointed by Administrative Agent, on behalf of Buyers, and reasonably acceptable to Seller, or appointed by Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith during the continuance of an Event of Default.

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“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which may include a lookback) being established by Administrative Agent, on behalf of Buyers, in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for business loans at such times; provided that, if Administrative Agent, on behalf of Buyers, decides that any such convention is not administratively feasible, then the Administrative Agent, on behalf of Buyers, may establish another convention in its reasonable discretion.

“Default” shall mean any event that, with the giving of notice, the passage of time, or both, would constitute an Event of Default.

“Defaulted Asset” shall mean any Purchased Asset as to which (i) there is a breach beyond any applicable notice and cure period of a representation or warranty by Seller under Exhibit III attached hereto (without regard to any knowledge qualifier therein), (ii) a default has occurred and is continuing for at least twenty-five (25) days beyond any applicable notice and cure period under the related Purchased Asset Documents in the payment when due of any scheduled payment of interest or principal or any other amounts due under the Purchased Asset Documents, (iii) the occurrence and continuance of any other “event of default” as defined under the related Purchased Asset Documents, (iv) to the extent that the related Transaction is deemed to be a loan under federal, state or local law, Administrative Agent, on behalf of Buyers, ceases to have a first priority perfected security interest in the related Purchased Asset, (v) a Significant Modification has been made without the consent of Administrative Agent, on behalf of Buyers, pursuant to this Agreement, (vi) the related Purchased Asset File or any material portion thereof is subject to a continuing Bailee Delivery Failure or has been released from the possession of Custodian under the Custodial Agreement to anyone other than Administrative Agent, on behalf of Buyers, or any Affiliate of Administrative Agent, on behalf of Buyers, except in accordance with the terms of the Custodial Agreement, (vii) upon the occurrence of any Act of Insolvency with respect to any co-participant or any other person having an interest in such Purchased Asset or any related Mortgaged Property that is senior to, or pari passu with, in right of payment or priority with the rights of Administrative Agent, on behalf of Buyers, in such Purchased Asset, (viii) such Purchased Asset has gone into special servicing, however so defined in any servicing, or pooling and servicing, agreement related to a securitization or similar transaction, or (ix) the related Mortgaged Property ceases to have appropriate zoning approval or required insurance in the relevant jurisdiction that is likely to have a material adverse effect on the value of the related Mortgaged Property, and in any such case such failure continues beyond any applicable notice and cure period under the related Purchased Asset Documents.

“Depository Bank” shall mean Wells Fargo Bank, National Association, or any successor depository bank appointed by Administrative Agent, on behalf of Buyers, and reasonably acceptable to Seller, or appointed by Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith during the continuance of an Event of Default.

“Diligence Fees” shall mean fees, costs and expenses payable by Seller to Administrative Agent and Buyers in respect of Administrative Agent’s and Buyers’ actual, reasonable and necessary out-of-pocket fees, costs and expenses (other than legal expenses) incurred in connection with its review of the Diligence Materials hereunder and Administrative Agent’s and Buyers’ continuing due diligence reviews of Purchased Assets pursuant to Section 21 or otherwise hereunder.

“Diligence Materials” shall mean, with respect to any New Asset, the related Preliminary Due Diligence Package together with the related Supplemental Due Diligence Package.

“Division” shall mean, as to any Person, such Person dividing and/or otherwise engaging in and/or becoming subject to, in each case, any division pursuant to, or as permitted by, §18-217 of the Delaware Limited Liability Company Act.

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“Early Opt-in Election” means, if the then-current Benchmark is LIBOR, the occurrence of the joint election by Administrative Agent, on behalf of Buyers, and Seller to trigger a fallback from LIBOR and the provision by Administrative Agent, on behalf of Buyers, of written notice of such election to other parties hereto.

“Early Repurchase Date” shall have the meaning specified in Section 3(i)(i) of this Agreement.

“Electronic Signature” shall have the meaning specified in Section 28(f) of this Agreement.

“Eligible Assets” shall mean (i) performing Mortgage Loans, Mezzanine Loans and Participation Interests (A) acceptable to Administrative Agent, on behalf of Buyers, in the exercise of its sole discretion exercised in good faith, (B) secured directly by an Eligible Property, (C) which have a term equal to or less than ten (10) years (assuming exercise of all extension options), (D) as to which the applicable representations and warranties set forth in Exhibit III are true and correct as of the applicable Purchase Date unless otherwise disclosed in the Exception Report delivered to Administrative Agent on or prior to such Purchase Date, (E) [reserved], (F) that have a maximum LTV not in excess of 85%, (G) that have an original principal balance of not less than Five Million Dollars ($5,000,000) and (H) that are not subject to restrictions on transfer of lender’s interest therein and (ii) such other commercial real estate debt instruments (including, without limitation and for the avoidance of doubt, Mezzanine Loans) acceptable to Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith in each case, acceptable to Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith on a case-by-case basis.  Notwithstanding the foregoing, or any provision to the contrary set forth either in this Agreement or in any other Transaction Document, in no event shall Seller be required to enter into any Hedging Transactions in connection with any existing or proposed Purchased Assets and Seller shall at all times have the ability, to be exercised in its sole discretion at any time, whether to enter into, modify or terminate any such Hedging Transaction.

“Eligible Property” shall mean a property that is a multifamily, office, retail, industrial, hospitality, self-storage, mixed-use property or manufactured housing or such other property type acceptable to Administrative Agent in the exercise of its sole discretion exercised in good faith.

“Environmental Law” means:  (a) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Re-authorization Act of 1986, 42 U.S.C. §9601 et seq.; (b) the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §6901 et seq.; (c) the Clean Air Act, 42 U.S.C. §7401 et seq., as amended by the Clean Air Act Amendments of 1990; (d) the Clean Water Act of 1977, 33 U.S.C. §1251 et seq.; (e) the Toxic Substances Control Act, 15 U.S.C.A. §2601 et seq.; (f) all other federal, state and local laws, ordinances, regulations or policies relating to pollution or protection of human health or the environment including without limitation, air pollution, water pollution, or the use, handling, discharge, disposal or release or recovery of on-site or off-site Hazardous Materials, as each of the foregoing may be amended from time to time; and (g) any and all regulations promulgated under or pursuant to any of the foregoing statutes.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” shall mean any corporation or trade or business (whether or not incorporated) that is a member of any group of organizations described in (i) Section 414(b) or (c) of the Code or Section 4001(b) of ERISA of which Seller is a member at any relevant time or (ii) solely for purposes of the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Seller is a member.

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“Erroneous Payment Recipient” shall have the meaning specified in Section27(c)(i) hereof.

“Event of Default” shall have the meaning specified in Section 14(a).

“Exception Report” shall have the meaning specified in Section 3(c)(viii).

“Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to any Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of any Recipient being organized under the laws of, or having its principal office or the office from which it books the Transaction located in, the jurisdiction imposing such Tax (or any political subdivision thereof), or (ii) that are Other Connection Taxes, (b) in the case of a Buyer, withholding Taxes imposed on amounts payable to or for the account of such Buyer pursuant to a law in effect as of the date on which such Person (i) becomes a party to this Agreement, (ii) changes the office from which it books the Transactions or (iii) where Buyer is treated as a partnership for tax purposes and the tax status of a partner in such partnership is determinative of the obligation to pay Taxes, the later of the date on which Buyer acquired its applicable interest hereunder or the date on which the affected partner becomes a partner of Buyer, except in each case to the extent that pursuant to Section 3(p) or Section 3(r) amounts with respect to such taxes were payable either to such Person’s assignor immediately before such Person became a party to this Agreement or to such Person immediately before it changed the office from which it books the Transaction, (c) Taxes attributable to any Recipient’s failure to comply with Section 3(r) of this Agreement and (d) any withholding Taxes imposed under FATCA.

“Executive Order 13224” shall mean Executive Order 13224 “On Terrorist Financing:  Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism”, effective September 24, 2001.

“Exit Fee” shall have the meaning specified in the Fee Letter.

“Extension Fee” shall have the meaning specified in the Fee Letter.

“Facility Amount” shall mean Two Hundred Fifty Million Dollars ($250,000,000).

“Facility Termination Date” shall mean November 3, 2022, as the same may be extended in accordance with Section 9 of this Agreement.

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), together in each case with any current or future regulations, or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any law fiscal rule or practice adopted pursuant to any intergovernmental agreement implementing such Sections of the Code.

“FATF” shall mean the Financial Action Task Force on Money Laundering.

“FDIA” shall mean the Federal Deposit Insurance Act, as amended.

“FDICIA” shall mean Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991.

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“Fee Letter” shall mean that certain letter agreement, dated the date hereof, between Administrative Agent, on behalf of Buyers, and Seller, as the same may be amended, supplemented or otherwise modified from time to time.

“Filings” shall have the meaning specified in Section 6(b) of this Agreement.

“Final Approval” shall have the meaning specified in Section 3(d) of this Agreement.

“Financial Covenant Compliance Certificate” shall mean an Officer’s Certificate from Guarantor confirming that as of the fiscal quarter most recently ended, Guarantor shall satisfy the financial covenants set forth in Section 9 of the Guaranty, in the form attached hereto as Exhibit VI.

“First Mortgage A-Note” shall mean (i) a senior Mortgage Note in an AB Mortgage Loan or (ii) a senior controlling pari passu Mortgage Note in a Split Mortgage Loan.

“Floor” means, for any Transaction under this Agreement, the benchmark rate floor (which may be zero), if any, provided for in this Agreement with respect to LIBOR as determined for such Transaction.

“Future Advance Asset” shall mean any Purchased Asset with respect to which there exists a continuing obligation on the part of the holder of such Purchased Asset, pursuant to the terms and conditions of the Purchased Asset Documents, to provide additional funding to the Mortgagor.

“Future Advance Purchase” shall have the meaning specified in Section 3(h) of this Agreement.

“GAAP” shall mean United States generally accepted accounting principles consistently applied as in effect from time to time.

“Governmental Authority” shall mean any national or federal government, any state, regional, local or other political subdivision thereof with jurisdiction and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guarantee” shall mean, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Guarantee of a Person shall be deemed to be an amount equal to the maximum reasonably anticipated liability in respect thereof as determined by such Person in accordance with GAAP.  The terms “Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.

“Guarantor” shall mean ACRES Commercial Realty Corp., a Maryland corporation, together with its permitted successors and assigns.

“Guaranty” shall mean that certain Guaranty, dated as of the date hereof, made by Guarantor in favor of Administrative Agent, on behalf of Buyers, as the same may be amended, supplemented or otherwise modified from time to time.

“Hedging Transactions” shall mean, with respect to any or all of the Purchased Assets, any short sale of U.S. Treasury Securities or mortgage-related securities, futures contract (including currency futures) or options contract or any interest rate swap, cap or collar agreement or similar arrangements providing for

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protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller, or by the underlying obligor with respect to any Purchased Asset and pledged to Seller as collateral for such Purchased Asset, with one or more counterparties that is an Affiliated Hedge Counterparty or a Qualified Hedge Counterparty or, with respect to any Hedging Transaction pledged to Seller as additional collateral for a Purchased Asset, complies with such other rating requirement applicable to such Hedging Transaction set forth in the related Purchased Asset Documents or which is otherwise acceptable to Administrative Agent, on behalf of Buyers; provided that Seller shall not grant or permit any liens, security interests, charges, or encumbrances with respect to any such Hedging Transactions for the benefit of any Person other than Administrative Agent, on behalf of Buyers.

“Income” shall mean, with respect to any Purchased Asset at any time, any payment or other cash distribution thereon of principal, interest, dividends, fees, reimbursements or proceeds thereof (including sales proceeds) or other cash distributions thereon (including casualty or condemnation proceeds).

“Indebtedness” shall mean, for any Person:  (i) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (ii) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within sixty (60) days of the date the respective goods are delivered or the respective services are rendered; (iii) Indebtedness of others secured by a lien on the property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (iv) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (v) Capital Lease Obligations of such Person; (vi) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements; (vii) Indebtedness of others Guaranteed by such Person; (viii) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (ix) Indebtedness of general partnerships of which such Person is a general partner or of which such Person is secondarily on contingently liable (other than by endorsement of instruments in the course of collection), whether by reason of any agreement to acquire such indebtedness, to supply or advance sums or otherwise; and (x) all net liabilities or obligations under any interest rate swap, interest rate cap, interest rate floor, interest rate collar or other hedging instrument or agreement.

“Indemnified Amounts” shall have the meaning specified in Section 20(a) of this Agreement.

“Indemnified Parties” shall have the meaning specified in Section 20(a) of this Agreement.

“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Seller under any Transaction Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

“Independent Appraiser” shall mean an independent professional real estate appraiser who is a member in good standing of the American Appraisal Institute, and, if the state in which the subject Eligible Property is located certifies or licenses appraisers, is certified or licensed in such state, and in each such case, who has a minimum of five (5) years’ experience in the subject property type.

“Independent Director” shall mean, with respect to any corporation or limited liability company, an individual who:  (a) is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or,

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if none of those companies is then providing professional independent directors, another nationally-recognized company reasonably approved by Administrative Agent, on behalf of Buyers, in each case that is not an Affiliate of such corporation or limited liability company and that provides professional independent directors and other corporate services in the ordinary course of its business; (b)is duly appointed as a member of the board of directors of such corporation or as an independent manager, member of the board of managers, or special member of such limited liability company; and (c)is not, and has never been, and will not while serving as Independent Director be (i)a member (other than an independent, non-economic “springing” member), partner, equityholder, manager, director, officer or employee of such corporation or limited liability company or any of its equityholders or affiliates (other than an affiliate that is not in the direct chain of ownership of such corporation or limited liability company and that is a Single-Purpose Entity; provided that the fees such individual earns from serving as an Independent Director of such affiliates in any given year constitute in the aggregate less than5% of such individual’s annual income for that year); (ii)a creditor, supplier or service provider (including provider of professional services) to such corporation or limited liability company or any of its equityholders or affiliates (other than a nationally recognized company that routinely provides professional independent managers or directors and that also provides lien search and other similar services to such corporation or limited liability company or any of its equityholders or affiliates in the ordinary course of business); (iii)a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or (iv)a Person that controls (whether directly, indirectly or otherwise) any of clauses(i) or (ii)above.

“Insolvency Law” shall mean the Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments and similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

“Insured Closing Letter and Escrow Instructions” shall mean a letter addressed to Seller and Administrative Agent, on behalf of Buyers, from the title insurance underwriter (or any agent thereof) acting as an agent for each Table Funded Purchased Asset and related escrow instructions, which letter and instructions shall be in form and substance reasonably acceptable to Administrative Agent and Seller.

“Key Person Event” shall mean if any two (2) Key Persons shall fail to remain actively and directly involved in the management and policies of ACRES Commercial Realty Corp., or in a substantially similar capacity.

“Key Persons” shall mean Mark Fogel, Chief Executive Officer and President, Marty Reasoner, Managing Partner, Originations or Andrew Fentress, Managing Partner, Capital Markets.

“Last Endorsee” shall have the meaning specified in Schedule 2 of this Agreement.

“LIBOR” shall mean, for any Pricing Period with respect to a Purchased Asset, the per annum rate for deposits in U.S. Dollars that appears on Reuters Screen LIBOR01 Page (or the successor thereto) as one-month LIBOR as of 11:00 a.m., London time, on the Pricing Rate Reset Date, but in no event, less than zero or such other rate with respect to a Transaction as set forth in the related Confirmation.

“LTV” shall mean, with respect to any Eligible Asset, the ratio of the aggregate outstanding debt (which shall include such Eligible Asset and all debt senior to or pari passu with such Eligible Asset) secured, directly or indirectly, by the related Eligible Property or Properties, to the aggregate “as-is” market value of such Eligible Property or Properties as determined by Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith.

“Manager” shall mean ACRES Capital, LLC, a New York limited liability company.

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“Mandatory Early Repurchase Date” shall have the meaning specified in Section3(i)(ii) of this Agreement.

“Margin Credit Event” shall mean, with respect to any Purchased Asset, the date upon which material changes (i.e., changes that adversely impact the value of the Purchased Asset relative to Buyers’ initial underwriting or the most recent determination of Market Value) relative to the performance or condition of (i) the relevant Mortgaged Property, (ii) the Mortgagor (or its sponsor(s)) in relation to such Purchased Asset or (iii) the commercial real estate market in the relevant jurisdiction relating to the relevant Mortgaged Property, taken in the aggregate (excluding for any reason relating to fluctuation in current interest rates, interest rate spreads and credit spreads), exist with respect to such Purchased Asset as determined by Administrative Agent in its sole discretion exercised in good faith.

“Margin Deficit” shall have the meaning specified in Section 4(a) of this Agreement.

“Margin Excess” shall have the meaning specified in Section 4(b) of this Agreement.

“Margin Materiality Threshold” shall have the meaning specified in the Fee Letter.

“Market Value” shall mean, with respect to any Purchased Asset as of any relevant date, the market value of such Purchased Asset on such date, as determined by Administrative Agent in its sole discretion exercised in good faith, which determination shall be conclusive absent manifest error.

“Material Adverse Effect” shall mean a material adverse effect on (i) the property, business, operations, financial condition or credit quality of Guarantor, Pledgor and/or Seller, taken as a whole, (ii) the ability of the Guarantor, Pledgor or Seller to perform its obligations under any of the Transaction Documents to which it is party, (iii) the validity or enforceability of any the Transaction Documents, (iv) the material rights and remedies of Buyers under any of the Transaction Documents or (v) the Market Value, rating (if applicable) or liquidity of all the Purchased Assets in the aggregate.

“Maximum Asset Exposure Threshold” shall have the meaning specified in the Fee Letter.

“Maximum Purchase Percentage” shall mean, with respect to any Purchased Asset, the “Maximum Purchase Percentage” specified in Schedule 1 (or as otherwise specified in the applicable Confirmation).

“Mezzanine Borrower” shall mean, with respect to any Mezzanine Loan, the obligor on the related Mezzanine Note, the pledgor under the related Mezzanine Pledge Agreement, and the owner of the related Capital Stock.

“Mezzanine Loan” shall mean a performing mezzanine loan secured by pledges of 100% of the Capital Stock of the Mortgagor under a related Mortgage Loan which is a Purchased Asset.

“Mezzanine Loan Repurchase Assets” shall have the meaning specified in Section 6(f) hereof.

“Mezzanine Note” shall mean the original executed promissory note or other tangible evidence of the Mezzanine Loan indebtedness.

“Mezzanine Pledge Agreement” shall mean, with respect to any Purchased Asset that is a Mezzanine Loan, the pledge and security agreement creating a valid and enforceable lien on the related Capital Stock.

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“Monthly Statement” shall mean, for each calendar month during which this Agreement shall be in effect, Seller’s or Servicer’s, as applicable, reconciliation in arrears of beginning balances, interest and principal paid to date and ending balances for each Purchased Asset, together with a certified written report describing (i)any developments or events with respect to such Purchased Asset since the prior Monthly Statement that are reasonably likely to have a Material Adverse Effect, (ii)any Defaults or potential Defaults, (iii)any and all written modifications to any Purchased Asset Documents since the prior Monthly Statement, (iv)loan status, collection performance and any delinquency and loss experience with respect to each Purchased Asset, (v)an update as to the expected disposition or sale of the Purchased Assets and (vi)such other information as Administrative Agent, on behalf of Buyers, may reasonably request with respect to Seller, any Purchased Asset, Mortgagor or Mortgaged Property.

“Moody’s” shall mean Moody’s Investors Service, Inc.

“Mortgage” shall mean the mortgage, deed of trust, deed to secure debt or other instruments, creating a valid and enforceable first lien on or a first priority ownership interest in a Mortgaged Property.

“Mortgage Loan” shall mean (i) a whole commercial mortgage loan or (ii) a First Mortgage A-Note, in each case secured by a Mortgage and evidenced by a Mortgage Note and all other Purchased Asset Documents, all right, title and interest of Seller in and to any Mortgaged Property covered by the related Mortgage and all related Servicing Rights.

“Mortgage Note” shall mean (a) with respect to a Mortgage, a note or other evidence of indebtedness of a Mortgagor secured by such Mortgage and (b) with respect to a Participation Interest, a Participation Certificate evidencing such Participation Interest.

“Mortgaged Property” shall mean, in the case of (a) a Mortgage Loan, the real property or properties securing repayment of the debt evidenced by a Mortgage Note (or Mortgage Notes, in the case of an AB Mortgage Loan or Split Mortgage Loan) and (b) a Mezzanine Loan, the real property or properties owned by the Person the Capital Stock of which is pledged as collateral for such Mezzanine Loan.

“Mortgagor” shall mean, in the case of (a) a Mortgage Loan, the obligor on a Mortgage Note, the grantor of the related Mortgage and the owner of the related Mortgaged Property and (b) a Mezzanine Loan, the obligor on any applicable Mezzanine Note.

“New Asset” shall mean an Eligible Asset that Seller proposes to sell to Administrative Agent, on behalf of Buyers, pursuant to a Transaction.

“OFAC” shall mean the Office of Foreign Assets Control of the United States Department of the Treasury.

“Officer’s Certificate” shall mean, as to any Person, a certificate of the chief executive officer, the chief financial officer, the president, any vice president or the secretary of such Person.

“Other Connection Taxes” means, Taxes imposed as a result of a present or former connection between any Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under or engaged in any other transaction pursuant to or enforced any Transaction Document).

“Other Taxes” shall mean any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that may arise from any payment made under any Transaction Document

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or from the execution, delivery or enforcement of, or otherwise with respect to, any Transaction Document, except any such Taxes that are Other Connection Taxes.

“Participant” shall have the meaning specified in Section 17(b) hereof.

“Participation Certificate” shall mean a participation certificate which evidences the outstanding balance of a Participation Interest.

“Participation Interest” shall mean a senior controlling pari passu participation interest in a performing Mortgage Loan.

“Payment” shall have the meaning specified in Section 27(c)(i) hereof.

“Payment Notice” shall have the meaning specified in Section 27(c)(ii) hereof.

“Permitted Encumbrances” shall mean (a) liens for real property Taxes, ground rents, water charges, sewer rates and assessments not yet due and payable; (b) liens arising by operation of law (such as materialmen’s, mechanics’, carriers’, workmen’s, repairmen’s and similar liens) arising in the ordinary course of business which are (i) discharged by payment, bonding or otherwise or (ii) being contested in good faith by the related Mortgagor in accordance with the related Purchased Asset Documents; (c) covenants, conditions and restrictions, rights of way, easements and other matters of public record, which do not individually or in the aggregate, in the reasonable judgment of Seller, materially interfere with (i) the current use of the related Mortgaged Property, (ii) the security intended to be provided by the related Mortgage, (iii) the underlying obligor’s ability to pay its obligations when they become due or (iv) the value of the related Mortgaged Property; (d) liens and encumbrances set forth in the related Title Policy; and (e) rights of existing or future tenants as tenants only pursuant to leases.

“Permitted Transferee” shall have the meaning set forth in the Fee Letter.

“Person” shall mean an individual, corporation, limited liability company, business trust, partnership, joint tenant or tenant-in-common, trust, joint stock company, joint venture, unincorporated organization, or other entity, or a federal, state or local government or any agency or political subdivision thereof.

“Plan” shall mean an employee benefit or other plan established or maintained during the five-year period ended prior to the date of this Agreement or to which Seller or any ERISA Affiliate makes, is obligated to make or has, within the five-year period ended prior to the date of this Agreement, been required to make contributions and that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code.

“Plan Assets” shall mean “plan assets” within the meaning of the U.S. Department of Labor regulations located at 29 C.F.R. 2510.3-101, as modified by Section 3(42) of ERISA, and shall include assets of any (i) employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title I of ERISA or (ii) plan (as defined in Section 4975(e)(l) of the Code) subject to Section 4975 of the Code.

“Pledge Agreement” shall mean that certain Pledge and Security Agreement, dated as of the date hereof, by Pledgor in favor of Administrative Agent, on behalf of Buyers, as the same may be amended, restated, supplemented, replaced, or otherwise modified from time to time, pledging all of Pledgor’s interest in the Capital Stock of Seller to Administrative Agent, on behalf of Buyers.

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“Pledgor” shall mean ACRES Realty Funding, Inc., a Delaware corporation, together with its permitted successors and assigns.

“Portfolio Exposure Threshold” shall have the meaning specified in the Fee Letter.

“Power of Attorney to Administrative Agent, on behalf of Buyers” shall mean (i) that certain Power of Attorney to Administrative Agent, on behalf of Buyers, dated as of the date hereof executed by Seller in favor of Administrative Agent, on behalf of Buyers, and (ii) such other power of attorney executed pursuant to this Agreement in substantially the form attached as Exhibit II-1.

“Power of Attorney to Seller” shall mean (i) that certain Power of Attorney to Seller dated as of the date hereof executed by Administrative Agent, on behalf of Buyers, in favor of Seller and (ii) such other power of attorney executed pursuant to this Agreement substantially in the form of Exhibit II-2.

“Preliminary Approval” shall have the meaning specified in Section 3(b) of this Agreement.

“Preliminary Due Diligence Package” shall mean, with respect to any New Asset, the following due diligence information, to the extent available and applicable, relating to such New Asset to be provided by Seller to Administrative Agent, on behalf of Buyers, pursuant to this Agreement:

(a)Seller’s internal credit committee or investment committee memorandum, among other things, outlining the proposed transaction, including potential transaction benefits and all material underwriting risks and Underwriting Issues, anticipated exit strategies, cash flows and all other characteristics of the proposed transaction that a prudent buyer would consider material, redacted as necessary to omit all privileged and confidential information of any kind;

(b)current rent roll and rollover schedule, if applicable;

(c)cash flow pro forma, plus historical information, if available;

(d)flood certification, in form and substance acceptable to Administrative Agent;

(e)maps and photos, if available;

(f)interest coverage ratios and annualized underwritten debt yield (or such other underwriting methodology utilized by Seller and approved by Administrative Agent, on behalf of Buyers);

(g)description of the Mortgaged Property, along with a description of the Mortgagor and sponsor (including their experience with other projects, ownership structure and financial statements);

(h)loan-to-value ratio;

(i)Seller’s or any Affiliate’s relationship with the Mortgagor or any affiliate;

(j)material third party reports, to the extent available and applicable, including:  (i) engineering and structural reports, each in form and prepared by consultants acceptable to Administrative Agent, on behalf of Buyers; (ii) current Appraisal; (iii) Phase I environmental report (including asbestos and lead paint report) and, if applicable, Phase II or other follow-up environmental report if recommended in Phase I, each in form and prepared by consultants acceptable to Administrative Agent, on behalf of Buyers, as determined in its reasonable discretion, exercised in good faith; (iv) seismic reports, if applicable (and only if the related Eligible Property is included in seismic zone 3), each in form

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and prepared by consultants acceptable to Administrative Agent, on behalf of Buyers, as determined in its reasonable discretion, exercised in good faith; (v) operations and maintenance plan with respect to asbestos containing materials, each in form and prepared by consultants acceptable to Administrative Agent, on behalf of Buyers, as determined in its reasonable discretion, exercised in good faith; (vi) the servicing data tape; (vii) credit reports by a credit reporting agency acceptable to Administrative Agent, on behalf of Buyers, as determined in its reasonable discretion, exercised in good faith, in form and substance acceptable to Administrative Agent, on behalf of Buyers, as determined in its reasonable discretion, exercised in good faith; and (viii) background searches and reports of the findings of such searches, in form and substance acceptable to Administrative Agent, as determined in its reasonable discretion, exercised in good faith;

(k)copies of documents evidencing such New Asset, or current drafts thereof, including, without limitation, underlying debt and security documents, guaranties, Mortgagor’s organizational documents, loan and collateral pledge agreements, and intercreditor agreements, as applicable;

(l)insurance reports in form and substance acceptable to Administrative Agent, on behalf of Buyers, as determined in its reasonable discretion, exercised in good faith, and prepared by third-party consultants acceptable to Administrative Agent, on behalf of Buyers, as determined in its reasonable discretion, exercised in good faith, and (ii) insurance certificates or other evidence of insurance coverage evidencing the insurance required to be maintained with respect to any Eligible Property or Properties pursuant to Section 3(c)(iv) hereof (including evidence of terrorism insurance coverage and such other customary insurance coverage satisfactory to Administrative Agent, on behalf of Buyers, as determined in its reasonable discretion, exercised in good faith);

(m)analyses and reports with respect to such other matters concerning the New Asset as Administrative Agent, on behalf of Buyers, may in its reasonable discretion require; and

(n)with respect to any Transaction involving a New Asset that is a Future Advance Asset, Seller shall indicate in the related Preliminary Due Diligence Package that such New Asset is a Future Advance Asset and shall provide Administrative Agent, with the information required to complete the Confirmation regarding such Future Advance Asset, as well as the then remaining unfunded principal amount of all Purchased Assets that constitute Future Advance Assets.

“Prescribed Laws” shall mean, collectively, (a) the USA PATRIOT Act, (b) Executive Order 13224, (c) the International Emergency Economic Power Act, 50 U.S.C. §1701 et. seq., (d) the Bank Secrecy Act (31 U.S.C. Sections 5311 et seq.) as amended and (e) all other Requirements of Law adopted by and applicable in the United States of America and relating to money laundering or terrorism, including without limitation, the USA PATRIOT Act and all regulations and executive orders adopted by the United States of America promulgated with respect to money laundering or terrorism, including, without limitation, those promulgated by the Office of Foreign Assets Control of the United States Department of the Treasury.

“Price Differential” shall mean, with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Repurchase Price thereof (excluding any amount attributable to Price Differential in the definition thereof), calculated on the basis of a three hundred sixty (360) day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (such aggregate amount to be reduced by any amount of such Price Differential paid by Seller to Administrative Agent, on behalf of Buyers, prior to such date, with respect to such Transaction).

“Pricing Period” shall mean, with respect to each Purchased Asset (x) in the case of the first (1st) Remittance Date following the purchase of such Purchased Asset, the period from and including the

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original Purchase Date for such Purchased Asset to but excluding such Remittance Date, and (y)in the case of each subsequent Remittance Date, the one-month period from and including the preceding Remittance Date to but excluding such Remittance Date; provided, that no Pricing Period for a Purchased Asset shall end after the Repurchase Date for such Purchased Asset.

“Pricing Rate” shall mean, for any Pricing Period with respect to a Purchased Asset, an annual rate equal to the Benchmark for such Pricing Period, plus the Applicable Spread for the related Purchased Asset (subject to adjustment and/or conversion as provided in Sections 3(l) and 3(m) of this Agreement).

“Pricing Rate Reset Date” shall mean, with respect to a Purchased Asset, (x) in the case of the first (1st) Pricing Period for such Purchased Asset, the original Purchase Date for such Purchased Asset, and (y) in the case of each subsequent Pricing Period, two (2) Business Days preceding the Remittance Date on which such Pricing Period begins.

“Principal Payment” shall mean, with respect to any Purchased Asset, any payment or prepayment of principal received in respect thereof (including casualty or condemnation proceeds to the extent that such proceeds are not required under the underlying loan documents to be reserved, escrowed, readvanced or applied for the benefit of the Mortgagor or the related Mortgaged Property).  For purposes of clarification, prepayment premiums, fees or penalties shall not be deemed to be principal.

“Prohibited Person” shall mean any Person:  (i) listed in the Annex to, or otherwise subject to the provisions of, Executive Order 13224; (ii) that is owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order 13224; (iii) domiciled in the United States of America and with whom Administrative Agent and/or any Buyer is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law adopted in the United States of America, including Executive Order 13224; (iv) who commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order 13224; (v) that is the target of Sanctions;(vi) that is a foreign shell bank; (vii) that is a resident of, or whose subscription funds are transferred from or through an account in, a jurisdiction that has been designated as a non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the FATF, of which the U.S. is a member and with which designation the U.S. representative to the group or organization continues to concur (see http://www.fatf-gati.org for the FATF’s “Non-Cooperative Countries and Territories Initiative”); or (viii) who is an Affiliate of a Person described above.

“Prohibited Transferee” shall mean any of the Persons listed on Schedule 3 attached to this Agreement, together with each of their respective Affiliates.

“Purchase Date” shall mean, with respect to any Eligible Asset, the date on which such Eligible Asset is transferred by Seller to Administrative Agent, on behalf of Buyers.

“Purchase Percentage” shall mean, with respect to any Purchased Asset, the applicable Maximum Purchase Percentage specified in Schedule 1 (or as otherwise specified in the applicable Confirmation).

“Purchase Price” shall mean, with respect to any Purchased Asset, the price at which such Purchased Asset is transferred by Seller to Administrative Agent, on behalf of Buyers, on the applicable Purchase Date.  The Purchase Price as of any Purchase Date for any Purchased Asset shall be an amount (expressed in dollars) equal to the product of (a) the outstanding principal balance of such Purchased Asset, multiplied by (b) the applicable Purchase Percentage.  The Purchase Price shall increase by any Future Advance Purchase pursuant to Section 3(h) and any payment made to Seller in connection with a Margin Excess pursuant to Section 4(b), and shall decrease by any payment applied in connection with a Margin

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Deficit pursuant to Section4(a) and any Principal Payment applied pursuant to Section5 to reduce such Purchase Price and any other amounts paid to Administrative Agent, on behalf of Buyers, by Seller to reduce such Purchase Price.

“Purchased Asset” shall mean (i) with respect to any Transaction, the Eligible Assets sold by Seller to Administrative Agent, on behalf of Buyers, in such Transaction and (ii) with respect to the Transactions in general, all Eligible Assets sold by Seller to Administrative Agent, on behalf of Buyers.

“Purchased Asset Documents” shall mean, with respect to a Purchased Asset, the documents specified in Schedule 2.

“Purchased Asset File” shall mean the Purchased Asset Documents, together with any additional documents and information required to be delivered to Administrative Agent, on behalf of Buyers, or its designee (including Custodian) pursuant to this Agreement.

“Purchased Asset File Checklist” shall have the meaning specified in the Custodial Agreement.

“Purchased Asset Schedule” shall have the meaning specified in the Custodial Agreement.

“Qualified Hedge Counterparty” shall mean, with respect to any Hedging Transaction, any entity other than an Affiliated Hedge Counterparty, that (a) qualifies as an “eligible contract participant” as such term is defined in the Commodity Exchange Act (as amended by the Commodity Futures Modernization Act of 2000), (b) the long-term debt of which is rated no less than “A+” by Standard & Poor’s and “A1” by Moody’s and (c) is reasonably acceptable to Administrative Agent, on behalf of Buyers,; provided that, with respect to clause (c), if Administrative Agent, on behalf of Buyers, has approved an entity as a counterparty, it may not thereafter deem such counterparty unacceptable with respect to any previously outstanding Transaction unless clause (a) or (b) no longer applies with respect to such counterparty.

“Quarterly Report” shall mean, for each fiscal quarter during which this Agreement shall be in effect, (i) Seller’s or Servicer’s, as applicable, certified written report summarizing (with a separate cover sheet for each Purchased Asset or, in the case of a Purchased Asset secured (directly or indirectly) by a portfolio of Mortgaged Properties, a cover sheet for such portfolio on a consolidated basis), with respect to the Mortgaged Properties securing each Purchased Asset (or, in the case of a Purchased Asset secured (directly or indirectly) by a portfolio of Mortgaged Properties, such information on a consolidated basis), the net operating income, debt service coverage, occupancy, the revenues per room (for hospitality properties) and sales per square footage (for retail properties), in each case, to the extent received by Seller, and such other information as mutually agreed by Seller and Administrative Agent, on behalf of Buyers, and (ii) the updated underwriting report.

“Recipient” means (a) Administrative Agent, or (b) any Buyer, as applicable.

“Reference Time” with respect to any setting of the then-current Benchmark means (1) if such Benchmark is LIBOR, 11:00 a.m. (London time) on the day that is two London banking days preceding the date of such setting, and (2) if such Benchmark is not LIBOR, the time determined by Administrative Agent, on behalf of Buyers, in accordance with the Benchmark Replacement Conforming Changes.

“Regulations T, U and X” shall mean Regulations T, U and X of the Board of Governors of the Federal Reserve System (or any successor thereto), as the same may be modified and supplemented and in effect from time to time.

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“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.

“Remittance Date” shall mean the eighteenth (18th) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day.

“Representatives” shall have the meaning specified in Section 28(a) hereof.

“Repurchase Assets” shall have the meaning specified in Section 6(a) hereof.

“Repurchase Date” shall mean, with respect to any Purchased Asset, the date that is the earliest to occur of the following:  (a) the Facility Termination Date, (b) the date that is specified in the related Confirmation, (c) if applicable, the related Early Repurchase Date, Mandatory Early Repurchase Date or Accelerated Repurchase Date, or (d) the maturity date of such Purchased Asset or, in the case of a Participation Interest, the maturity date of the underlying Mortgage Loan (subject to extension, if applicable, in accordance with the related Purchased Asset Documents).

“Repurchase Obligations” shall mean the Aggregate Repurchase Price and all other amounts due under the Transaction Documents (including interest which would be payable as post-petition interest in connection with any bankruptcy or similar proceeding) irrespective of whether such obligations are direct or indirect, absolute or contingent, matured or unmatured.

“Repurchase Price” shall mean, with respect to any Purchased Asset, as of any date, the price at which such Purchased Asset is to be transferred from Administrative Agent, on behalf of Buyers, to Seller upon termination of the related Transaction; in each case, such price shall equal the sum of the Purchase Price of such Purchased Asset and the accrued and unpaid Price Differential with respect to such Purchased Asset as of the date of such determination, minus all Income and other cash actually received by Buyers in respect of such Purchased Asset and applied towards the Repurchase Price and/or Price Differential pursuant to this Agreement.

“Requirement of Law” shall mean any law (including, without limitation, Prescribed Law), treaty, rule, regulation, code, directive, policy, order or requirement or determination of an arbitrator or a court or any other Governmental Authority in each case, as adopted by the United States of America, whether now or hereafter enacted or in effect.

“Reserve Requirements” shall mean, with respect to any date of determination, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such date (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board of Governors of the Federal Reserve System) maintained by Buyers.

“Sanctions” shall have the meaning specified in Section 10(xxv)(A) of this Agreement.

“SEC” shall mean the Securities and Exchange Commission.

“Seller” shall have the meaning specified in the introductory paragraph of this Agreement.

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“Servicer” shall mean Greystone Servicing Company LLC, or any successor servicer appointed by Administrative Agent, on behalf of Buyers, and reasonably acceptable to Seller; provided that the provisions of Section22 are satisfied.

“Servicer Acknowledgment” shall mean (i) that certain servicer acknowledgment, dated as of the date hereof, executed by Seller and acknowledged by Servicer and Administrative Agent, on behalf of Buyers, and (ii) such other servicer acknowledgment entered into by Seller on Administrative Agent’s behalf in accordance with Section 22 of this Agreement.

“Servicing Agreement” shall mean (i) that certain Servicing Agreement, dated as of the date hereof, by and between Servicer and Seller, and (ii) such other servicing or subservicing agreement entered into by Seller on Administrative Agent’s behalf in accordance with Section 22 of this Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time.

“Servicing Records” shall have the meaning specified in Section 22(b) of this Agreement.

“Servicing Rights” shall mean contractual, possessory or other rights of any Person to administer, service or subservice any Purchased Assets (or to possess any Servicing Records relating thereto), including:  (i) the rights to service the Purchased Assets; (ii) the right to receive compensation (whether direct or indirect) for such servicing, including the right to receive and retain the related servicing fee and all other fees with respect to such Purchased Assets; and (iii) all rights, powers and privileges incidental to the foregoing, together with all Servicing Records relating thereto.

“Significant Modification” shall mean (i) any extension, amendment, waiver, termination, rescission, cancellation, release, subordination or other modification to the terms of, or any collateral, guaranty or indemnity for, any Purchased Asset or Purchased Asset Document (including, without limitation, any provision related to the amount or timing of any scheduled payment of interest or principal, the validity, perfection or priority of any security interest, or the release of any collateral or obligor), (ii) any sale, transfer, disposition or any similar action with respect to any collateral for any Purchased Asset or (iii) the foreclosure or exercise of any material right or remedy by the holder of any Purchased Asset or Purchased Asset Document; provided that, (a) routine and customary modifications in the administration of the Purchased Asset Documents and other non-material, administrative or ministerial modifications with no economic effect on the value of the related Purchased Asset or related Mortgaged Property regarding consent rights over leases, budgets, utilization of reserves or the release thereof, approval of escrows and bonding amounts for mechanics’ or materialmen’s liens, tax abatements or tax challenges and (b) provided that Seller has given Administrative Agent, on behalf of Buyers, at least ten (10) days’ prior notice thereof (which notice shall include a summary of the related proposed amendments or modification), any waivers, consents, amendments or modifications to any Purchased Asset Document, to the extent solely providing for the conversion of the interest rate thereunder to a benchmark rate based on SOFR (or another benchmark rate to the extent that such other benchmark rate is being implemented in order to match the benchmark interest rate hereunder) and any benchmark conforming changes made in connection therewith (including waivers, consents, modifications or amendments to or replacements of any related interest rate protection agreements and/or caps relating to the applicable Purchased Asset that are necessary to effect such conversion to SOFR or such other benchmark rate) shall (in each case, with respect to each of the preceding clauses (a) and (b)) not be considered Significant Modifications.

“Single-Purpose Entity” shall mean any corporation, limited partnership or limited liability company that, since the date of its formation and at all times on and after the date hereof, has complied with and shall at all times comply with the provisions of Section 13 of this Agreement.

“SIPA” shall have the meaning specified in Section 25(a) of this Agreement.

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“SOFR” with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.

“Split Mortgage Loan” shall mean a Mortgage Loan evidenced by two or more senior pari passu Mortgage Notes.

“Standard & Poor’s” shall mean Standard & Poor’s Financial Services, L.L.C., a division of McGraw Hill Financial Inc. and any successor in interest.

“Subsidiary” shall mean, as to any Person, a corporation, partnership or other entity Controlled by such Person.  Unless otherwise qualified, all references to a Subsidiary or to Subsidiaries in this Agreement shall refer to a Subsidiary or Subsidiaries of Seller and/or Guarantor.

“Supplemental Due Diligence Package” shall mean, with respect to any New Asset, information or deliveries concerning such New Asset that Administrative Agent, on behalf of Buyers, shall reasonably request in addition to the Preliminary Due Diligence Package, including, without limitation, a confirmation that the credit memorandum represents the final terms of the underlying transaction, a loan-to-value ratio computation and a final annualized underwritten debt yield computation (or such other underwriting methodology utilized by Seller and approved by Administrative Agent, on behalf of Buyers) for such New Asset.

“Survey” shall mean a certified ALTA/ACSM (or applicable state standards for the state in which a Mortgaged Property is located) survey of a Mortgaged Property prepared by a registered independent surveyor and in form and content reasonably satisfactory to Administrative Agent, on behalf of Buyers, and the company issuing the Title Policy for such Mortgaged Property.

“Table Funded Purchased Asset” shall mean a Purchased Asset which is sold to Administrative Agent, on behalf of Buyers, simultaneously with the origination or acquisition thereof, which origination or acquisition is financed with the Purchase Price, pursuant to Seller’s request, paid directly to a title company or other settlement agent, in each case, approved by Administrative Agent, on behalf of Buyers, for disbursement in connection with such origination or acquisition.  A Purchased Asset shall cease to be a Table Funded Purchased Asset after Custodian has delivered a Trust Receipt to Administrative Agent certifying its receipt of the Purchased Asset File therefor.

“Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term SOFR” means, for the applicable Corresponding Tenor as of the applicable Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

“Title Policy” shall mean (a) an American Land Title Association lender’s title insurance policy or a comparable form of lender’s title insurance policy approved for use in the applicable jurisdiction, in form and substance reasonably acceptable to Administrative Agent, on behalf of Buyers, or, (b) if such policy has not yet been issued, (i) a pro forma policy, (ii) a preliminary title policy together with an Insured Closing Letter and Escrow Instructions or (iii) a “marked up” commitment, in each case that is binding on the title insurer.

“Transaction” shall have the meaning specified in Section 1 of this Agreement.

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“Transaction Conditions Precedent” shall have the meaning specified in Section3(f) of this Agreement.

“Transaction Costs” shall have the meaning specified in Section 20(b) of this Agreement.

“Transaction Documents” shall mean, collectively, this Agreement, the Blocked Account Agreement, the Custodial Agreement, the Fee Letter, the Guaranty, the Pledge Agreement, the Servicing Agreement and Servicer Acknowledgment, the Power of Attorney to Administrative Agent, on behalf of Buyers, the Power of Attorney to Seller, all Transfer Documents, all Confirmations executed pursuant to this Agreement in connection with specific Transactions and all other documents executed in connection herewith and therewith.

“Transfer” shall mean, with respect to any Person, any sale or other whole or partial conveyance of all or any portion of such Person’s assets, or any direct or indirect interest therein to a third party (other than in connection with the transfer of a Purchased Asset to Administrative Agent, on behalf of Buyers, in accordance herewith), including the granting of any purchase options, rights of first refusal, rights of first offer or similar rights in respect of any portion of such assets or the subjecting of any portion of such assets to restrictions on transfer.

“Transfer Documents” shall mean, with respect to any Purchased Asset, all applicable Purchased Asset Documents necessary to transfer all of Seller’s right, title and interest in such Purchased Asset to Administrative Agent, on behalf of Buyers, in accordance with the terms of this Agreement.

“Trust Receipt” shall mean a trust receipt issued by Custodian, or, in the case of a Table Funded Purchased Asset, Bailee, as applicable, confirming the Custodian or Bailee’s, as applicable, possession of certain Purchased Asset Files that are held by the Custodial or Bailee, as applicable, on behalf of Administrative Agent, on behalf of Buyers, substantially in the form required under the Custodial Agreement or the Bailee Agreement.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided that if, by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of any security interest is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, with respect to perfection or the effect of perfection or non-perfection, “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such perfection or effect of perfection or non-perfection.

“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the Benchmark Replacement Adjustment with respect thereto.

“Underwriting Issues” shall mean, with respect to any New Asset, all material information of which Seller has knowledge that, based on the making of reasonable inquiries and the exercise of reasonable care and diligence by a reasonable institutional mortgage loan buyer in determining whether to originate or acquire such New Asset under the circumstances, would, in the context of the totality of the Transaction in question, be considered a materially “negative” factor (either separately or in the aggregate with other information relating to such New Asset), including, but not limited to, whether such New Asset was repurchased from any warehouse loan facility or a repurchase transaction due to the breach of a representation and warranty or a material defect in loan documentation or closing deliveries (such as the absence of any material Purchased Asset Document(s)).

“United States Person” shall have the meaning specified in Section ‎3(r)(i) hereof.

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“Upfront Fee” shall have the meaning specified in the Fee Letter.

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56).

“U.S. Tax Compliance Certificate” shall have the meaning specified in Section 3(r)(ii)(C) hereof.

“Voting Stock” shall mean, with respect to any specified “person” (as that term is used in Section 13(d)(3) of the 1934 Act) as of any date, the Capital Stock of that person that is at the time entitled to vote generally in the election of the board of directors of that person.

3.INITIATION; CONFIRMATION; TERMINATION; FEES

(a)Seller may prior to the Facility Termination Date, from time to time request that Administrative Agent, on behalf of Buyers, enter into a Transaction with respect to one or more New Assets by submitting a Preliminary Due Diligence Package for Administrative Agent, on behalf of Buyers’ review and approval, which approval shall be in the sole discretion of Administrative Agent, as exercised in good faith.  Notwithstanding anything to the contrary herein, Administrative Agent, on behalf of Buyers, shall have no obligation to consider for purchase any New Asset if, immediately after the purchase of such New Asset, the Aggregate Repurchase Price would exceed the Facility Amount.  Administrative Agent, Buyers and their respective representatives shall have the right to review all New Assets proposed to be sold to Administrative Agent, on behalf of Buyers, in any Transaction and to conduct its own due diligence investigation of such New Assets as Administrative Agent and Buyers determine is necessary in Administrative Agent’s sole discretion exercised in good faith.  Notwithstanding any provision to the contrary herein or in any other Transaction Document, Administrative Agent, on behalf of Buyers, shall be entitled to determine, in its sole discretion exercised in good faith, whether a New Asset qualifies as an Eligible Asset or whether to reject any New Asset proposed to be sold to Administrative Agent, on behalf of Buyers, by Seller, and Administrative Agent, on behalf of Buyers, shall have no obligation to enter into any Transactions, which Transactions shall be entered into in the sole discretion of Administrative Agent, on behalf of Buyers, exercised in good faith.

(b)Upon Administrative Agent’s receipt of a Preliminary Due Diligence Package, Administrative Agent, on behalf of Buyers, shall have the right to request a Supplemental Due Diligence Package to evaluate the proposed Transaction.  Upon Administrative Agent’s receipt or waiver of such Supplemental Due Diligence Package, Administrative Agent, on behalf of Buyers, shall, in its sole discretion exercised in good faith, within three (3) Business Days, either (i) notify Seller of its intent to proceed with the Transaction, together with its determination of the Purchase Price and the Market Value for the related New Asset (such notice, a “Preliminary Approval”) or (ii) deny Seller’s request.  Administrative Agent’s failure to respond to Seller within three (3) Business Days shall be deemed to be a denial of Seller’s request to enter into the proposed Transaction, unless Administrative Agent, on behalf of Buyers, and Seller have agreed otherwise in writing.

(c)Upon Seller’s receipt of Preliminary Approval with respect to a Transaction, Seller shall, if Seller desires to enter into such Transaction with respect to the related New Asset upon the terms set forth by Administrative Agent, on behalf of Buyers, in the Preliminary Approval, deliver the documents set forth below in this Section 3(c) with respect to each New Asset and related Eligible Property or Properties (to the extent not already delivered in the Preliminary Due Diligence Package or in the Supplemental Due Diligence Package) as a condition precedent to a Final Approval and issuance of a Confirmation, all in a manner and/or form satisfactory to Administrative Agent in its sole discretion exercised in good faith and pursuant to documentation satisfactory to Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith:

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(i)Delivery of Purchased Asset Documents.  Copies of each of the final Purchased Asset Documents, or drafts of such Purchased Asset Documents in substantially final form if such New Asset is being originated concurrently with the transfer to Administrative Agent, on behalf of Buyers, subject to delivery of final, executed copies of such Purchased Asset Documents on the Purchase Date of such New Asset.

(ii)Environmental and Engineering.  A “Phase I” (and, if recommended by the Phase I, a “Phase II”) environmental report, an asbestos survey, if applicable, and an engineering report, each in form reasonably satisfactory to Administrative Agent, on behalf of Buyers, by an engineer and an environmental consultant, approved by Administrative Agent.

(iii)Appraisal.  If obtained by Seller, an Appraisal of the related Eligible Property or Properties dated less than twelve (12) months prior to the proposed Purchase Date.

(iv)Insurance.  Certificates or other evidence of insurance detailing insurance coverage in respect of the related Eligible Property or Properties of types (including but not limited to casualty, general liability and terrorism insurance coverage), in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in the Purchased Asset Documents and otherwise reasonably satisfactory to Administrative Agent, on behalf of Buyers.  Such certificates or other evidence shall indicate that Seller (or as to a New Asset that is a Participation Interest, the lead lender on the related whole loan in which Seller is a participant) will be named as an additional insured as its interest may appear and shall contain a loss payee endorsement in favor of such additional insured with respect to the policies required to be maintained under the Purchased Asset Documents.

(v)Opinions of Counsel.  Copies of all legal opinions with respect to the New Asset (which shall include a non-consolidation opinion, if applicable, as determined by Administrative Agent, acting in its reasonable discretion) that shall be in form and substance reasonably satisfactory to Administrative Agent, on behalf of Buyers; provided that Seller may deliver drafts of such opinions if such New Asset is being originated concurrently with the transfer to Administrative Agent, on behalf of Buyers, and shall deliver final, executed copies of such legal opinions on the Purchase Date of such New Asset.

(vi)Title Insurance.  (A) An unconditional commitment from the title company to issue a Title Policy or Policies in favor of Seller and Seller’s successors and/or assigns with respect to each Mortgage securing such New Asset with an amount of insurance that shall be not less than the principal balance of such New Asset, or (B) an endorsement or confirmatory letter from the title company that issued the existing Title Policy (in an amount not less than the principal balance of such New Asset) in favor of Seller and Seller’s successors and assigns adding such parties as an additional insured.

(vii)Additional Real Estate Matters.  To the extent obtained by Seller, such other real estate related certificates and documentation as may have been reasonably requested by Administrative Agent, on behalf of Buyers, such as:  (A) certificates of occupancy issued by the appropriate Governmental Authority and either letters certifying that the related Eligible Property or Properties are in compliance with all applicable zoning laws issued by the appropriate Governmental Authority, a zoning report in form and prepared by a zoning consultant satisfactory to Administrative Agent, on behalf of Buyers, or evidence that the related Title Policy includes a zoning endorsement; and (B) abstracts of all material leases in effect at the Mortgaged Property delivered in connection with the New Asset.

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(viii)Exception Report.  A written report of any exceptions to the representations and warranties in Exhibit III attached hereto (an “Exception Report”).

(ix)Other Documents.  Such other documents as Administrative Agent, on behalf of Buyers, shall reasonably deem to be necessary.

(d)Within three (3) Business Days of Seller’s delivery of the documents and materials contemplated in Section 3(c) above, Administrative Agent shall in its sole discretion exercised in good faith notify Seller that either (A) Administrative Agent, on behalf of Buyers, has not approved the New Asset or(B) Administrative Agent, on behalf of Buyers, agrees to purchase the New Asset, subject to satisfaction (or waiver by Administrative Agent) of the Transaction Conditions Precedent (such notice, a “Final Approval”) set forth in Section 3(f) below.  Administrative Agent’s failure to respond to Seller within three (3) Business Days shall be deemed to be a denial of Seller’s request that Administrative Agent, on behalf of Buyers, purchase the New Asset, unless Administrative Agent, on behalf of Buyers, and Seller have agreed otherwise in writing.

(e)Subject to satisfaction of the Transaction Conditions Precedent, Administrative Agent, on behalf of Buyers, shall deliver to Seller an executed Confirmation with respect to a proposed Transaction; provided that, unless otherwise agreed by Seller, Administrative Agent shall deliver a separate Confirmation with respect to each New Asset that will be the subject of a Transaction.  Each Confirmation shall be deemed to be incorporated herein by reference with the same effect as if set forth herein at length.

(f)Provided that each of the Transaction Conditions Precedent set forth in this Section 3(f) have been satisfied (or waived by Administrative Agent in its sole discretion exercised in good faith), each Buyer, in the amount of each such Buyer’s pro rata share of the Purchase Price, shall transfer the Purchase Price to Seller with respect to each New Asset for which it has issued a Confirmation on the Purchase Date specified in such Confirmation (which Purchase Date shall be at least one (1) Business Day after the date the Final Approval is delivered), and the related New Asset shall be concurrently transferred by Seller to Administrative Agent, on behalf of Buyers, or its nominee.  For purposes of this Section 3(f), the conditions precedent to any proposed Transaction (“Transaction Conditions Precedent”) shall be satisfied with respect to such proposed Transaction if:

(i)no uncured monetary Default, material non-monetary Default or Event of Default, or any unsatisfied Margin Deficit shall have occurred and be continuing as of the Purchase Date;

(ii)Seller shall have executed a Confirmation for such proposed Transaction;

(iii)[reserved];

(iv)[reserved];

(v)Administrative Agent shall have (A) determined, in its sole discretion exercised in good faith in accordance with Section 3(a) of this Agreement, that the New Asset proposed to be sold to Administrative Agent, on behalf of Buyers, by Seller in such Transaction is an Eligible Asset, (B) obtained internal credit approval for the inclusion of such New Asset as a Purchased Asset in a Transaction, (C) confirmed that, after giving effect to such Purchased Asset, the Concentration Limit shall be satisfied and (D) determined, in its sole discretion exercised in good faith, that the Maximum Asset Exposure Threshold and Portfolio Exposure Threshold will be satisfied immediately after giving effect to such proposed Transaction;

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(vi)(A) if the New Asset is not a Table Funded Purchased Asset, the applicable Purchased Asset File described in Schedule 2 of this Agreement shall have been delivered to Custodian, and Administrative Agent, on behalf of Buyers, shall have received a Trust Receipt with respect to such Purchased Asset File, and (B) if the Purchased Asset is a Table Funded Purchased Asset, the documents required by Schedule 2 shall have been delivered to Bailee and Bailee shall have executed and delivered a Bailee Agreement;

(vii)Seller shall have delivered to any related Mortgagor, obligor, related servicer or lead lender a direction letter in accordance with Section 5(a) of this Agreement unless such Mortgagor, obligor, related servicer or lead lender is already remitting payments to Servicer, in which case Seller shall direct Servicer to remit all such amounts into the Blocked Account in accordance with Section 5(a) of this Agreement and to service such payments in accordance with the provisions of this Agreement;

(viii)Seller shall have paid to Administrative Agent, for its own account and/or on behalf of Buyers, as applicable, (A) any fees then due and payable under the Fee Letter and (B) any unpaid Transaction Costs in respect of such Purchased Asset due and owing by Seller (which amounts, at Seller’s option, may be held back from funds remitted to Seller by Buyers on the Purchase Date);

(ix)[reserved];

(x)Administrative Agent, on behalf of Buyers, shall have received true and complete copies of fully executed originals of all Transfer Documents;

(xi)Subject to the limitations set forth in the defined term Eligible Asset, Administrative Agent, on behalf of Buyers, shall have received a copy of any document relating to any Hedging Transaction entered into in connection with the related New Asset, and Seller shall have validly pledged and assigned to Administrative Agent, on behalf of Buyers, all of Seller’s rights under each such Hedging Transaction, if any;

(xii)no circumstance shall exist or event have occurred resulting in a Material Adverse Effect;

(xiii)Administrative Agent, on behalf of Buyers, shall not have determined that the introduction of, or a change in, any Requirement of Law or in the interpretation or administration of any Requirement of Law has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Administrative Agent or any Buyer, to enter into any Transaction and no Governmental Authority shall have imposed material restrictions on the authority of Administrative Agent or any Buyer to enter into any Transaction;

(xiv)Administrative Agent, on behalf of Buyers, shall not have determined, in its sole discretion exercised in good faith, that an event or circumstance exists that has caused the occurrence of (A) a material change in financial markets as a result of, an outbreak or escalation of hostilities or a material change in national or international political, financial or economic conditions, or (B) a general suspension of trading on major stock exchanges, or (C) a disruption in or moratorium on commercial banking activities or securities settlement services;

(xv)no circumstance shall exist or event have occurred resulting in (A) the effective absence of a “repo market” or comparable “lending market” for financing debt obligations secured by commercial mortgage loans or (B) Administrative Agent or Buyers not being able to finance

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Eligible Assets through the “repo market” or “lending market” with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; and

(xvi)no Key Person Event shall have occurred.

(g)Each Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the related Transaction covered thereby.

(h)Future Advances.  With respect to any Transaction involving an Eligible Asset that is a Future Advance Asset, Seller shall indicate in the related Preliminary Due Diligence Package that such Eligible Asset is a Future Advance Asset and shall provide Administrative Agent, on behalf of Buyers, with the information required to complete the Confirmation regarding such Future Advance Asset, as well as, the then remaining unfunded future funding obligations under all Future Advance Assets.  At any time prior to the Repurchase Date (but no more than two (2) times per month for each Future Advance Asset), in the event a future advance is to be made by Seller pursuant to the Purchased Asset Documents with respect to a Future Advance Asset, Seller may submit to Administrative Agent, on behalf of Buyers, a request that Buyers transfer their respective pro rata share of cash to Seller in an amount not to exceed the Maximum Purchase Percentage, multiplied by the amount of such future advance (a “Future Advance Purchase”), which Future Advance Purchase shall increase the outstanding Purchase Price for such Future Advance Asset.  Notwithstanding anything to the contrary contained in this Agreement, Administrative Agent, on behalf of Buyers, shall be under no obligation to make a Future Advance Purchase, and shall determine in its sole and absolute discretion, exercised in good faith, whether to proceed with any proposed Future Advance Purchase.  Buyers shall transfer cash to Seller as provided in this Section 3(h) (and in accordance with the wire instructions provided by Seller in such request) on the date requested by Seller, which date shall be no earlier than two (2) Business Days following the Business Day on which Administrative Agent reasonably determines that the conditions precedent to such Future Advance Purchase as set forth in this Section 3(h) have been satisfied (or, in Administrative Agent’s sole and absolute discretion, as determined in good faith, waived).  Any Future Advance Purchase to be made by Administrative Agent, on behalf of Buyers, in accordance with this Section 3(h) shall be subject to satisfaction of the following conditions:

(i)no unsatisfied Margin Deficit, Default or Event of Default has occurred and is continuing or will result from the funding of such Future Advance Purchase;

(ii)the funding of the Future Advance Purchase will not cause the aggregate outstanding Purchase Price for all Purchased Assets to exceed the Facility Amount;

(iii)the Future Advance Purchase will not cause the Purchase Price of the applicable Future Advance Asset to exceed the Concentration Limit;

(iv)Administrative Agent, on behalf of Buyers, shall have determined, in its sole discretion exercised in good faith, that the Maximum Asset Exposure Threshold and Portfolio Exposure Threshold will be satisfied immediately after giving effect to the funding of the Future Advance Purchase;

(v)Seller shall have demonstrated to the reasonable satisfaction of Administrative Agent, on behalf of Buyers, that all conditions to the future advance under the Purchased Asset Documents have been satisfied;

(vi)Administrative Agent, on behalf of Buyers, and Seller shall have executed and delivered a restated Confirmation for the applicable Transaction to set forth the new outstanding

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Purchase Price for such Purchased Asset and any other modifications to the terms set forth on the existing Confirmation;

(vii)the Future Advance Purchase shall be in an amount equal to or greater than One Million Dollars ($1,000,000); and

(viii)previously or simultaneously with Buyers funding of the Future Advance Purchase, Seller shall have funded or caused to be funded to the Mortgagor (or to an escrow agent or as otherwise directed by the Mortgagor) its pro rata portion of such Future Advance Purchase in respect of such Future Advance Asset.

(ix)Seller and Administrative Agent, on behalf of Buyers, shall have approved any required modification to the Confirmation with respect to the applicable Future Advance Asset;

(x)Buyers credit committee shall have approved the Future Advance Purchase;

(xi)no Key Person Event shall have occurred; and

(xii)Administrative Agent, on behalf of Buyers, shall not have determined, in its sole discretion exercised in good faith, that an event or circumstance exists that has caused the occurrence of (A) a material change in financial markets, as a result of an outbreak or escalation of hostilities, or a material change in national or international political, financial or economic conditions, (B) a general suspension of trading on major stock exchanges or (C) a disruption in or moratorium on commercial banking activities or securities settlement services.

(i)Early Repurchase and Mandatory Repurchase.

(i)Seller shall be entitled to terminate any or all Transactions on demand, and repurchase the related Purchased Assets on any Business Day prior to the applicable Repurchase Date (an “Early Repurchase Date”); provided, however, that:

(A)no uncured monetary Default, material non-monetary Default or Event of Default, or any unsatisfied Margin Deficit shall be continuing or would occur or result from such early repurchase;

(B)Seller notifies Administrative Agent in writing, no later than five (5) Business Days prior to the Early Repurchase Date, of its intent to terminate such Transaction and repurchase the related Purchased Asset; and

(C)Seller shall pay to Buyers on the Early Repurchase Date an amount equal to the sum of the Repurchase Price for such Transaction, all Transaction Costs and any other amounts payable by Seller and outstanding under this Agreement or the other Transaction Documents (including, without limitation, Section 3(n), Section 3(o), Section 3(p) and Section 3(q) of this Agreement, if any) with respect to such Transaction against transfer to Seller or its agent of the related Purchased Asset.

If all Transactions are terminated by Seller in accordance with this Section 3(i)(i), at Seller’s request this Agreement and all Transaction Documents shall terminate simultaneously with the repurchase of the last remaining Purchased Asset, except with respect to those provisions which by their terms survive the termination of this Agreement.

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(ii)In addition to any other rights and remedies of Administrative Agent and Buyers under any Transaction Document, upon the occurrence of a Purchased Asset becoming a Defaulted Asset due to the occurrence of any one or more elements of the definition of “Defaulted Asset” set forth herein, Seller shall, in accordance with the procedures set forth in Article3(i)(i)(B)-(C), repurchase any such Purchased Asset on the date (the “Mandatory Early Repurchase Date”) that is five (5)Business Days after the earlier of Seller’s receipt of notice from Administrative Agent or Seller’s actual knowledge of the occurrence thereof.

(j)Mandatory Repurchase.  On the Repurchase Date for any Transaction, termination of the applicable Transaction will be effected by transfer to Seller or, if requested by Seller, its designee of the related Purchased Assets, and any Income in respect thereof received by Administrative Agent, on behalf of Buyers (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Section 4 or Section 5 hereof) against the simultaneous transfer to Administrative Agent, on behalf of Buyers, of the applicable Repurchase Price, all Transaction Costs and any other amounts payable by Seller and outstanding under this Agreement with respect to such Transaction (including without limitation, Section 3(n), Section 3(o), Section 3(p) and Section 3(q) of this Agreement, if any, and the Exit Fee, if applicable) to an account of Buyers.

(k)Partial Prepayments.  So long as no Event of Default has occurred and is then continuing, the Repurchase Price with respect to one or more Purchased Assets may be paid in part at any time upon two (2) Business Days prior written notice from Seller to Administrative Agent; provided, however, that any such payment shall be accompanied by an amount representing accrued Price Differential with respect to such Purchased Asset(s) on the amount of such payment and all other amounts then due under the Transaction Documents.  Each partial payment of the Repurchase Price that is voluntary (as opposed to mandatory under the terms of this Agreement) shall be in an amount of not less than One Million Dollars ($1,000,000).Administrative Agent, on behalf of Buyers, and Seller shall execute and deliver a restated Confirmation for the applicable Transaction to set forth the new outstanding Purchase Price and outstanding principal balance for such Purchased Asset in connection with such partial repurchase.

(l)Benchmark Replacement.  Notwithstanding anything to the contrary herein or in any other Transaction Document, if:

(i)(A) a Benchmark Transition Event or, as the case may be, an Early Opt-in Election and (B) a Benchmark Replacement Date with respect thereto have occurred prior to the Reference Time in connection with any setting of the then-current Benchmark, then such Benchmark Replacement will replace the then-current Benchmark for all purposes under this Agreement and under any other Transaction Document in respect of such Benchmark setting and subsequent Benchmark settings without requiring any amendment to, or requiring any further action by or consent of any other party to, this Agreement or any other Transaction Document; or

(ii)(A)a Benchmark Transition Event or, as the case may be, an Early Opt-in Election and the Benchmark Replacement Date with respect thereto has already occurred prior to the Reference Time for any setting of the then-current Benchmark and as a result the then-current Benchmark is being determined in accordance with clauses (2), (3) or (4) of the definition of “Benchmark Replacement”; and

(A)Administrative Agent, on behalf of Buyers, subsequently determines, that (w) Term SOFR and a Benchmark Replacement Adjustment with respect thereto is or has becomes available and the Benchmark Replacement Date with respect thereto has occurred, (x) there is currently a market for U.S. dollar-denominated transactions utilizing Term SOFR as a Benchmark and for determining the Benchmark Replacement Adjustment

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with respect thereto, (y)Term SOFR is being recommended as the Benchmark for U.S.dollar-denominated syndicated credit facilities by the Relevant Government Authority and (z)in any event, Term SOFR, the Benchmark Replacement Adjustment with respect thereto and the application thereof is administratively feasible for the Administrative Agent (as determined by Administrative Agent, on behalf of Buyers), then clause(1) of the definition of “Benchmark Replacement” will, without requiring any amendment to, or requiring any further action by or consent of any other party to, this Agreement or any other Transaction Document, replace such then-current Benchmark for all purposes hereunder and under any other Transaction Document in respect of such Benchmark setting and subsequent Benchmark settings on and from the beginning of the next Pricing Period or, as the case may be, Available Tenor so long as Administrative Agent, on behalf of Buyers, notifies Seller prior to the commencement of such next Pricing Period or, as the case may be, Available Tenor.

(m)Benchmark Replacement Conforming Changes.  In connection with the implementation of a Benchmark Replacement, Administrative Agent, on behalf of Buyers, will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Transaction Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without requiring any further action by or consent of any other party to this Agreement or any other Transaction Document; provided, that Administrative Agent, on behalf of Buyers, will not apply such Benchmark Replacement Conforming Changes on Seller unless either MSBNA, acting in its individual capacity, or Administrative Agent, on behalf of Buyers, is applying such Benchmark Replacement Conforming Changes on other customers similarly situated to Seller under other repurchase facilities involving commercial real estate loans.  Administrative Agent, on behalf of Buyers, will promptly notify Seller of (i) any occurrence of (A) a Benchmark Transition Event or, as the case may be, an Early Opt-in Election and (B) the Benchmark Replacement Date with respect thereto, (ii) the implementation of any Benchmark Replacement, and (iii) the effectiveness of any Benchmark Replacement Conforming Changes.  Any determination, decision or election that may be made by Administrative Agent, on behalf of Buyers, pursuant to this Section 3(m), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in the sole discretion of Administrative Agent, on behalf of Buyers, exercised in good faith, and without consent from Seller or any other party to any other Transaction Document.

(n)Upon demand by Administrative Agent, on behalf of Buyers, Seller shall indemnify Administrative Agent and Buyers, and hold Administrative Agent and Buyers harmless from any actual net loss or out-of-pocket cost or expense (not to include any lost profit or opportunity) (including, without limitation, reasonable out-of-pocket attorneys’ fees and disbursements) that Administrative Agent or Buyers actually sustains or incurs as a direct consequence of (i) a default by Seller in terminating any Transaction after Seller has given a notice in accordance with Section 3(i) of a termination of a Transaction, (ii) any payment of all or any portion of the Repurchase Price, as the case may be, on any day other than a Remittance Date and (iii) Seller’s failure to sell Eligible Assets to Administrative Agent, on behalf of Buyers, after Seller has notified Administrative Agent of a proposed Transaction and Administrative Agent, on behalf of Buyers, has given a Final Approval to purchase such Eligible Assets in accordance with the provisions of this Agreement (unless the Final Approval differs materially from the Preliminary Approval).  This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Assets.

(o)Capital Adequacy.  If Administrative Agent shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy, including the Reserve Requirements or

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any other similar reserve, special deposit or similar requirements relating to extensions of credit or other assets of Administrative Agent or any Buyer, or in the interpretation or application thereof or compliance by Administrative Agent or such Buyer, or any corporation controlling Administrative Agent or such Buyer, with any request or directive regarding such requirements (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof has the effect of reducing the rate of return on any Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which such Buyer, or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Buyer’s or such corporation’s policies with respect to such requirements) by an amount deemed by Administrative Agent, on behalf of Buyers, to be material, then from time to time, within five (5)Business Days after submission by Administrative Agent, on behalf of Buyers, to Seller of a written request therefor, Seller shall pay to Administrative Agent or such Buyer, such additional amount or amounts as will compensate Administrative Agent or such Buyer for such reduction; provided, that Administrative Agent, on behalf of Buyers, will not impose such additional amounts on Seller unless either MSBNA, acting in its individual capacity, or Administrative Agent, on behalf of Buyers, is imposing such additional amounts on other customers similarly situated to Seller under other repurchase facilities involving commercial real estate loans.  A certificate as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Administrative Agent to Seller and shall be conclusive and binding upon Seller in the absence of manifest error.  With respect to each reduction in the rate of return as described above, this covenant shall survive for a period of one hundred eighty (180)days from the date of the incurrence of such reduction by Administrative Agent or any Buyer.  This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Assets.

(p)Any and all payments by or on account of any obligation of Seller under the Transaction Documents shall be made without deduction or withholding for any Taxes, except as required by applicable law.  If any applicable law requires the deduction or withholding of any Tax from any such payment (as determined in the good faith discretion of Seller or Administrative Agent), then Seller shall be entitled to make (or cause to be made) such deduction or withholding and to timely pay (or cause to be timely paid) the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable shall be increased by Seller as necessary so that after such deduction or withholding has been made, each Buyer receives an amount equal to the sum it would have received had no such deduction or withholding been made.  Seller shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with Requirements of Law.  As soon as practicable after any payment of Taxes by Seller to a Governmental Authority pursuant to this Section 3(p), Seller shall deliver to Administrative Agent, on behalf of Buyers, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Administrative Agent.

(q)Seller shall indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3(q)) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to Seller by a Buyer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Buyer, shall be conclusive absent manifest error.

(r)If any Buyer is entitled to an exemption from or reduction of withholding Tax with respect to payments made under the Transaction Documents, such Buyer shall deliver to Seller and Administrative Agent, prior to becoming a party to this Agreement, and at the time or times reasonably requested by Seller or Administrative Agent, such properly completed and executed documentation reasonably requested by

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Seller or Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, each Buyer shall deliver such other documentation prescribed by applicable law or reasonably requested by Seller or Administrative Agent as will enable Seller to determine whether or not such Buyer, is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section3(r)(i), Section3(r)(ii) and Section3(r)(iv) below) shall not be required if in such Buyer’s reasonable judgment such completion, execution or submission would be illegal, would subject Buyer, to any material unreimbursed cost or expense or would otherwise materially prejudice the legal or commercial position of such Buyer.  Without limiting the generality of the foregoing:

(i)if a Buyer is a United States person (as defined in Section 7701(a)(30) of the Code)(a “United States Person”), it shall deliver to Seller and Administrative Agent on or prior to the date on which Buyer becomes a party to this Agreement (and from time to time thereafter upon the reasonable request of Seller), executed originals of IRS Form W-9 certifying that such Buyer is exempt from U.S. federal backup withholding tax;

(ii)if a Buyer is not a United States Person, it shall, to the extent it is legally entitled to do so, deliver to Seller and Administrative Agent (in such number of copies as shall be requested by Seller) on or prior to the date on which such Buyer, becomes a party under this Agreement (and from time to time thereafter upon the reasonable request of Seller), whichever of the following is applicable:

(A)in the case of a Buyer claiming the benefits of an income tax treaty to which the United States is a party, (1) with respect to payments characterized as interest for U.S. tax purposes under any Transaction Document, executed originals of IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (2) with respect to any other applicable payments under any Transaction Document, IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(B)executed originals of IRS Form W-8ECI;

(C)in the case of a Buyer claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (1) a certificate to the effect that Buyer is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of Seller within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (2) executed originals of IRS Form W-8BEN or W-8BEN-E; or

(D)to the extent a Buyer is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E, a U.S. Tax Compliance Certificate, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if such Buyer is a partnership and one or more direct or indirect partners of such Buyer are claiming the portfolio interest exemption, such Buyer may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner;

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(iii)if a Buyer is not a United States Person, it shall, to the extent it is legally entitled to do so, deliver to Seller and Administrative Agent (in such number of copies as shall be requested by Seller) on or prior to the date on which such Buyer becomes a party to this Agreement (and from time to time thereafter upon the reasonable request of Seller and/or Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit Seller or Administrative Agent to determine the withholding or deduction required to be made; and

(iv)each Buyer shall deliver to Seller and Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by Seller or Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Seller or Administrative Agent as may be necessary for Seller and Administrative Agent to comply with their obligations under FATCA and to determine whether a Buyer has complied with such Buyer’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this Section 3(r)(iv), “FATCA” shall include any amendments made to FATCA after the date of this Agreement;

provided that each Buyer agrees that if any form or certification it previously delivered pursuant to this Section 3(r) expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Seller (and Administrative Agent) in writing of its legal inability to do so.

(s)If any of the events described in Section 3(o) or Section 3(p) result in Administrative Agent’s request, on behalf of Buyers, for additional amounts, then Seller shall have the option to notify Administrative Agent, on behalf of Buyers, in writing of its intent to terminate all of the Transactions and repurchase all of the Purchased Assets no later than five (5) Business Days after such notice is given to Administrative Agent, and such repurchase by Seller shall be conducted pursuant to and in accordance with Section 3(h) but without the payment of any Exit Fee.  The election by Seller to terminate the Transactions in accordance with this Section 3(s) shall not relieve Seller for liability with respect to any additional amounts or increased costs actually incurred by Administrative Agent or Buyers prior to the actual repurchase of the Purchased Assets.

(t)Tax Refunds on Indemnified Amounts.  If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 3 (including by the payment of additional amounts pursuant to this Section 3), it shall pay to Seller an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out‑of‑pocket expenses (including Taxes) of such Recipient and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Seller, upon the request of such Recipient, shall repay to such Recipient the amount paid over pursuant to this Section 3(t) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such Recipient is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this Section 3(t), in no event will the Recipient be required to pay any amount to Seller pursuant to this Section 3(t) the payment of which would place the Recipient in a less favorable net after-Tax position than the Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This paragraph shall not be construed to require any Recipient to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to Seller or any other Person.

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(u)Mandatory Repurchase on Facility Maturity Date.  From and after the Facility Termination Date, Administrative Agent, on behalf of Buyers, shall have no further obligation to purchase any New Assets.  On the Facility Termination Date, Seller shall be obligated to repurchase all of the Purchased Assets and transfer payment of the Repurchase Price for each such Purchased Asset, together with the accrued and unpaid Price Differential and all Transaction Costs and other amounts due and payable to Buyers hereunder, against the transfer by Administrative Agent, on behalf of Buyers, to Seller of each such Purchased Asset.  Following the Facility Termination Date, Administrative Agent, on behalf of Buyers, shall not be obligated to transfer any Purchased Assets to Seller until payment in full to Buyers of all amounts due hereunder.

(v)Notwithstanding any provision herein to the contrary, any rule, regulation, guideline or directive adopted after the date of this Agreement that implements (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act, or(ii) a capital or liquidity accords adopted by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or such rules, regulations, guidelines or directives adopted by United States or foreign regulatory authorities, in each case under clause (ii) pursuant to Basel III, shall in each case be deemed to be an adoption of or change in a Requirement of Law made subsequent to the date of this Agreement.

(w)Status of Administrative Agent. On or before the date the Administrative Agent (or any successor thereto) becomes a party to this Agreement, such Administrative Agent shall provide to the Seller, two duly-signed, properly completed copies of the documentation prescribed in clause (i) or (ii) below, as applicable (together with all required attachments thereto): (i) if the Administrative Agent is a “United States person” (as defined in Section 7701(a)(30) of the Code), executed copies of IRS Form W-9 certifying that such Administrative Agent is exempt from U.S. federal backup withholding tax, or (ii) if the Administrative Agent is not a “United States person” (as defined in Section 7701(a)(30) of the Code), (A) with respect to any payments to be received on its own behalf, executed copies of IRS Form W-8ECI or W-8BEN-E, as applicable, and (B) with respect to payments received on account of any Buyer, executed copies of IRS Form W-8IMY certifying that Administrative Agent is either (1) a “qualified intermediary” which has assumed primary withholding responsibility under Chapters 3 and 4 of the Code and primary IRS Form 1099 reporting and back-up withholding responsibility, or (2) a U.S. branch providing such form as evidence of its agreement with the Seller to be treated as a “United States person” (as defined in Section 7701(a)(30) of the Code) for U.S. federal withholding tax purposes.

4.MANDATORY PAYMENT OR DELIVERY OF ADDITIONAL ASSETS

(a)Administrative Agent, on behalf of Buyers, may determine and re-determine the Asset Base Components on any Business Day and on as many Business Days as it may elect.  Upon the occurrence of a Margin Credit Event with respect to one or more Purchased Assets, if at any such time the aggregate Purchase Price of such Purchased Assets is greater than the aggregate Asset Base Components of such Purchased Assets as determined by Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith and such amount equals or exceeds the Margin Materiality Threshold (a “Margin Deficit”), then Seller shall, not later than two (2) Business Days after receipt of notice of such Margin Deficit from Administrative Agent, on behalf of Buyers, (i) deliver to Buyers cash, (ii) request a funding of Margin Excess under Section 4(b) to offset such Margin Deficit, or (iii) utilize any combination of the foregoing,  in an amount sufficient to reduce the aggregate Purchase Price of such Purchased Assets to an amount equal to the aggregate Asset Base Components as re-determined by Administrative Agent, on behalf of Buyers, after giving effect to the delivery of cash or additional collateral by Seller to Buyers, pursuant to this Section 4(a).  Any cash delivered to Buyers pursuant to this Section 4(a) shall be applied by Administrative Agent, on behalf of Buyers, to reduce the Purchase Price of the applicable Purchased Assets that caused the related Margin Deficit to exist, allocated on a pro-rata basis.

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(b)If at any such time the Purchase Price of one or more Purchased Assets is less than the aggregate Asset Base Components of such Purchased Assets as determined by Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith (a “Margin Excess”), then Buyers shall, no later than five (5) Business Days after receipt of a request from Seller, transfer cash to Seller in an amount (not to exceed such Margin Excess) such that the Purchase Price of such Purchased Asset, after the addition of any such cash so transferred, will thereupon not exceed such Asset Base Component as re-determined by Administrative Agent, on behalf of Buyers, after giving effect to the delivery of cash by Buyers to Seller pursuant to this Section 4(b); provided that (i) no Margin Deficit, monetary Default, material non-monetary Default or any Event of Default has occurred and is continuing or would result from such funding, (ii) such funding shall not result in the Aggregate Repurchase Price of all Purchased Assets exceeding the Facility Amount and (iii) each such funding shall be in an amount of not less than the Margin Materiality Threshold.  Any cash delivered by Buyers to Seller pursuant to this Section 4(b) shall be applied by Administrative Agent, on behalf of Buyers, to increase the Purchase Price of the applicable Purchased Asset(s) that caused the related Margin Excess to exist, allocated on a pro-rata basis.  Administrative Agent, on behalf of Buyers, and Seller shall execute and deliver a restated Confirmation(s) for the applicable Transaction(s) to set forth the new Purchase Price(s) for such Purchased Asset(s).  Seller may not request funding under this Section 4(b) more than three (3) times in any calendar month.

(c)The failure of Administrative Agent, on behalf of Buyers, or Buyers on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the rights of Administrative Agent, on behalf of Buyers, to do so at a later date.  Seller and Administrative Agent, on behalf of Buyers, each agree that a failure or delay by Administrative Agent, on behalf of Buyers, to exercise its rights hereunder shall not limit or waive Administrative Agent or Buyers’ rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.

5.INCOME PAYMENTS AND PRINCIPAL PAYMENTS

(a)On or before the date hereof, Seller and Administrative Agent, on behalf of Buyers, shall establish and maintain with the Depository Bank a deposit account in the name of Seller and under the sole control of Administrative Agent, on behalf of Buyers, with respect to which the Blocked Account Agreement shall have been executed (such account, together with any replacement or successor thereof, the “Blocked Account”).  Administrative Agent, on behalf of Buyers, shall have sole dominion and control (including, without limitation, “control” within the meaning of Section 9.01(a) of the UCC) over the Blocked Account.  Seller shall cause all Income with respect to the Purchased Assets to be deposited in the Blocked Account.  In furtherance of the foregoing, Seller shall cause Servicer to remit to the Blocked Account all Income received in respect of the Purchased Assets on the date specified for remittances as set forth in the Servicer Acknowledgment.  All Income in respect of the Purchased Assets, which may include payments in respect of associated Hedging Transactions, shall be deposited directly into, or, if applicable, remitted directly from the applicable underlying collection account to, the Blocked Account.

(b)Unless an Event of Default shall have occurred and be continuing, on each Remittance Date, all Income on deposit in the Blocked Account in respect of the Purchased Assets and the associated Hedging Transactions shall be applied as follows:

(i)first, to Administrative Agent, on behalf of Buyers, an amount equal to the Price Differential which has accrued and is outstanding in respect of the Transactions as of such Remittance Date;

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(ii)second, to Administrative Agent, on behalf of Buyers, any accrued and unpaid Transaction Costs and all other amounts payable by Seller and outstanding hereunder and under the other Transaction Documents (other than the Repurchase Price);

(iii)third, if a Principal Payment in respect of any Purchased Asset has been made during the related Collection Period, to Administrative Agent, on behalf of Buyers, an amount equal to the product of the amount of such Principal Payment, multiplied by the applicable Purchase Percentage;

(iv)fourth, if a Margin Deficit shall exist with respect to one or more Purchased Assets, to Administrative Agent, on behalf of Buyers, an amount such that, after giving effect to such payment, the aggregate Purchase Price of such Purchased Assets is equal to the aggregate Asset Base Components of such Purchased Assets, as determined by Administrative Agent, on behalf of Buyers, after giving effect to such payment to the extent of remaining funds in the Blocked Account; and

(v)fifth, to Seller, the remainder, if any.

If, on any Remittance Date, the amounts deposited in the Blocked Account shall be insufficient to make the payments required under (i) through (iii) above of this Section 5(b), and Seller does not otherwise make such payments on such Remittance Date, the same shall constitute an Event of Default hereunder.

(c)Unless an Event of Default shall have occurred and be continuing, any unscheduled Principal Payment (including net sale proceeds) in respect of any Purchased Asset for which the Income thereof has been received by the Depository Bank during any Collection Period shall be applied, no later than two (2) Business Days after receipt of notice from Seller of its request to apply such payment in accordance with this subsection (c), as follows:

(i)first, to Administrative Agent, on behalf of Buyers, an amount equal to the product of the amount of such Principal Payment multiplied by the Purchase Percentage;

(ii)second, if a Margin Deficit shall exist with respect to one or more Purchased Assets, to Administrative Agent, on behalf of Buyers, to the extent of Income available after the payment made in accordance with Section 5(c)(i) above, an amount equal to the aggregate Margin Deficit until paid in full; and

(iii)third, to Seller the remainder, if any.

(d)If an Event of Default shall have occurred and be continuing, all Income on deposit in the Blocked Account in respect of the Purchased Assets and the associated Hedging Transactions shall be applied as determined in Administrative Agent, on behalf of Buyers, acting in its sole discretion exercised in good faith pursuant to Section 14(b)(ii).

(e)If at any time during the term of any Transaction any Income is distributed to Seller with respect to the related Purchased Asset or Seller has otherwise received such Income and has made a payment in respect of such Income to Administrative Agent, on behalf of Buyers, pursuant to this Section 5, and for any reason such amount is required to be returned by any Buyer to an obligor under such Purchased Asset (either before or after the Repurchase Date), such Buyer, may provide Seller and Administrative Agent with notice of such required return, and Seller shall pay the amount of such required return to such Buyer by 11:00 a.m. (New York time) on the Business Day following Seller’s receipt of such notice.

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(f)Subject to the other provisions hereof, Seller shall be responsible for all Transaction Costs in respect of any Purchased Assets to the extent it would be so obligated if the Purchased Assets had not been sold to Administrative Agent, on behalf of Buyers.  Administrative Agent, on behalf of Buyers, shall provide Seller with notice of any Transaction Costs, and Seller shall pay the amount of any Transaction Costs to Administrative Agent, on behalf of Buyers, by 11:00 a.m. (New York time) on the later of (i) five (5) Business Days after the date on which Administrative Agent, on behalf of Buyers, has informed Seller that such amount is due under the Purchased Asset Documents and(ii) three (3) Business Days following Seller’s receipt of such notice.

6.CAUTIONARY SECURITY INTEREST

(a)Administrative Agent, Buyers, and Seller intend that all Transactions hereunder be sales to Administrative Agent, on behalf of Buyers, of the Purchased Assets for all purposes (other than for U.S. federal, state and local income or franchise tax purposes) and not loans from Buyers to Seller secured by the Purchased Assets.  However, in the event that any Transaction is deemed to be a loan, and as security for Seller’s performance of the Repurchase Obligations, Seller hereby pledges to Administrative Agent, on behalf of Buyers, and hereby grants to Administrative Agent, on behalf of Buyers, a first priority security interest in all of Seller’s right, title and interest in and to the following (collectively, and together with the Mezzanine Loan Repurchase Assets (as defined below), the “Repurchase Assets”):

(i)all of the Purchased Assets (including, for the avoidance of doubt, all security interests, mortgages and liens on personal or real property securing the Purchased Assets) and related Servicing Rights;

(ii)all Income from the Purchased Assets;

(iii)all insurance policies and insurance proceeds relating to any Purchased Asset or the related Eligible Property;

(iv)all “general intangibles”, “accounts” and “chattel paper” as defined in the UCC relating to or constituting any and all of the foregoing;

(v)all replacements, substitutions or distributions on or proceeds, payments and profits of, and records and files relating to, any and all of the foregoing;

(vi)any other property, rights, titles or interests as are specified in the Confirmation and/or the Trust Receipt, the Purchased Asset Schedule or exception report with respect to the foregoing in all instances, whether now owned or hereafter acquired, now existing or hereafter created; and

(vii)the Blocked Account and all amounts and property from time to time on deposit therein.

(b)With respect to the security interest in the Repurchase Assets granted in Section 6(a) and Section 6(f) hereof, and with respect to the security interests granted in Sections 6(c) and 6(d), Administrative Agent, on behalf of Buyers, shall, upon the occurrence and during the continuance of an Event of Default, have all of the rights and may exercise all of the remedies of a secured creditor under the UCC and any other applicable law and shall have the right to apply the Repurchase Assets or proceeds therefrom to the obligations of Seller under the Transaction Documents.  In furtherance of the foregoing, (i) Administrative Agent, on behalf of Buyers, at Seller’s sole cost and expense, shall cause to be filed as a protective filing with respect to the Repurchase Assets and as a UCC filing with respect to the security

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interests granted in Sections6(c), 6(d) and6(f) one or more UCC financing statements in form satisfactory to Administrative Agent, on behalf of Buyers (to be filed in the filing office indicated therein) and, with respect to Seller, containing the following collateral description “all assets of the debtor, whether now owned or hereafter acquired” or words to that effect and, with respect to Pledgor, describing all of the items set forth in the definition of Collateral in the Pledge Agreement, in such locations as may be necessary to perfect and maintain perfection and priority of the outright transfer (including under Section22 of this Agreement) and the security interest granted hereby and, in each case, continuation statements and any amendments thereto (including, without limitation, by causing to be filed any amendments necessary to add or delete Repurchase Assets covered by the financing statement to reflect the purchase and repurchase of Purchased Assets) (collectively, the “Filings”), and shall forward copies of such Filings to Seller upon completion thereof, and (ii)Seller and Pledgor shall, from time to time, at their own expense, deliver and cause to be duly filed all such further filings, instruments and documents and take all such further actions as may be necessary or desirable or as may be requested by Administrative Agent, on behalf of Buyers, with respect to the perfection and priority of the outright transfer of the Purchased Assets and the security interest granted hereunder in the Repurchase Assets and the other collateral specified in Sections6(c), 6(d) and6(f) and the rights and remedies of Administrative Agent, on behalf of Buyers, with respect to the Repurchase Assets (including under Section22 of this Agreement) (including the payments of any fees and Taxes required in connection with the execution and delivery of this Agreement).

(c)Seller hereby pledges to Administrative Agent, for the benefit of Buyers, as security for the performance by Seller of the Repurchase Obligations and hereby grants to Administrative Agent, on behalf of Buyers, a first priority security interest in all of Seller’s right, title and interest in and to Seller’s rights under all Hedging Transactions relating to Purchased Assets entered into by Seller and all proceeds thereof.  Seller shall take all action as is necessary or desirable to obtain consent to assignment of any such Hedging Transaction to Administrative Agent, on behalf of Buyers, and shall cause the counterparty under each such Hedging Transaction to enter into such document or instrument satisfactory to Administrative Agent, Seller and such counterparty, pursuant to which such counterparty will covenant and agree to accept notice from Administrative Agent, on behalf of Buyers, to redirect payments under such Hedging Transaction as Administrative Agent may direct.  So long as no Event of Default shall be continuing, Administrative Agent, on behalf of Buyers, agrees that it will not redirect payments under any Hedging Transaction pledged to Administrative Agent, on behalf of Buyers, pursuant to the terms of this Section 6(c).

(d)Seller hereby pledges to Administrative Agent, on behalf of Buyers, as security for the performance by Seller of the Repurchase Obligations and hereby grants to Administrative Agent, on behalf of Buyers, a first priority security interest in all of Seller’s right, title and interest in and to the Servicing Rights and the Blocked Account and all amounts and property from time to time on deposit therein and all replacements, substitutions or distributions on or proceeds, payments and profits of, and records and files relating to, the Servicing Rights and the Blocked Account.

(e)In connection with the repurchase by Seller of any Purchased Asset in accordance herewith, upon receipt of the Repurchase Price by Administrative Agent, on behalf of Buyers, Administrative Agent, on behalf of Buyers, will deliver to Seller, at Seller’s expense, such documents and instruments as may be reasonably necessary and requested by Seller to reconvey such Purchased Asset and any Income related thereto to Seller.

(f)In order to further secure the Repurchase Obligations hereunder, Seller hereby grants, assigns and pledges to Administrative Agent, on behalf of Buyers, a fully perfected first priority security interest in the Mezzanine Loans, all replacements, substitutions or distributions on, or proceeds, payments and profits of, and records and files relating thereto, and all related Servicing Rights, the Transaction Documents (to the extent such Transaction Documents and Seller’s right thereunder relate to the Mezzanine

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Loans), all documentation governing the Mezzanine Loans, any right or interest in or to property of any kind whatsoever, whether real, personal, or mixed and whether tangible or intangible, relating to the Mezzanine Loans, all insurance policies and insurance proceeds relating to any Mezzanine Loans or the related Mortgaged Property, including, but not limited to, any payments or proceeds under any related primary insurance, hazard insurance, Income, interest rate protection agreements, accounts (including any interest of Seller in escrow accounts) and any other contract rights, instruments, accounts, payments, rights to payment (including payments of interest or finance charges), general intangibles and other assets relating to the Mezzanine Loans (including, without limitation, any other accounts) or any interest in Mezzanine Loans, and any proceeds (including the related securitization proceeds) and distributions with respect to any of the foregoing and any other property, rights, title or interests as are specified on a Confirmation and/or Trust Receipt with respect to the Mezzanine Loans, in all instances, whether now owned or hereafter acquired, now existing or hereafter created (collectively, the “Mezzanine Loan Repurchase Assets”).

7.PAYMENT, TRANSFER AND CUSTODY

(a)Subject to the terms and conditions of this Agreement, on the Purchase Date for each Transaction, ownership of the Purchased Assets and all rights thereunder shall be transferred to Administrative Agent, on behalf of Buyers, or its designee (including Custodian) against the simultaneous transfer of the Purchase Price by Buyers to an account of Seller specified in the Confirmation relating to such Transaction.  Administrative Agent, on behalf of Buyers, will provide Seller with a Power of Attorney to Seller, allowing Seller to administer, operate and service such Purchased Assets.  So long as no Event of Default shall have occurred and be continuing, such Power of Attorney to Seller shall be binding upon Administrative Agent, on behalf of Buyers, and Administrative Agent’s successors and assigns.

(b)With respect to each Table Funded Purchased Asset, Seller shall cause the Bailee to deliver to Administrative Agent by no later than 1:00 p.m. (New York time), on the Purchase Date, by electronic transmission a true and complete copy of the related Mortgage Note, Mezzanine Note or Participation Certificate (as applicable) with assignment in blank (as applicable), loan agreement, Mortgage or Mezzanine Pledge Agreement and LLC certificate (as applicable), Title Policy, the Insured Closing Letter and Escrow Instructions, if any, and the executed Bailee Agreement and Trust Receipt.  In connection with the sale of each Purchased Asset, not later than 1:00 p.m. (New York time), two (2) Business Days prior to the related Purchase Date (or with respect to a Table Funded Purchased Asset not later than 1:00 p.m. (New York time) on the third (3^rd) Business Day following the applicable Purchase Date), Seller shall deliver or cause Bailee to deliver (with a copy to Administrative Agent, on behalf of Buyers) and release to the Custodian (together with the Purchased Asset File Checklist), and shall cause the Custodian to deliver a Trust Receipt on the Purchase Date (or in the case of a Table Funded Purchased Asset, not later than two (2) Business Days following the receipt by the Custodian) confirming the receipt of, the original (or where indicated, copied) documents set forth on Schedule 2, pertaining to each of the Purchased Assets identified in the Purchased Asset File Checklist delivered therewith; provided that if Seller cannot deliver, or cause to be delivered, any of the original Purchased Asset Documents required to be delivered as originals (excluding the Mortgage Note, Mezzanine Note, the Assignment of Mortgage, the LLC certificate and, if applicable, the Participation Certificate, originals of which must be delivered at the time required under the provisions above), Seller shall deliver a photocopy thereof and an Officer’s Certificate of Seller certifying that such copy represents a true and correct copy of the original and shall use its best efforts to obtain and deliver such original document within one hundred eighty (180) days after the related Purchase Date (or such longer period after the related Purchase Date to which Administrative Agent, on behalf of Buyers, may consent in its sole discretion exercised in good faith, so long as Seller is, as certified in writing to Administrative Agent, not less frequently than monthly, using its best efforts to obtain the original).  After the expiration of such best efforts period, Seller shall deliver to Administrative Agent, on behalf of Buyers, a certification that states, despite Seller’s best efforts, Seller was unable to obtain such original document, and thereafter Seller shall have no further obligation to deliver the related original document.

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Notwithstanding the foregoing, Administrative Agent, on behalf of Buyers, shall, at its option, have the right to cancel the purchase of an Eligible Asset if the required originals and/or copies, as applicable, of the related promissory note, Mortgage and guaranty have not been delivered as required in this Agreement, to be exercised by Administrative Agent, on behalf of Buyers, if at all, within thirty (30) days following the date of Administrative Agent’s knowledge of the related delivery failure.

(c)From time to time, Seller shall forward to Custodian additional original documents or additional documents evidencing any assumption, modification, consolidation or extension of a Purchased Asset approved in accordance with the terms of this Agreement, and upon receipt of any such other documents, Custodian shall, subject to and otherwise in accordance with the applicable provisions of the Custodial Agreement, hold such other documents on behalf of Administrative Agent, on behalf of Buyers, and as Administrative Agent, on behalf of Buyers, shall request from time to time.  With respect to any documents which have been delivered or are being delivered to recording offices for recording and have not been returned to Seller in time to permit their delivery hereunder at the time required, in lieu of delivering such original documents, Seller shall deliver to Administrative Agent, on behalf of Buyers, a true copy thereof with an Officer’s Certificate certifying that such copy is a true, correct and complete copy of the original, which has been transmitted for recordation.  Seller shall deliver such original documents to Custodian promptly when they are received.  With respect to all of the Purchased Assets delivered by Seller to Administrative Agent, on behalf of Buyers, or its designee (including Custodian), Seller shall execute an omnibus Power of Attorney to Administrative Agent, on behalf of Buyers, irrevocably appointing Administrative Agent, on behalf of Buyers, its attorney-in-fact with full power to (i) complete and record any Assignment of Mortgage, (ii) complete the endorsement of any Mortgage Note, Mezzanine Note, LLC certificate or Participation Certificate (as applicable) and (iii) take such other steps as may be necessary or desirable to enforce Administrative Agent, on behalf of Buyers, rights against any Purchased Assets and the related Purchased Asset Files and the Servicing Records.  Administrative Agent, on behalf of Buyers, shall deposit the Purchased Asset Files representing the Purchased Assets, or cause the Purchased Asset Files to be deposited directly, with Custodian to be held by Custodian on behalf of Administrative Agent, on behalf of Buyers.  The Purchased Asset Files shall be maintained in accordance with Custodial Agreement.  Any Purchased Asset File not delivered to Administrative Agent, on behalf of Buyers, or its designee (including Custodian) is and shall be held in trust by Seller or its designee for the benefit of Administrative Agent, on behalf of Buyers, as the owner thereof.  Seller or its designee shall maintain a copy of the Purchased Asset File and the originals of the Purchased Asset File not delivered to Administrative Agent, on behalf of Buyers, or its designee.  The possession of the Purchased Asset File by Seller or its designee is at the will of Administrative Agent, on behalf of Buyers, for the sole purpose of servicing the related Purchased Asset, and such retention and possession by Seller or its designee is in a custodial capacity only.  The books and records (including, without limitation, any computer records or tapes) of Seller or its designee shall be marked appropriately to reflect clearly the transfer, subject to the terms and conditions of this Agreement, of the related Purchased Asset to Administrative Agent, on behalf of Buyers.  Seller or its designee (including Custodian) shall release its custody of the Purchased Asset File only in accordance with written instructions from Administrative Agent, on behalf of Buyers, unless such release is required as incidental to the servicing of the Purchased Assets or is in connection with a repurchase of any Purchased Asset by Seller or is pursuant to the order of a court of competent jurisdiction.

(d)On the date of this Agreement, Administrative Agent, on behalf of Buyers, shall have received all of the following items and documents, each of which shall be satisfactory to Administrative Agent, on behalf of Buyers, in form and substance:

(i)Transaction Documents.  (A) This Agreement, duly executed and delivered by Seller and Administrative Agent, on behalf of Buyers; (B) the Custodial Agreement, duly executed and delivered by Seller, Administrative Agent, on behalf of Buyers, and Custodian;(C) the Blocked Account Agreement, duly executed and delivered by Seller, Administrative Agent, on behalf of

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Buyers, and Depository Bank; (D)the Fee Letter, duly executed and delivered by Seller and Administrative Agent, on behalf of Buyers; (E)the Guaranty, duly executed and delivered by Guarantor; (F)the Power of Attorney to Administrative Agent, on behalf of Buyers; (G)the Power of Attorney to Seller; (H)the Servicing Agreement and Servicer Acknowledgment duly executed by the parties thereto; (I)the Pledge Agreement, duly executed and delivered by Pledgor; and (J)the Filings, together with any other documents necessary or requested by Administrative Agent, on behalf of Buyers, to perfect the security interest granted by Seller in favor of Administrative Agent, on behalf of Buyers, for the benefit of Buyers, under this Agreement or any other Transaction Documents;

(ii)Fees and Costs.  The Upfront Fee and all other Transaction Costs payable to Administrative Agent, on behalf of Buyers, in connection with the negotiation of the Transaction Documents;

(iii)Organizational Documents.  Certified copies of the organizational documents of Seller, Pledgor and Guarantor and resolutions or other documents evidencing the authority of Seller, Pledgor and Guarantor with respect to the execution, delivery and performance of the Transaction Documents to which it is a party and each other document to be delivered by Seller and/or Guarantor from time to time in connection with the Transaction Documents (and Administrative Agent and Buyers may conclusively rely on such certifications until it receives notice in writing from Seller, Pledgor or Guarantor, as the case may be, to the contrary);

(iv)Legal Opinion.  Opinions of counsel to Seller, Pledgor and Guarantor in form and substance satisfactory to Administrative Agent and Buyers as to authority, enforceability of the Transaction Documents to which it is a party, perfection, bankruptcy safe harbors, the Investment Company Act and such other matters as may be requested by Administrative Agent; and

(v)Other Documents.  Such other documents as Buyer may reasonably request.

8.CERTAIN RIGHTS OF ADMINISTRATIVE AGENT, ON BEHALF OF BUYERS, WITH RESPECT TO THE PURCHASED ASSETS

(a)Subject to the terms and conditions of this Agreement, title to all Purchased Assets shall pass to Administrative Agent, on behalf of Buyers, on the applicable Purchase Date, and Administrative Agent, on behalf of Buyers, and Buyers shall have free and unrestricted use of its interest in the Purchased Assets in accordance with the terms and conditions of the Purchased Asset Documents, subject in all respects to the applicable terms, conditions and limitations set forth in the Transaction Documents.  Nothing in this Agreement or any other Transaction Document shall preclude Administrative Agent, on behalf of Buyers, and Buyers from engaging (at their own expense) in repurchase transactions with the Purchased Assets with Persons in conformity with the terms and conditions of the Purchased Asset Documents or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating the Purchased Assets to Persons (other than any Prohibited Transferees so long as no Event of Default is then continuing) in conformity with the terms and conditions of the Purchased Asset Documents, but no such transaction shall relieve Administrative Agent, on behalf of Buyers, or Buyers of its obligations to transfer the Purchased Assets to Seller pursuant to Section 3 of this Agreement or of Administrative Agent’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Section 5 of this Agreement or otherwise affect the rights, obligations and remedies of any party to this Agreement.

(b)Nothing contained in this Agreement or any other Transaction Document shall obligate Administrative Agent, on behalf of Buyers, to segregate any Purchased Assets delivered to Administrative Agent, on behalf of Buyers, by Seller.  Notwithstanding anything to the contrary in this Agreement or any

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other Transaction Document, no Purchased Asset shall remain in the custody of Seller or an Affiliate of Seller other than as permitted herein.  Subject to the terms and conditions of this Agreement, any documents delivered to Custodian pursuant to Section7 of this Agreement shall be released only in accordance with the terms and conditions of the Custodial Agreement.

9.EXTENSION OF FACILITY TERMINATION DATE

.  (i) unless Seller notifies Buyer within thirty (30) days prior to then current Facility Termination Date, the Facility Termination Date shall automatically be extended for two (2) additional one (1) year periods (the “First Automatic Extension Period” and the “Second Automatic Extension Period,” respectively); and (ii) at the request of Seller delivered to Administrative Agent no earlier than ninety (90) days and no later than thirty (30) days before the end of the Second Automatic Extension Period or the then current Facility Termination Date, as applicable, Seller may annually request an extension of the then current Facility Termination Date for a one (1) year period.  Such requests may be approved or denied in Administrative Agent’s sole discretion exercised in good faith, and in any case shall be approved only if (A) no uncured monetary Default, material non-monetary Default or Event of Default, or any unsatisfied Margin Deficit shall exist on the date of Seller’s request to extend or on the then current Facility Termination Date, (B) all representations and warranties of Seller, Pledgor and Guarantor in the Transaction Documents shall be true, correct, complete and accurate in all respects as of the then current Facility Termination Date (except such representations which by their terms speak as of a specified date and subject to any exceptions disclosed to Administrative Agent, on behalf of Buyers, in an Exception Report prior to such date and approved by Administrative Agent), and (C) on or before the then current Facility Termination Date, Seller shall have paid the Extension Fee to Buyers.

10.REPRESENTATIONS

Seller represents and warrants to Administrative Agent and Buyers, that as of the date of this Agreement and as of each Purchase Date and at all times while this Agreement and any Transaction thereunder is in effect or any Repurchase Obligations remain outstanding:

(i)Organization.  Seller (A) is a limited liability company duly organized, validly existing and in good standing under the laws and regulations of the State of Delaware; (B) is duly licensed, qualified, and in good standing in every state where such licensing or qualification is necessary for the transaction of Seller’s business except with respect to licenses, franchises and qualification to do business in clauses (a) and (b) to the extent the failure to obtain any such license, franchise or qualification would not have a Material Adverse Effect; (C) has all requisite limited liability company or other power, and has all governmental licenses, authorizations, consents and approvals necessary, to (1) own and hold its assets and to carry on its business as now being conducted and proposed to be conducted and (2) to execute the Transaction Documents and enter into the Transactions thereunder, and (D) has all requisite limited liability company or other power to execute, deliver, and perform its obligations under this Agreement and the other Transaction Documents.

(ii)Authorization; Due Execution; Enforceability.  The execution, delivery and performance by Seller of each of this Agreement and each of the other Transaction Documents have been duly authorized by all necessary limited liability company or other action on its part.  The Transaction Documents have been duly executed and delivered by Seller for good and valuable consideration.  The Transaction Documents constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

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(iii)Non-Contravention; Consents.  Neither the execution and delivery of the Transaction Documents, nor consummation by Seller of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by Seller with the terms, conditions and provisions of the Transaction Documents (or any of them) will (A) conflict with or result in a breach of the organizational documents of Seller (B) conflict with any applicable law (including, without limitation, Prescribed Laws), rule or regulation or result in a breach or violation of any of the terms, conditions or provisions of any judgment or order, writ, injunction, decree or demand of any Governmental Authority applicable to Seller, (C) result in the creation or imposition of any lien or any other encumbrance upon any of the assets of Seller, other than pursuant to the Transaction Documents or (D) violate or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, contract or other material agreement to which Seller is a party or by which Seller may be bound.

(iv)Litigation; Requirements of Law.  Unless notice is given by or on behalf of Seller to Administrative Agent, on behalf of Buyers, from time to time, there is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against Seller or any of its assets which (A) may, individually or in the aggregate, result in any Material Adverse Effect; (B) may have an adverse effect on the validity of the Transaction Documents or any action taken or to be taken in connection with the obligations of Seller under any of the Transaction Documents; (C) makes a claim or claims in an amount greater than Two Hundred and Fifty Thousand Dollars ($250,000); or (D) requires filing with the SEC in accordance with the 1934 Act or any rules thereunder.  Seller is in compliance in all material respects with all Requirements of Law.  Seller is not in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

(v)No Broker.  Seller has not dealt with any broker, investment banker, agent or other Person (other than Morgan Stanley Bank, N.A. or an Affiliate thereof) who may be entitled to any commission or compensation in connection with the sale of the Purchased Assets pursuant to any Transaction Documents.

(vi)Good Title to Purchased Assets.  Immediately prior to the purchase of any Purchased Assets by Administrative Agent, on behalf of Buyers, from Seller, such Purchased Assets are free and clear of any lien, security interest, claim, option, charge, encumbrance or impediment to transfer to Administrative Agent, on behalf of Buyers (including any “adverse claim” as defined in Section 8-102(a)(1) of the UCC), and are not subject to any rights of setoff, any prior sale, transfer, assignment, or participation by Seller or any agreement (other than as provided for in the Transaction Documents) by Seller to assign, convey, transfer or participate in such Purchased Assets, in whole or in part, and Seller is the sole legal record and beneficial owner of, and owns and has the right to sell and transfer, such Purchased Assets to Administrative Agent, on behalf of Buyers, and, upon transfer of such Purchased Assets to Administrative Agent, on behalf of Buyers, Administrative Agent, on behalf of Buyers, shall be the owner of such Purchased Assets (other than for U.S. federal, state and local income and franchise tax purposes) free of any adverse claim, subject to Seller’s rights pursuant to this Agreement.  In the event that the related Transaction is recharacterized as a secured financing of the Purchased Assets and with respect to the security interests granted in Section 6(a), Section 6(c) and Section 6(d), and Section 6(f), the provisions of this Agreement and the filing of the Filings are effective to create in favor of Administrative Agent, on behalf of Buyers, a valid security interest in all right, title and interest of Seller in, to and under the Repurchase Assets specified in Section 6(a) and the other collateral specified in Section 6(c), Section 6(d) and Section 6(f), and Administrative Agent, on behalf of Buyers, shall have a valid, perfected and enforceable first priority security interest in the

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Repurchase Assets and such other collateral, subject to no lien or rights of others other than as granted herein.

(vii)No Default; No Material Adverse Effect.  No uncured monetary Default, material non-monetary Default or any Event of Default exists under or with respect to the Transaction Documents.  To Seller’s actual knowledge, there are no post-Transaction facts or circumstances that have a Material Adverse Effect on any Purchased Asset that Seller has not notified Administrative Agent of in writing.

(viii)Representations and Warranties Regarding Purchased Assets; Delivery of Purchased Asset File.  Each Purchased Asset sold hereunder, as of the applicable Purchase Date for the Transaction in question, conforms to the applicable representations and warranties set forth in Exhibit III attached hereto, except as has been disclosed to Administrative Agent in an Exception Report prior to Administrative Agent’s, on behalf of Buyers, issuance of a Confirmation with respect to the related Purchased Asset, or as otherwise approved by Administrative Agent, on behalf of Buyers.  It is understood and agreed that the representations and warranties set forth in Exhibit III hereto (as modified by any Exception Report disclosed to Administrative Agent in writing prior to Administrative Agent’s, on behalf of Buyers, issuance of a Confirmation with respect to the related Purchased Asset), shall survive delivery of the respective Purchased Asset File to Administrative Agent, on behalf of Buyers, or its designee (including Custodian).  With respect to each Purchased Asset, the Purchased Asset File and any other documents required to be delivered under this Agreement and the Custodial Agreement for such Purchased Asset have been delivered to Administrative Agent, on behalf of Buyers, or Bailee, as applicable, or to Custodian on behalf of Administrative Agent, on behalf of Buyers.  Seller or its designee is in possession of a complete, true and accurate Purchased Asset File with respect to each Purchased Asset, except for such documents the originals of which have been delivered to Custodian.

(ix)Adequate Capitalization; No Fraudulent Transfer.  After giving effect to each Transaction (A) the amount of the “present fair saleable value” of the assets of Seller will, as of such date, exceed the amount of all “liabilities of Seller, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (B) the present fair saleable value of the assets of Seller will, as of such date, be greater than the amount that will be required to pay the liabilities of Seller on its debts as such debts become absolute and matured, (C) Seller will not have, as of such date, an unreasonably small amount of capital with which to conduct its businesses, and (D) Seller will be able to pay its debts as they mature.  Seller does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature.  Seller is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Seller or any of its assets.  Seller is not transferring any New Asset with any intent to hinder, delay or defraud any of its creditors.  For purposes of this Section 10(ix), “debt” means “liability on a claim”, “claim” means any (1) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, and (2) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

(x)Organizational Documents.  Seller has delivered to Administrative Agent, on behalf of Buyers, true and correct certified copies of its organizational documents, together with all amendments thereto.

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(xi)No Encumbrances.  There are (A) no outstanding rights, options, warrants or agreements on the part of Seller for a purchase, sale or issuance, in connection with the Purchased Assets (B) no agreements on the part of Seller to issue, sell or distribute the Purchased Assets and (C) no obligations on the part of Seller (contingent or otherwise) to purchase, redeem or otherwise acquire any securities or interest therein, except, in each of the foregoing instances, as contemplated by the Transaction Documents.

(xii)No Investment Company or Holding Company.  Neither Seller, Pledgor nor Guarantor is required to register as an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(xiii)Taxes.  Seller has filed or caused to be filed all tax returns that would be delinquent if they had not been filed on or before the date hereof and has paid all Taxes due and payable on or before the date hereof and all Taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority; no tax liens have been filed against any of Seller’s assets; and, to Seller’s actual knowledge, no claims are being asserted with respect to any such Taxes, fees or other charges.

(xiv)ERISA.  Neither Seller nor, except as would not reasonably be expected to have a Material Adverse Effect, any ERISA Affiliate (A) sponsors or maintains any Plans or (B) makes any contributions to or has any liabilities or obligations (direct or contingent) with respect to any Plans.  Seller (i) is not an “employee benefit plan” within the meaning of, and subject to the provisions of Title I of ERISA, or a “plan” as described in and subject to Section 4975 of the Code, and (ii) does not hold Plan Assets of one or more such “employee benefit plan” or “plans”. The consummation of the transactions contemplated by this Agreement will not constitute or result in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.  Either (A) the Seller is not a “governmental plan” within the meaning of Section 3(32) of ERISA and is not otherwise an entity subject to any law or regulation substantially similar to Section 406 of ERISA or Section 4975 of the Code due to the investment in Seller by a governmental or other plan or (B) the consummation of the transactions contemplated by this Agreement will not constitute or result in a violation of any such substantially similar law or regulation.

(xv)Judgments/Bankruptcy.  Except as disclosed in writing to Administrative Agent, on behalf of Buyers, there are no judgments against Seller, Pledgor or Guarantor that are unsatisfied of record or docketed in any court located in the United States of America and no Act of Insolvency has ever occurred with respect to Seller, Pledgor or Guarantor.

(xvi)Full and Accurate Disclosure.  No information provided pursuant to or during the negotiation of the Transaction Documents, or any written statement furnished by or on behalf of Seller pursuant to the terms of the Transaction Documents (including any certification of Bailee), contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made when such statements and omissions are considered in the totality of the circumstances in question.

(xvii)Financial Information.  All financial data concerning Seller, Pledgor and Guarantor and all data concerning the Purchased Assets that has been delivered to Administrative Agent, on behalf of Buyers, by Seller, any Affiliate of Seller or Seller’s advisors is true, complete and correct in all material respects and has been prepared in accordance with GAAP (to the extent applicable).  Since the delivery of such data, except as otherwise disclosed in writing to Administrative Agent, on behalf of Buyers, there has been no material adverse change in the business or financial

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condition of Seller, Pledgor or Guarantor or the Purchased Assets, or in the results of operations of Seller, Pledgor or Guarantor.

(xviii)Jurisdiction of Organization.  Seller’s jurisdiction of organization is the State of Delaware.

(xix)Location of Books and Records.  The location where Seller keeps its books and records is at its chief executive office at 390 RXR Plaza Uniondale, NY 11556.

(xx)Authorized Representatives.  The duly authorized representatives of Seller are listed on, and true signatures of such authorized representatives are set forth on, Exhibit V attached to this Agreement.

(xxi)Use of Proceeds; Regulations T, U and X.  All proceeds of each Transaction shall be used by Seller for purposes permitted under Seller’s governing documents; provided that no part of the proceeds of any Transaction will be secured directly or indirectly by margin stock.  Neither the entering into nor consummation of any Transaction hereunder, nor the use of the proceeds thereof, will violate any provision of Regulations T, U and X.

(xxii)Regulatory Status.  Seller is not a “bank holding company” or a direct or indirect subsidiary of a “bank holding company” as defined in the Bank Holding Company Act of 1956, as amended, and Regulation Y thereunder of the Board of Governors of the Federal Reserve System.

(xxiii)Hedging Transactions.  Subject to the caveat set forth in the last sentence of the defined term “Eligible Asset,” as of the Purchase Date for any Purchased Asset that is subject to a Hedging Transaction, each such Hedging Transaction is in full force and effect in accordance with its terms, each counterparty thereto is an Affiliated Hedge Counterparty or a Qualified Hedge Counterparty, and no “Termination Event”, “Event of Default”, “Potential Event of Default” or any similar event, however denominated, has occurred with respect thereto.

(xxiv)Anti-Money Laundering.  The operations of Seller, Pledgor, Guarantor and their Subsidiaries are and have been conducted at all times during the two (2) year period immediately preceding each determination date, in material compliance with all applicable financial recordkeeping and reporting requirements, including those required by the Prescribed Laws, and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving Seller, Pledgor or Guarantor or any of their Subsidiaries with respect to the Prescribed Laws is pending or, to the best knowledge of Seller, threatened.

(xxv)OFAC.

(A)None of Seller, any director, officer or employee of Seller, or to Seller’s knowledge, any agent, Affiliate or representative of Seller, is a Person that is, or is owned or controlled by a Person that is:  (1) the subject of any sanction administered or enforced by OFAC, the United Nations Security Council, the European Union, or Her Majesty’s Treasury (collectively, “Sanctions”); or (2) located, organized or resides in a country or territory that is the subject of comprehensive Sanctions (including, without limitation, Cuba, Iran, North Korea, the Crimea region of Ukraine and Syria.

(B)Seller is not now knowingly engaged in, and will not knowingly engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.

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(xxvi)Anti-Corruption.

(A)None of Seller, its directors, officers, or employees, or, to Seller’s knowledge, any agent or representative of Seller, has taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any Person while knowing that all or some portion of the money or value will be offered, given or promised to anyone to improperly influence official action, to obtain or retain business or otherwise to secure any improper advantage, in each case in violation of applicable anti-corruption or anti-bribery laws.(B) Seller and, to Seller’s knowledge, Seller’s Affiliates have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintained, and will continue to maintain, policies and procedures reasonably designed to promote and achieve compliance with such laws.

11.NEGATIVE COVENANTS OF SELLER

On and as of date of this Agreement and each Purchase Date and at all times while this Agreement and any Transaction hereunder is in effect or any Repurchase Obligations remain outstanding, Seller shall not without the prior written consent of Administrative Agent, on behalf of Buyers:

(a)subject to Seller’s right to repurchase the Purchased Assets, take any action which would, either directly or indirectly, materially impair or adversely affect Administrative Agent’s title to the Purchased Assets;

(b)transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, including, without limitation, any effective transfer or other disposition as a result of a Division of Seller, or pledge or hypothecate, directly or indirectly, any interest in the Purchased Assets (or any of them) to any Person other than Administrative Agent, on behalf of Buyers, or engage in repurchase transactions or similar transactions with respect to the Purchased Assets (or any of them) with any Person other than Administrative Agent, on behalf of Buyers, except where the Purchased Assets in question are simultaneously repurchased from Administrative Agent, on behalf of Buyers, which may be transferred either back to Seller or at Seller’s direction;

(c)create, incur or permit to exist any lien, charge, encumbrance or security interest in or on any of the Repurchase Assets or other collateral subject to the security interests granted by Seller pursuant to Section 6 of this Agreement;

(d)create, incur or permit any lien, security interest, charges, or encumbrances with respect to any Repurchase Assets or Hedging Transaction relating to the Purchased Assets for the benefit of any Person other than Administrative Agent, on behalf of Buyers;

(e)consent or assent to a Significant Modification of any Purchased Asset without the prior written consent of Administrative Agent;

(f)[reserved];

(g)after the occurrence and during the continuation of any monetary Default, material non-monetary Default or any Event of Default, make any distribution (other than distributions as necessary to enable Guarantor to maintain its status as a real estate investment trust within the meaning of the Code and avoid any excise tax payable pursuant to Section 4981 of the Code (in each case, without regard to Guarantor’s ability to make consent dividends within the meaning of Section 565 of the Code)), payment

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on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity or ownership interest of Seller, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller;

(h)sponsor or maintain any Plans or make any contributions to, or have any liability or obligation (direct or contingent) with respect to, any Plan or except as would not have a Material Adverse Effect, permit any ERISA Affiliate to sponsor or maintain any Plans or make any contributions to, or have any liability or obligation (direct or contingent) with respect to, any Plan;

(i)engage in any transaction that would cause any obligation or action taken or to be taken hereunder (or the exercise by Administrative Agent or any Buyer, of any of its rights under this Agreement, the Purchased Assets or any Transaction Document) to be a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or a violation of any law or regulation substantially similar to Section 406 of ERISA or Section 4975 of the Code;

(j)make any future advances under any Purchased Asset to any underlying obligor that are not permitted by the related Purchased Asset Documents, except to the extent approved by Administrative Agent on behalf of Buyers;

(k)seek its dissolution, liquidation, Division or winding up, in whole or in part;

(l)incur any Indebtedness except as provided in Section 13(i) hereof, or otherwise cease to be a Single-Purpose Entity;

(m)permit the organizational documents or organizational structure of Seller to be amended without the prior written consent of Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith;

(n)except to the extent contributed by Seller or any of its Affiliates to a collateralized loan obligation transaction, acquire or maintain any right or interest in any Purchased Asset or Mortgaged Property that is senior to, junior to or pari passu with the rights and interests of Administrative Agent, on behalf of Buyers, therein under this Agreement and the other Transaction Documents unless such right or interest becomes a Purchased Asset hereunder;

(o)directly or indirectly use the proceeds from any Transaction, or lend contribute or otherwise make available such proceeds to any other Person to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions or in any other manner that would result in a violation of Sanctions by any Person (including Administrative Agent or any Buyer); or

(p)directly or, to its knowledge, indirectly use the proceeds from any Transaction or lend, contribute or otherwise make available such proceeds to any Person for the purpose of financing or facilitating any activity that would violate applicable anti-corruption laws, rules, or regulations.

(q)use any escrow or reserve held pursuant to the Purchased Asset Documents in its possession or control for any reason other than uses permitted under the Purchased Asset Documents.

12.AFFIRMATIVE COVENANTS OF SELLER

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On and as of the date of this Agreement and each Purchase Date and at all times while this Agreement and any Transaction thereunder is in effect or any Repurchase Obligations remain outstanding:

(a)Seller shall promptly notify Administrative Agent when it has actual knowledge of any event and/or condition that is likely to have a Material Adverse Effect.

(b)Seller shall give notice to Administrative Agent of the following (accompanied by an Officer’s Certificate setting forth details of the occurrence referred to therein and stating what actions Seller has taken or proposes to take with respect thereto):

(i)promptly upon receipt by Seller of notice or actual knowledge of the occurrence of any monetary Default, material non-monetary Default or any Event of Default;

(ii)with respect to any Purchased Asset sold to Administrative Agent, on behalf of Buyers, hereunder, promptly following receipt of any unscheduled Principal Payment (in full or in part);

(iii)with respect to any Purchased Asset sold to Administrative Agent, on behalf of Buyers, hereunder, promptly following receipt by Seller of notice or actual knowledge that the related Mortgaged Property has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to affect adversely the value of such Mortgaged Property;

(iv)promptly upon receipt of notice by Seller or actual knowledge of (A) any Purchased Asset that becomes a Defaulted Asset, (B) any lien or any security interest (other than security interests created hereby) on, or claim asserted against, any Purchased Asset or, to Seller’s actual knowledge, the underlying collateral therefor, (C) any event or change in circumstances that has or could reasonably be expected to have caused any credit impairment to any Purchased Asset or any obligor or guarantor in respect of any Purchased Asset, (D) any change with respect to Servicer or in the servicing of any Purchased Asset, or (E) any regulatory, including material licensing, issues with respect to any Purchased Asset;

(v)promptly, and in any event within ten (10) days after service of process on any of the following, give to Administrative Agent notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened) or other legal or arbitrable proceedings affecting Seller, Pledgor or Guarantor or affecting any of the assets of Seller, Pledgor or Guarantor before any Governmental Authority that (A) questions or challenges the validity or enforceability of any of the Transaction Documents or any action to be taken in connection with the transactions contemplated hereby, (B) makes a claim or claims in an aggregate amount greater than Two Hundred and Fifty Thousand Dollars ($250,000) with respect to Seller or Ten Million Dollars ($10,000,000) with respect to Guarantor, (C) which, individually or in the aggregate, if adversely determined could reasonably be likely to have a Material Adverse Effect, (D) requires filing with the SEC in accordance with the 1934 Act and any rules thereunder or (E) raises any material lender licensee issues with respect to any Purchased Asset;

(vi)promptly upon any transfer of any underlying Mortgaged Property or any direct or indirect equity interest in any Mortgagor of which Seller has actual knowledge, whether or not consent to such transfer is required under the applicable Purchased Asset Documents;

(vii)promptly, and in any event within ten (10) days after Seller or any of its ERISA Affiliates knows or has reason to know that any “reportable event” (within the meaning of

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Section4043(c) of ERISA) has occurred or is reasonably expected to occur in respect of a Plan that, individually or in the aggregate, either has resulted, or would reasonably be expected to result, in a Material Adverse Effector in a Lien arising  under ERISA or Section 403(k) of the Code;

(viii)a breach of any representation or warranty by Seller under Exhibit III attached hereto;

(ix)with respect to any Future Advance Asset, if Seller has failed to fund any additional advance to the related Mortgagor as and when required under, and otherwise in accordance with, the terms and conditions of the related Purchased Asset Documents; and

(x)there is a Change of Control with respect to either Guarantor or Pledgor from the Person or Persons who are directly or indirectly Controlling either Guarantor or Pledgor, as applicable, as of the Closing Date.

(c)Seller shall provide Administrative Agent with copies of such documents as Administrative Agent, on behalf of Buyers, may reasonably request evidencing the truthfulness of the representations set forth in Section 10 hereof.

(d)Seller shall defend the right, title and interest of Administrative Agent, on behalf of Buyers, in and to the Purchased Assets and any Hedging Transactions against, and take such other action as is necessary to remove, any liens, security interests, claims, encumbrances, charges and demands of all Persons thereon (other than security interests granted to Administrative Agent, on behalf of Buyers, hereunder), and take any such other action as is necessary to obtain or preserve a first priority perfected security interest in the Purchased Assets and any Hedging Transactions.

(e)Seller will permit Administrative Agent or any Buyer, or its designated representative to inspect any of Seller’s records with respect to all or any portion of the Purchased Assets and the conduct and operation of its business related thereto at such reasonable times and with reasonable frequency requested by Administrative Agent or any Buyer, or its designated representative and to make copies of extracts of any and all thereof.

(f)If any amount payable under or in connection with any of the Purchased Assets shall be or become evidenced by any new or otherwise subsequently-arising promissory note, other instrument or chattel paper (as each of the foregoing is defined under the UCC), such note, instrument or chattel paper shall be immediately delivered to Administrative Agent, on behalf of Buyers, or its designee, duly endorsed in a manner satisfactory to Administrative Agent or if any collateral or other security shall subsequently be delivered to Seller in connection with any Purchased Asset, Seller shall immediately deliver or forward such item of collateral or other security to Administrative Agent, on behalf of Buyers, or its designee, together with such instruments of assignment as Administrative Agent may reasonably request.

(g)Seller shall provide (or cause to be provided) to Administrative Agent, on behalf of Buyers, the following financial and reporting information:

(i)the Monthly Statement, which report shall be delivered to Administrative Agent for each calendar month during the term of this Agreement in accordance with the timing set forth in section 3.12 of the Servicing Agreement;

(ii)the Quarterly Report, together with all operating statements and occupancy information that Seller or Servicer has received relating to the Purchased Assets for the related fiscal quarter, which reports shall be delivered to Administrative Agent for each fiscal quarter

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during the term of this Agreement within forty-five (45)days following the end of each such fiscal quarter;

(iii)a Financial Covenant Compliance Certificate, to be delivered by Guarantor within forty-five (45) days after the end of the first three (3) fiscal quarters and within one-hundred and twenty (120) days after the end of each fiscal year;

(iv)within forty-five (45) days following the end of each of the first three quarters, and within ninety (90) days following the end of each fiscal year, as the case may be, an Officer’s Certificate of Seller in form and substance reasonably satisfactory to Administrative Agent, on behalf of Buyers, certifying that during such fiscal quarter or year Seller has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Transaction Documents to be observed, performed or satisfied by it, and that there has occurred no Event of Default and no event or circumstance has occurred that is reasonably likely to result in a Material Adverse Effect;

(v)as soon as available and in any event within forty-five (45) days after the end of each quarter (other than the last fiscal quarter of each fiscal year), the unaudited consolidated balance sheets of Guarantor and its consolidated subsidiaries as at the end of such period and the related unaudited consolidated statements of income and retained earnings and of cash flows for the Guarantor and its consolidated subsidiaries for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a responsible officer of Guarantor, which certificate shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of Guarantor and its consolidated subsidiaries in accordance with GAAP, as at the end of, and for, such period (subject to normal year-end adjustments);

(vi)as soon as available and in any event within ninety (90) days after the end of each fiscal year of Guarantor, the audited consolidated balance sheets of Guarantor and its consolidated subsidiaries as at the end of such fiscal year and the related audited consolidated statements of income and retained earnings and of cash flows for the Guarantor and its consolidated subsidiaries for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, shall have no “going concern” qualification and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of Guarantor and its respective consolidated subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP.  Information required to be delivered pursuant to clauses (v) and (vi) of this Section shall be deemed to have been delivered on the date on which the Guarantor posts such information on the Guarantor’s website on the internet or the SEC posts such information on their website at www.sec.gov/edgar/searchedgar/webusers.htm or at another website identified in a written notice to the Administrative Agent and accessible by the Administrative Agent without charge;

(vii)within ten (10) Business Days after Administrative Agent’s request, such further information with respect to the operation of any Mortgaged Property, Purchased Asset, the financial affairs of Seller, Pledgor or Guarantor and any Plan and Multiemployer Plan as may be reasonably requested by Administrative Agent, on behalf of Buyers, including all business plans prepared by or for Seller;

(viii)upon Administrative Agent’s, on behalf of Buyers, reasonable request for any Appraisal that is dated more than twelve (12) months prior to such request, no more often than

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annually, updated Appraisals of the Mortgaged Properties relating to the Purchased Assets, at Seller’s sole cost and expense; and

(ix)such other reports as Administrative Agent, on behalf of Buyers, shall reasonably request.

(h)Seller shall at all times comply in all material respects with all laws (including, without limitation, Prescribed Laws), ordinances, rules and regulations of any federal, state, municipal or other public authority having jurisdiction over Seller or any of its assets, and Seller shall do or cause to be done all things reasonably necessary to preserve and maintain in full force and effect its legal existence and all licenses material to its business.

(i)Seller agrees that, from time to time upon the prior written request of Administrative Agent, on behalf of Buyers, it shall (A) execute and deliver such further documents, provide such additional information and reports and perform such other acts as Administrative Agent may reasonably request in order to insure compliance with all Prescribed Laws applicable to Seller and to fully effectuate the purposes of this Agreement and (B) provide such opinions of counsel concerning matters relating to the Prescribed Laws as Administrative Agent may reasonably request; provided, however, that nothing in this Section 12(j) shall be construed as requiring Administrative Agent to conduct any inquiry or decreasing Seller’s responsibility for its statements, representations, warranties or covenants under this Agreement.  In order to enable Administrative Agent, Buyers, and their respective Affiliates to comply with any anti-money laundering program and related responsibilities including, but not limited to, any obligations under the Prescribed Laws and regulations thereunder, Seller, on behalf of itself and its Affiliates, represents and covenants to Administrative Agent,  Buyers, and their Affiliates that:  (A) neither Seller, nor, any of its Affiliates, is a Prohibited Person and (B) Seller is not acting on behalf of or on behalf of any Prohibited Person.  Seller agrees to promptly notify Administrative Agent, on behalf of Buyers, or a person appointed by Administrative Agent, on behalf of Buyers, to administer its anti-money laundering program, if applicable, of any change in information affecting this Section 12(i).

(j)Seller shall at all times keep proper books of records and accounts in which full, true and correct entries shall be made of its transactions in accordance with GAAP and set aside on its books from its earnings for each fiscal year all such proper reserves in accordance with GAAP.

(k)Seller shall advise Administrative Agent in writing of the opening of any new chief executive office of Seller, Pledgor or Guarantor or the closing of any such office and of any change in Seller’s, Pledgor’s or Guarantor’s name or the places where the books and records pertaining to the Purchased Assets are held not less than fifteen (15) Business Days prior to taking any such action.

(l)Seller shall pay when due all Transaction Costs.  Seller shall pay and discharge all Taxes, levies, liens and other charges, if any, on its assets and on the Purchased Assets that, in each case, in any manner would create any lien or charge upon the Purchased Assets, except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP.

(m)Seller shall maintain its existence as a limited liability company organized solely and in good standing under the law of the State of Delaware and shall not dissolve, liquidate, be subject to a Division, merge with or into any other Person or otherwise change its organizational structure or documents or identity or incorporate or organize in any other jurisdiction.

(n)Seller shall maintain all records with respect to the Purchased Assets and the conduct and operation of its business with no less a degree of prudence than if the Purchased Assets were held by Seller

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for its own account and will furnish Administrative Agent upon request by Administrative Agent or its designated representative, with information reasonably obtainable by Seller with respect to the Purchased Assets and the conduct and operation of its business.

(o)Seller shall provide Administrative Agent with notice of each modification of any Purchased Asset Documents consented to by Seller (including such modifications which do not constitute a Significant Modification).

(p)Seller shall provide Administrative Agent with reasonable access to operating statements, the occupancy status and other property level information, with respect to the Mortgaged Properties, that are either in Seller’s possession or available to Seller, plus any such additional reports as Administrative Agent, on behalf of Buyers, may reasonably request.

(q)Seller may propose, and Administrative Agent, on behalf of Buyers, will consider, but shall be under no obligation to approve, strategies for the foreclosure or other realization upon the security for any Purchased Asset that has become a Defaulted Asset.

(r)Seller shall not cause any Purchased Asset to be serviced by any servicer other than a servicer expressly approved in writing by Administrative Agent, on behalf of Buyers.  Seller shall provide written notification to Administrative Agent within one (1) Business Day of any rating agency reducing the credit or servicer rating applicable to any servicer.

(s)If Seller shall at any time become entitled to receive or shall receive any rights, whether in addition to, in substitution of, as a conversion of, or in exchange for a Purchased Asset, or otherwise in respect thereof, Seller shall accept the same as Administrative Agent, on behalf of Buyers, agent, hold the same in trust for Administrative Agent, on behalf of Buyers, and deliver the same forthwith to Administrative Agent, on behalf of Buyers (or Custodian, as appropriate) in the exact form received, duly endorsed by Seller to Administrative Agent, on behalf of Buyers, if required, together with all related and necessary duly executed Transfer Documents to be held by Administrative Agent, on behalf of Buyers, hereunder as additional collateral security for the Transactions.  If any sums of money or property so paid or distributed in respect of the Purchased Assets shall be received by Seller, Seller shall, until such money or property is paid or delivered to Buyers, hold such money or property in trust for Buyers, segregated from other funds of Seller, as additional collateral security for the Transactions.

(t)To the extent any additional limited liability company is formed by Division of Seller (and without prejudice to Section 11), Seller shall cause any such additional limited liability company to transfer, convey and assign to Administrative Agent, on behalf of Buyers, on a servicing released basis all of such additional limited liability company’s right, title and interest in and to the Purchased Assets, together with all related Servicing Rights in the same manner and to the same extent as the sale, transfer, conveyance and assignment by Seller on the initial Purchase Date of all of Seller’s right, title and interest in and to the Purchased Assets, together with all related Servicing Rights.

13.SINGLE-PURPOSE ENTITY

Seller hereby represents and warrants to Administrative Agent and Buyers, and covenants with Administrative Agent and Buyers, that, on and as of the date of this Agreement and each Purchase Date and at all times while this Agreement and any Transaction hereunder is in effect or any Repurchase Obligations remain outstanding:

(a)it is and intends to remain solvent, and it has paid and will pay its debts and liabilities (including overhead expenses) from its own assets as the same shall become due;

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(b)it has complied and will comply with the provisions of its certificate of formation and its limited liability company agreement necessary to maintain its separate existence;

(c)it has done or caused to be done and will do all things necessary to observe limited liability company formalities and to preserve its existence;

(d)it has maintained and will maintain all of its books, records, financial statements and bank accounts separate from those of its affiliates, its members and any other Person, and it will file its own tax returns (except to the extent consolidation is required or permitted under GAAP or as a matter of law);

(e)it has been, is and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate of Seller), it shall correct any known misunderstanding regarding its status as a separate entity, it shall conduct business in its own name, it shall not identify itself or any of its Affiliates as a division or part of the other and it shall maintain and utilize separate stationery, invoices and checks;

(f)it has not owned and will not own any property or any other assets other than the Purchased Assets, cash and its interest under any associated Hedging Transactions;

(g)it has not engaged and will not engage in any business other than the origination, acquisition, ownership, financing and disposition of the Purchased Assets and the associated Hedging Transactions in accordance with the applicable provisions of the Transaction Documents;

(h)except for capital contributions and capital distributions permitted under the terms and conditions of its organizational documents and properly reflected on its books and records, it has not entered into, and will not enter into, any contract or agreement with any of its affiliates, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arm’s length basis with Persons other than such affiliate;

(i)it has not incurred and will not incur any indebtedness or obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than (A) obligations under the Transaction Documents, (B) obligations under the documents evidencing the Purchased Assets, and(C) unsecured trade payables, in an aggregate amount not to exceed Two Hundred and Fifty Thousand Dollars ($250,000) at any one time outstanding, incurred in the ordinary course of acquiring, owning, financing and disposing of the Purchased Assets; provided, however, that any such trade payables incurred by Seller shall be paid within sixty (60) days of the date incurred;

(j)it has not made and will not make any loans or advances to any other Person, and shall not acquire obligations or securities of any member or affiliate of any member or any other Person (other than in connection with the origination or acquisition of Purchased Assets);

(k)it will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

(l)neither it nor Guarantor will seek (A) the dissolution, liquidation, Division or winding up, in whole or in part of Seller or (B) the division of Seller into two (2) or more limited liability companies or other legal entities;

(m)it will not commingle its funds and other assets with those of any of its Affiliates or any other Person;

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(n)it has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any of its Affiliates or any other Person;

(o)it has not held and will not hold itself out to be responsible for the debts or obligations of any other Person;

(p)it will (i) have at all times at least one (1) Independent Director and(ii) provide Administrative Agent with up-to-date contact information for all Independent Directors and a copy of the agreement pursuant to which each Independent Director consents to and serves as an Independent Director for Seller;

(q)its organizational documents shall provide that (i) no Independent Director of Seller may be removed or replaced without Cause, (ii) Administrative Agent be given at least two (2) Business Days prior notice of the removal and/or replacement of any Independent Director, together with the name and contact information of the replacement Independent Director and evidence of the replacement’s satisfaction of the definition of Independent Director and (iii) any Independent Director of Seller shall not have any fiduciary duty to anyone including the holders of the equity interests in Seller and any Affiliates of Seller except Seller and the creditors of Seller with respect to taking of, or otherwise voting on, any Act of Insolvency; provided that the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing;

(r)it shall not, without the consent of its Independent Directors, institute any proceeding to be adjudicated as bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against it, or file a petition or answer or consent seeking reorganization or relief under the Bankruptcy Code or consent to the filing of any such petition or to the appointment of a receiver, rehabilitator, conservator, liquidator, assignee, trustee or sequestrator (or other similar official) of it or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, or make an assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or take any action in furtherance of any of the foregoing; and

(s)it shall not have any Subsidiaries or employees.

14.EVENTS OF DEFAULT; REMEDIES

(a)Events of Default.  The following shall constitute an event of default (each, an “Event of Default”) by Seller hereunder:

(i)failure of Seller to repurchase one or more Purchased Assets on the applicable Repurchase Date;

(ii)failure of Seller to apply any Income received by Seller (or Servicer on behalf of Seller) in accordance with the provisions hereof; provided that no Event of Default under this clause (ii) shall occur if, in the case of a failure to deposit Income or any other amounts by any third-party servicer unaffiliated with Seller, such failure is cured within two (2) Business Days of written notice to Seller or the date on which Seller had actual knowledge of such breach or failure to perform and the defaulting servicer is removed and replaced with a replacement servicer satisfactory to Administrative Agent in its sole discretion within sixty (60) days of written notice to Seller;

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(iii)if any of the Transaction Documents shall for any reason (A) not cause, or shall cease to cause, Administrative Agent, on behalf of Buyers, to be the owner of, or, if recharacterized as a secured financing, a secured party with respect to, the Repurchase Assets specified in Section 6(a) hereof and the other collateral specified in Sections 6(c),6(d) or 6(f) hereof free of any adverse claim, liens and other rights of others (other than as granted herein); (B) cease, if a Transaction is recharacterized as a secured financing, to create a valid first priority perfected security interest in favor of Administrative Agent, on behalf of Buyers, in the Repurchase Assets specified in Section 6(a) hereof and the other collateral specified in Sections 6(c), 6(d) or 6(f) hereof; or (B) cease to be in full force and effect or if the enforceability of any of them is challenged or repudiated by Seller, Pledgor, Guarantor or Servicer or any other Person;

(iv)failure of Seller to make the payments required under Section 4(a) or Section 5(b) hereof on the date such payment is due;

(v)failure of Seller, Pledgor or Guarantor to make any other payment owing to Buyers which has become due, whether by acceleration or otherwise, under the terms of this Agreement or any other Transaction Document which failure is not remedied within the period specified herein or, if no period is specified for such payments ten (10) Business Days after notice thereof to Seller from Administrative Agent, on behalf of Buyers;

(vi)breach by Seller in the due performance or observance of any term, covenant or agreement contained in Section 11 of this Agreement; provided, that, if such breach is susceptible to cure as determined by Administrative Agent in its sole and absolute discretion, exercised in good faith, then Seller shall have five (5) days after the earlier to occur of notice from Administrative Agent or Seller’s actual knowledge of such breach to remedy such breach (providedfurther that, if Seller shall have commenced to cure such breach within such five (5) day period and thereafter diligently and expeditiously proceeds to cure the same, such five (5) day period shall be extended for such time as is reasonably necessary for Seller in the exercise of due diligence, to cure such breach, and in no event shall such cure period exceed thirty (30) days from Seller’s receipt of notice of such breach, provided that Seller is continuously and diligently curing such breach).

(vii)a Change of Control shall have occurred with respect to Seller, Pledgor or Guarantor;

(viii)any representation made by Seller or Pledgor herein or in any Transaction Document shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated and such representation breach continues unremedied for twenty (20) Business Days after the earlier to occur of the receipt of written notice thereof from Buyer, or the discovery thereof by the applicable Person; provided that the representations and warranties made by Seller in Sections 10(vi) or 10(viii) hereof shall not be considered an Event of Default if incorrect or untrue in any material respect (which determination shall be made with respect to the representations and warranties in Exhibit III without regard to any knowledge qualifier therein), if Administrative Agent, on behalf of Buyers, terminates the related Transaction and Seller repurchases the related Purchased Asset(s) on an Early Repurchase Date no later than five (5) Business Days after receiving written notice of such incorrect or untrue representation; provided, however, that if Seller shall have made any such representation with knowledge that it was materially incorrect or untrue at the time made, such misrepresentation shall constitute an Event of Default;

(ix)(A) a final judgment by any competent court in the United States of America for the payment of money in an amount greater than Two Hundred Fifty Thousand Dollars ($250,000)

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shall have been rendered against Seller and remains undischarged or unpaid for a period of thirty (30)days, during which period execution of such judgment is not effectively stayed or (B)a final judgment by any competent court in the United States of America for the payment of money in an amount greater than Ten Million Dollars ($10,000,000) shall have been rendered against Guarantor and remains undischarged or unpaid for a period of sixty (60)days, during which period execution of such judgment is not effectively stayed by bonding over or other similar means;

(x)(A) Seller or Pledgor shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party, and which default involves the failure to pay an obligation in excess of Two Hundred Fifty Thousand Dollars ($250,000) or (B) Guarantor shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party, and which default involves the failure to pay an obligation in excess of Ten Million Dollars ($10,000,000); provided, however, that any such default, failure to perform or breach shall not constitute an Event of Default if Seller, Pledgor or Guarantor, as the case may be, cures such default, failure to perform or breach, as the case may be, within the grace period, if any, provided under the applicable agreement;

(xi)the breach by Guarantor of (A) any financial covenant set forth in Section 9 of the Guaranty or (B) any other term, covenant, obligation or condition set forth in the Guaranty;

(xii)if Seller shall breach or fail to perform any of the terms, covenants, obligations or conditions of this Agreement or any other Transaction Document, other than as specifically otherwise referred to in this Section 14(a), and such breach or failure to perform is susceptible of cure and is not remedied within thirty (30) days after notice thereof to Seller by Administrative Agent, or its successors or assigns; provided, however, that if such default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period; and providedfurther that Seller shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Seller, in the exercise of due diligence, to cure such default, and in no event shall such cure period exceed sixty (60) days from Seller’s receipt of Administrative Agent, on behalf of Buyers, notice of such default; and providedfurther that in the case of the occurrence of a non-monetary event of default under any Servicing Agreement, and such breach is curable by Seller, Seller cures such breach within ten (10) Business Days of written notice to Seller or the date on which Seller had actual knowledge of such breach or failure to perform and the defaulting servicer is removed and replaced with a replacement servicer satisfactory to Administrative Agent in its sole discretion within sixty (60) days of written notice to Seller;

(xiii)an Act of Insolvency shall have occurred with respect to Seller, Pledgor or Guarantor;

(xiv)[reserved];

(xv)an “event of default” or “facility termination event” (as defined in the agreements relating to a facility described below), by Seller, Pledgor or Guarantor beyond any applicable notice and cure period, shall have occurred under (A) any repurchase facility, loan facility or hedging transaction entered into by Seller, Pledgor or Guarantor and any Buyer, or any Affiliate of any Buyer, or (B) any repurchase facility, loan facility or hedging transaction with any Buyer, or any Affiliate of any Buyer, in which Seller, Pledgor or Guarantor is a guarantor;

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(xvi)any of the representations and warranties of Guarantor in the Guaranty or in any Financial Covenant Compliance Certificate shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated; or

(xvii)if Pledgor shall breach or fail to perform any of the terms, covenants, obligations or conditions of the Pledge Agreement, and such breach or failure to perform is susceptible of cure and is not remedied within the specified cure period or if no cure period is specified, ten (10) Business Days after notice thereof to Seller or Pledgor by Administrative Agent.

(b)Remedies.  If an Event of Default shall occur and be continuing, the following rights and remedies shall be available to Administrative Agent, on behalf of Buyers:

(i)At the option of Administrative Agent, on behalf of Buyers, exercised by written notice to Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency with respect to Seller, Pledgor or Guarantor), the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (the date on which such option is exercised or deemed to have been exercised, the “Accelerated Repurchase Date”) (and any Transaction for which the related Purchase Date has not yet occurred shall be canceled).

(ii)If Administrative Agent, on behalf of Buyers, exercises or is deemed to have exercised the option referred to in Section 14(b)(i) hereof (A) Seller’s obligations hereunder to repurchase all Purchased Assets shall become immediately due and payable on and as of the Accelerated Repurchase Date, and all Income deposited in the Blocked Account shall be retained by Administrative Agent, on behalf of Buyers, and applied to the Repurchase Obligations; (B) the Repurchase Price with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall include the accrued and unpaid Price Differential with respect to each Purchased Asset accrued at the Pricing Rate applicable upon an Event of Default for such Transaction; and (C) Custodian shall, upon the request of Administrative Agent, on behalf of Buyers (with simultaneous copy of such request to Seller), deliver to Administrative Agent, on behalf of Buyers, all instruments, certificates and other documents then held by Custodian relating to the Purchased Assets; and (D) this Agreement shall automatically terminate, except with respect to those provisions which by their terms survive the termination of this Agreement.

(iii)Administrative Agent, on behalf of Buyers, may, after ten (10) days’ notice to Seller of Administrative Agent’s, intent to take such action (provided that no such notice shall be required in the circumstances set forth in Section 9-611(d) of the UCC), (A) immediately sell, at a public or private sale in a commercially reasonable manner and at such price or prices as Administrative Agent, on behalf of Buyers, may deem to be satisfactory any or all of the Purchased Assets on a servicing released basis or (B) in its sole discretion exercised in good faith elect, in lieu of selling all or a portion of such Purchased Assets, to give Seller credit for such Purchased Assets in an amount equal to the Market Value of such Purchased Assets against the aggregate Repurchase Obligations.  The proceeds of any disposition of Purchased Assets effected pursuant to this Section 14(b)(iii) shall be applied:  first, to the costs and expenses incurred by Administrative Agent and Buyers, in connection with Seller’s default; second, to the costs of cover and/or Hedging Transactions, if any; third, to the Repurchase Price; fourth, to all other outstanding Repurchase Obligations; and fifth, the balance, if any, to Seller.  In the event that Buyers shall not have received repayment in full of the Repurchase Obligations following its liquidation of the Purchased Assets, Administrative Agent, on behalf of Buyers, may, in its sole discretion exercised in good faith, pursue Seller, Pledgor and Guarantor (to the extent provided in the Guaranty including, without limitation, the limitations on recourse set forth therein) for all or any part of any deficiency.

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(iv)The parties recognize that it may not be possible to purchase or sell all of the Purchased Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Assets may not be liquid.  In view of the nature of the Purchased Assets, the parties agree that, to the extent permitted by applicable law, liquidation of a Transaction or the Purchased Assets shall not require a public purchase or sale and that a private purchase or sale shall be deemed to have been made in a commercially reasonable manner.  Accordingly, Administrative Agent, on behalf of Buyers, may elect, in its sole discretion exercised in good faith, the time and manner of liquidating any Purchased Assets, and nothing contained herein shall (A) obligate Administrative Agent, on behalf of Buyers, to liquidate any Purchased Assets following the occurrence of an Event of Default or to liquidate all of the Purchased Assets in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Administrative Agent or Buyers.

(v)Seller shall be liable to Administrative Agent and Buyers, for (A) the amount of all expenses, including reasonable legal fees and expenses of counsel, incurred by Administrative Agent and Buyers in connection with or as a consequence of an Event of Default, (B) all costs incurred in connection with covering transactions or Hedging Transactions (including short sales) or entering into replacement transactions, and (C) all damages, losses, judgments, costs and other expenses of any kind that may be imposed on, incurred by or asserted against Administrative Agent and Buyers relating to or arising out of such hedging transactions or covering transactions, and (D) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default.

(vi)Administrative Agent, on behalf of Buyers, may exercise any or all of the remedies available to Administrative Agent and Buyers, immediately upon the occurrence of an Event of Default and at any time during the continuance thereof.  All rights and remedies arising under the Transaction Documents, as amended from time to time, are cumulative and not exclusive of any other rights or remedies that Administrative Agent or Buyers may have.

(vii)Administrative Agent, on behalf of Buyers, may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Administrative Agent or Buyers to enforce its rights by judicial process.  Seller also waives any defense Seller might otherwise have arising from the use of nonjudicial process, disposition of any or all of the Purchased Assets, or from any other election of remedies.  Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

(viii)Without limiting any other rights or remedies of Administrative Agent or Buyers, Administrative Agent and Buyers, shall have the right of set-off set forth in Section 26 hereof.

(ix)Administrative Agent and Buyers shall have, in addition to its rights and remedies under the Transaction Documents, all of the rights and remedies provided by applicable federal, state, foreign, and local laws (including, without limitation, if the Transactions are recharacterized as secured financings, the rights and remedies of a secured party under the UCC of the State of New York, to the extent that the UCC is applicable, and the right to offset any mutual debt and claim), in equity, and under any other agreement between any Buyer and Seller or Administrative Agent, Buyer and Seller exercisable upon ten (10) days notice from Administrative Agent to Seller.  Without limiting the generality of the foregoing, Administrative Agent and Buyers shall be entitled to set off the proceeds of the liquidation of the Purchased Assets against all of Seller’s or any Subsidiary of Guarantor’s obligations to Administrative Agent, Buyers, or their Affiliates, whether under this Agreement or under any other agreement between Seller or any Subsidiary of Guarantor

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and a Buyer or Administrative Agent, on behalf of Buyers, or between Seller and any Affiliate of any Buyer or Administrative Agent, on behalf of Buyers, or otherwise, whether or not such obligations are then due, without prejudice to Administrative Agent’s or any Buyer’s, right to recover any deficiency.

(x)Administrative Agent and each Buyer shall at any time have the right, in each case until such time as Administrative Agent, on behalf of Buyers, determines otherwise, to retain, to suspend payment or performance of, or to decline to remit, any amount or property that Administrative Agent, on behalf of Buyers, would otherwise be obligated to pay, remit or deliver to Seller hereunder if a Default or an Event of Default has occurred.

(xi)For the avoidance of doubt, Administrative Agent, on behalf of Buyers, shall have no obligation to review or purchase any Eligible Asset during the continuance of an Event of Default.

15.SINGLE AGREEMENT

Administrative Agent, on behalf of Administrative Agent, on behalf of Buyers, and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other.  Accordingly, each of Administrative Agent, on behalf of Buyers, and Seller agrees to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder.

16.NOTICES AND OTHER COMMUNICATIONS

All notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of attempted delivery, (b) certified or registered United States mail, postage prepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (d) by email (with confirmation of receipt by the receiving party); provided that, other than email notices with respect to communications under this Agreement related to (1) deliveries in connection with Administrative Agent, on behalf of Buyers, due diligence inspections of the Purchased Assets, (2) requests for Transactions (including Future Advance Purchases, (3) notices of partial prepayments or draws on Margin Excess (including Future Advance Purchases), (4) the delivery of Confirmations, (5) notices of early repurchases, (6) deliveries of financial statements or other reporting required under this Agreement and (7) notices requesting consent for Significant Modifications, which will not require any further notice upon confirmation of receipt by the receiving party, that such email notice must also be delivered by one of the means set forth in clauses (a), (b) or (c) above, to the addresses specified in Annex I hereto or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 16.  A notice shall be deemed to have been given:  (i) in the case of hand delivery, at the time of delivery; (ii) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; (iii) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day; or (iv) in the case of email, upon receipt of confirmation or receipt; provided that such emailed notice is also delivered as required in this Section 16.  A party receiving a notice that does not comply with the technical requirements for notice under this Section 16 may elect to waive any deficiencies and treat such notice as having been properly given.  Notwithstanding the foregoing, notices pursuant to Section 4 hereof may be sent by electronic mail to the email addresses set forth on Annex I attached hereto; provided that such notice

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delivered by email shall be deemed to be given only upon receipt of confirmation of receipt by the receiving party.

17.NON-ASSIGNABILITY

(a)The rights and obligations of Seller under the Transaction Documents, the Hedging Transactions and under any Transaction shall not be assigned by Seller without the prior written consent of Administrative Agent, on behalf of Buyers.  Any attempt by Seller to assign any of its rights or obligations under this Agreement without the prior written consent of Administrative Agent shall be null and void, ab initio.

(b)Any Buyer, may at any time, without the consent of Seller, Pledgor or Guarantor, sell participations in up to one hundred percent (100%) (in the aggregate, in one or more Transactions, including any assignments under Section 17(c)) of such Buyer’s, rights and/or obligations under the Transaction Documents (any such holder of a participation, a “Participant”); provided that, so long as no Event of Default has occurred and remains uncured, (i) Administrative Agent’s and such Buyer’s obligations and Seller’s rights and obligations under the Transaction Documents shall remain unchanged, (ii) Administrative Agent shall retain sole decision-making authority under the Transaction Documents (subject to the Co-Buyer Agreement), (iii) Seller shall continue to deal solely and directly with Administrative Agent, on behalf of Buyers, in connection with Administrative Agent’s, rights and obligations under the Transaction Documents (subject to the Co-Buyer Agreement) and (iv) such Buyer shall not assign, participate or sell any portion of its rights and obligations under the Transaction Documents to any Prohibited Transferee.

(c)Any Buyer may at any time, without the consent of Seller, Pledgor or Guarantor, sell and assign up to one hundred percent (100%) (in the aggregate, in one or more Transactions, and including any participation under Section 17(b)) of the rights and obligations of such Buyer, under the Transaction Documents.  From and after the effective date of such assignment, such assignee shall be a party and, to the extent provided in such assignment agreement, have the rights and obligations of such Buyer under the Transaction Documents with respect to the percentage and amount of the Repurchase Price allocated to it; provided that, so long as no Event of Default has occurred and remains uncured, such Buyer shall not assign, participate or sell any portion of its rights and obligations under the Transaction Documents to any Prohibited Transferee.

(d)As long as an Event of Default shall have occurred and be continuing, Administrative Agent and any Buyer, may assign, participate or sell its rights and obligations under the Transaction Documents and/or any Transaction to any Person without prior notice to Seller and without regard to the limitations set forth in Section 17(b) and Section 17(c) above.  From and after the date Administrative Agent or such Buyer, is no longer a party to this Agreement, Administrative Agent or such Buyer, as applicable, shall have no obligation to act as agent or to make decisions under this Agreement.

(e)Administrative Agent acting solely for this purpose as an agent of Seller, shall maintain a copy of each assignment and a register for the recordation of the names and addresses of the assignees, and ownership rights in the Transactions, Purchased Assets or other interests under this Agreement (as the same may be modified by any Co-Buyer Agreement).  The entries in such register shall be conclusive absent manifest error, and each of Seller, Administrative Agent and Buyers, and their respective assignees shall treat each Person whose name is recorded in such register pursuant to the terms hereof as the beneficial owner of the interests in the Transactions, Purchased Assets or other interests under this Agreement for all purposes.  If any assignee is a non-United States Person, such assignee shall timely provide Seller with such forms as may be required to establish the assignee’s status for U.S. withholding tax purposes.

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(f)If any Buyer sells a participation, Administrative Agent acting solely for this purpose as an agent of Seller, maintain a register on which it enters the name and address of each participant and the ownership rights of each participant in the Transactions, Purchased Assets or other interests under this Agreement.  The entries in such register shall be conclusive absent manifest error, and Administrative Agent, shall treat each Person whose name is recorded in such register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  If any participant is a non- United States Person, such participant shall timely provide Seller with such forms as may be required to establish such participant’s status for U.S. withholding tax purposes.

(g)Subject to the foregoing, the Transaction Documents and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns.  Nothing in the Transaction Documents, express or implied, shall give to any Person, other than the parties to the Transaction Documents and their respective successors, any benefit or any legal or equitable right, power, remedy or claim under the Transaction Documents.

(h)Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall prevent or prohibit any Buyer from pledging its interest in the Purchased Assets hereunder to a Federal Reserve Bank in support of borrowings made by such Buyer from such Federal Reserve Bank; provided, however, no such pledge shall release such Buyer, as the case may be, from any of its obligations hereunder or substitute any such pledgee for such Buyer, as the case may be, as a party hereto.

18.GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.

(a)This Agreement and any claim, controversy or dispute arising under or related to or in connection therewith, the relationship of the parties hereto, and/or interpretation and enforcement of the rights and duties of the parties hereto shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without giving effect to the conflict of law principles thereof, except for Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York.

(b)Each party irrevocably and unconditionally submits to the exclusive jurisdiction of any United States Federal or New York State court sitting in Manhattan, and any appellate court from any such court, solely for the purpose of any suit, action or proceeding brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement.

(c)To the extent that either party has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) with respect to itself or any of its property, such party hereby irrevocably waives and agrees not to plead or claim such immunity in respect of any action brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement.

(d)EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE OR DOMICILE AND IRREVOCABLY CONSENTS TO THE SERVICE OF ANY SUMMONS AND COMPLAINT AND ANY OTHER PROCESS BY THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS RESPECTIVE ADDRESS SPECIFIED HEREIN.  EACH PARTY HEREBY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT

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ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS SECTION18 SHALL AFFECT THE RIGHT OF ADMINISTRATIVE AGENT OR BUYERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ADMINISTRATIVE AGENT OR BUYERS TO BRING ANY ACTION OR PROCEEDING AGAINST SELLER OR ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.

(e)EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.

19.NO RELIANCE; DISCLAIMERS

(a)Each party hereby acknowledges, represents and warrants to the other that, in connection with the negotiation of, the entering into, and the performance under, the Transaction Documents and each Transaction thereunder:

(i)It is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the other party to the Transaction Documents, other than the representations expressly set forth in the Transaction Documents.

(ii)It has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed to be necessary, and it has made its own investment, hedging and trading decisions (including decisions regarding the suitability of any Transaction) based upon its own judgment and upon any advice from such advisors as it has deemed to be necessary and not upon any view expressed by the other party.

(iii)It is a sophisticated and informed Person that has a full understanding of all the terms, conditions and risks (economic and otherwise) of the Transaction Documents and each Transaction thereunder and is capable of assuming and willing to assume (financially and otherwise) those risks.

(iv)It is entering into the Transaction Documents and each Transaction thereunder for the purposes of managing its borrowings or investments or hedging its underlying assets or liabilities and not for purposes of speculation.

(v)It is not acting as a fiduciary or financial, investment or commodity trading advisor for the other party and has not given the other party (directly or indirectly through any other Person) any assurance, guaranty or representation whatsoever as to the merits (either legal, regulatory, tax, business, investment, financial accounting or otherwise) of the Transaction Documents or any Transaction thereunder.

(b)Each determination by Administrative Agent, on behalf of Buyers, of the Market Value with respect to each New Asset or Purchased Asset or the communication to Seller of any information pertaining to Market Value under this Agreement shall be made in Administrative Agent’s sole discretion exercised in good faith, subject to the following disclaimers:

(i)Administrative Agent, on behalf of Buyers, has assumed and relied upon, with Seller’s consent and without independent verification, the accuracy and completeness of the

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information provided by Seller and reviewed by Administrative Agent, on behalf of Buyers.  Administrative Agent, on behalf of Buyers, has not made any independent inquiry of any aspect of the New Assets or Purchased Assets or the underlying collateral.  Administrative Agent, on behalf of Buyers, view is based on economic, market and other conditions as in effect on, and the information made available to Administrative Agent, on behalf of Buyers, as of, the date of any such determination or communication of information, and such view may change at any time without prior notice to Seller.

(ii)Market Value determinations and other information provided to Seller constitute a statement of Administrative Agent, on behalf of Buyers, view of the value of one or more loans or other assets at a particular point in time and does not (A) constitute a bid for a particular trade, (B) indicate a willingness on the part of Administrative Agent, any Buyer, or any Affiliate thereof to make such a bid, or (C) reflect a valuation for substantially similar assets at the same or another point in time, or for the same assets at another point in time.

(iii)Market Value determinations and other information provided to Seller may vary significantly from valuation determinations and other information that may be obtained from other sources.

(iv)Market Value determinations and other information provided to Seller are communicated to Seller solely for its use and may not be relied upon by any other person and may not be disclosed or referred to publicly or to any third party without the prior written consent of Administrative Agent, on behalf of Buyers, which consent of Administrative Agent, on behalf of Buyers, may withhold or delay in its sole and absolute discretion, as determined in good faith.

(v)Administrative Agent makes no representations or warranties with respect to any Market Value determinations or other information provided to Seller.  Administrative Agent shall not be liable for any incidental or consequential damages arising out of any inaccuracy in such valuation determinations and other information provided to Seller, including as a result of any act of gross negligence or breach of any warranty.

(vi)Market Value determinations and other information provided to Seller in connection with Section 3(b) hereof are only indicative of the initial Market Value of the New Asset submitted to Administrative Agent, on behalf of Buyers, for consideration thereunder, and may change without notice to Seller prior to, or subsequent to, the transfer by Seller of the New Asset pursuant to Section 3(f) hereof.  No indication is provided as to Administrative Agent’s expectation of the future value of such Purchased Asset or the underlying collateral.

(vii)Initial Market Value determinations and other information provided to Seller in connection with Section 3(b) hereof are to be used by Seller for the sole purpose of determining whether to proceed in accordance with Section 3 hereof and for no other purpose.

(viii)All determinations of Market Value must be made by Administrative Agent in a manner that is consistent with the implied covenant of good faith and fair dealing under New York law.

20.INDEMNITY AND EXPENSES

(a)Seller hereby agrees to hold Administrative Agent, Buyers, and their respective Affiliates and each of their respective officers, directors and employees (the “Indemnified Parties”) harmless from and indemnify the Indemnified Parties against any and all actual out-of-pocket liabilities, obligations,

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losses, damages, penalties, actions, judgments, suits, fees, costs and expenses (including the actual and reasonable attorneys’ fees and disbursements of outside counsel and any and all servicing and enforcement costs incurred with respect to the Purchased Assets) or disbursements (all of the foregoing, collectively, “Indemnified Amounts”) that may at any time (including, without limitation, such time as this Agreement shall no longer be in effect and the Transactions shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, this Agreement or any Transactions thereunder or any action taken or omitted to be taken by any Indemnified Party under or in connection with any of the foregoing; provided that Seller shall not be liable for Indemnified Amounts resulting from the fraudulent acts, gross negligence or willful misconduct of any Indemnified Party.  Without limiting the generality of the foregoing, Seller agrees to hold each Indemnified Party harmless from and indemnify each Indemnified Party against all Indemnified Amounts with respect to all Purchased Assets relating to or arising out of any violation or alleged violation of any environmental law, rule or regulation or any consumer credit laws, including without limitation ERISA, the Truth in Lending Act and/or Real Estate Settlement Procedures Act, that, in each case, results from anything other than the gross negligence or willful misconduct of an Indemnified Party.  In any suit, proceeding or action brought by Administrative Agent or any Buyer in connection with any Purchased Asset for any sum owing thereunder, or to enforce any provisions of any Purchased Asset Documents, Seller will save, indemnify and hold Administrative Agent and Buyers harmless from and against all expenses, loss or damage suffered by Administrative Agent and Buyers by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from Seller.  Seller also agrees to reimburse an Indemnified Party as and when billed by such Indemnified Party for all such Indemnified Party’s costs and expenses incurred in connection with the enforcement or the preservation of such Indemnified Party’s rights under this Agreement and any other Transaction Document or any transaction contemplated hereby or thereby, including without limitation the actual and reasonable fees and disbursements of its outside counsel.  Without limiting the generality of the foregoing, Seller agrees to hold each Indemnified Party harmless from any action taken in connection with this Agreement or any Transaction Documents, including, but not limited to, the payment of any Repurchase Price, Price Differential, Principal Payment, Income or any other payment or fees.  Seller hereby acknowledges that its obligations hereunder are recourse obligations of Seller.This paragraph shall not apply to any Taxes, other than Taxes that represent Indemnified Amounts arising from any non Tax claim.

(b)Seller agrees to pay as and when billed by Administrative Agent or any Buyer (i) all Indemnified Amounts provided in Section 20(a), (ii) all of the actual and reasonable out-of-pocket costs and expenses incurred by Administrative Agent, on behalf of Buyers, in connection with the development, preparation and execution of, and any amendment, supplement or modification to this Agreement and the other Transaction Documents or any other documents prepared in connection herewith or therewith including without limitation all the actual and reasonable fees, disbursements and expenses of outside counsel to Administrative Agent and any Buyer, (iii) all of the costs and expenses incurred in connection with the consummation and administration of the Transactions contemplated hereby and thereby including without limitation all the actual and reasonable fees, disbursements and expenses of counsel to Administrative Agent and any Buyer, (iv) all costs and expenses contemplated by Section 14(b)(v) and (v) all the Diligence Fees (collectively, “Transaction Costs”).

21.DUE DILIGENCE

Seller acknowledges that Administrative Agent, on behalf of Buyers, has the right, subject to the limitations set forth in this Section 21, to perform continuing due diligence reviews with respect to the Purchased Assets, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or determining or re-determining the Asset Base Component for purposes

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of Section4 of this Agreement, or otherwise, and Seller agrees that Administrative Agent, on behalf of Buyers, at its option, has the right at any time to conduct a partial or complete due diligence review on any or all of the Purchased Assets, including, without limitation, ordering new credit reports and Appraisals on the applicable collateral and otherwise regenerating the information used to originate such Purchased Assets.  Upon reasonable prior notice to Seller, Administrative Agent, on behalf of Buyers, or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Purchased Asset Files, Servicing Records and any and all documents, records, agreements, instruments or information relating to any Purchased Asset in the possession or under the control of Seller, any servicer or sub-servicer and/or Custodian.  Seller also shall make available to Administrative Agent, on behalf of Buyers, a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Purchased Asset Files, the Servicing Records and the Purchased Assets.  Seller agrees to cooperate with Administrative Agent, on behalf of Buyers, and any third party underwriter designated by Administrative Agent or any Buyer in connection with such underwriting, including, but not limited to, providing Administrative Agent, on behalf of Buyers, and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession, or under the control, of such Seller.  Seller agrees to reimburse Administrative Agent, on behalf of Buyers, for any and all actual and reasonable out-of-pocket attorneys’ fees, costs and expenses incurred by Administrative Agent, on behalf of Buyers, in connection with continuing due diligence on Eligible Assets and Purchased Assets, including, without limitation, the cost of annual updated Appraisals on the Mortgaged Properties and Diligence Fees.

22.SERVICING

(a)The parties hereto agree and acknowledge that the Purchased Assets will be sold by Seller to Administrative Agent, on behalf of Buyers, on a servicing released basis.  In furtherance of the foregoing, Seller and Administrative Agent, on behalf of Buyers, hereby agree and confirm that from and after the date hereof, only such Servicing Agreements that have been approved by Administrative Agent, on behalf of Buyers, shall govern the servicing of the Purchased Assets and any prior agreement between Seller and any other Person or otherwise with respect to such servicing is hereby superseded in all respects.  Notwithstanding the foregoing, if Administrative Agent shall have received a duly executed Servicer Acknowledgment from Servicer, prior to an uncured Event of Default, Seller may retain Servicer, on behalf of Administrative Agent, to service the Purchased Assets for the benefit of or on behalf of Administrative Agent, on behalf of Buyers; provided, however, that the obligation of Servicer to service any Purchased Asset for the benefit of or on behalf of Administrative Agent, on behalf of Buyers, as aforesaid shall cease upon the repurchase of such Purchased Asset by Seller in accordance with the provisions of this Agreement or as otherwise provided in the Servicer Acknowledgment.

(b)Seller agrees that, as between Seller and Administrative Agent, on behalf of Buyers, Administrative Agent, on behalf of Buyers, is the owner of all servicing records, including but not limited to any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of Purchased Assets (the “Servicing Records”) so long as the Purchased Assets are subject to this Agreement.  Seller covenants to safeguard any such Servicing Records in Seller’s possession and to deliver them promptly to Administrative Agent, on behalf of Buyers, or its designee (including Custodian) at Administrative Agent’s request.

(c)Seller shall not, and shall not provide consent to Servicer to, employ any other sub-servicers to service the Purchased Assets without the prior written approval of Administrative Agent, on behalf of Buyers, which approval shall be in Administrative Agent’s, sole discretion exercised in good faith.

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(d)Seller shall cause Servicer and any other sub-servicers engaged on behalf of Administrative Agent to execute a Servicing Agreement with Seller and Administrative Agent, on behalf of Buyers, or a Servicer Acknowledgment acknowledging Administrative Agent’s, on behalf of Buyers, interest in the Purchased Assets and the Servicing Agreement and agreeing that Servicer and any sub-servicer (if applicable) shall deposit all Income with respect to the Purchased Assets in the Blocked Account, all in such manner as shall be reasonably acceptable to Administrative Agent.

(e)To the extent applicable and otherwise permitted under the related Servicing Agreement, Seller shall cause Servicer to permit Administrative Agent, on behalf of Buyers, to inspect Servicer’s servicing facilities for the purpose of satisfying such party that Servicer has the ability to service such Purchased Asset as provided in this Agreement.

(f)(i) Administrative Agent, on behalf of Buyers, may, in its sole discretion exercised in good faith if an Event of Default shall have occurred and be continuing, sell the Purchased Assets on a servicing released basis without payment of any termination fee or any other amount to Servicer, and (ii) to upon the occurrence of an Event of Default hereunder, Administrative Agent, on behalf of Buyers, shall have the right immediately to terminate Servicer’s right to service the Purchased Assets without payment of any penalty or termination fee in accordance with the Servicer Acknowledgment and Servicing Agreement.

23.TREATMENT FOR TAX PURPOSES

It is the intention of the parties that, for U.S. federal, state and local income and franchise tax purposes, the Transactions constitute a debt financing, and that Seller is, and, so long as no Event of Default shall have occurred and be continuing, will continue to be, treated as the owner of the Purchased Assets for such purposes.  Unless prohibited by applicable law, Seller and Administrative Agent, on behalf of Buyers, agree to treat the Transactions as described in the preceding sentence on any and all filings with any U.S. federal, state or local taxing authority.

24.INTENT

(a)The parties intend and acknowledge that this Agreement and each Transaction hereunder is a “master netting agreement” as that term is defined in Section 101(38A)(A) of the Bankruptcy Code.

(b)The parties intend and acknowledge that this Agreement and each Transaction hereunder is a “securities contract” as that term is defined in Section 741(7) of the Bankruptcy Code.

(c)The parties intend and acknowledge that the Guaranty is a “securities contract” as that term is defined in Section 741(7)(A)(xi) of the Bankruptcy Code.

(d)The parties intend and acknowledge that any payments or transfers of property made with respect to this Agreement or any Transaction to satisfy a Margin Deficit shall be considered “margin payments” or settlement payments” as such terms are defined in Sections 741(5) and 741(8) of the Bankruptcy Code or a transfer as defined under Section 101(54) of the Bankruptcy Code.

(e)The parties intend and acknowledge that the grants of security interests set forth in the Pledge Agreement and Section 6 that create the pledge of the Repurchase Assets, the other collateral specified in Sections 6(c), 6(d) or 6(f) and the Mezzanine Loan Repurchase Assets each constitute “a security agreement or other arrangement or other credit enhancement” that is “related to” this Agreement and Transactions hereunder within the meaning of Sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.

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(f)The parties intend and acknowledge that any provisions hereof or in any other document, agreement or instrument that is related in any way to the servicing of the Purchased Assets shall be deemed “related to” this Agreement within the meaning of Section 741 of the Bankruptcy Code.

(g)Each party hereto recognizes and intends that this Agreement be and is an agreement to provide financial accommodations and is not subject to assumption pursuant to Bankruptcy Code Section 365(a).

(h)Each party hereto agrees that it shall not challenge, and hereby waives to the fullest extent available under applicable law its right to challenge, the characterization of this Agreement or any Transaction hereunder as a “securities contract” or a “master netting agreement” within the meaning of the Bankruptcy Code.

(i)It is understood that, for so long as the non-defaulting party is a “financial institution,” “financial participant” or other entity listed in Sections 555, 561, 362(b)(6), 362(b)(27), 546(e) or 546(j) of the Bankruptcy Code, that party shall be entitled to the “safe harbor” benefits and protections afforded under the Bankruptcy Code with respect to a “securities contract” and a “master netting agreement.” Accordingly, such party’s (i) right to liquidate the Purchased Assets, Repurchase Assets, the other collateral specified in Sections 6(c), 6(d) or 6(f) and/or Mezzanine Loan Repurchase Assets delivered to it in connection with the Transactions hereunder or to accelerate or terminate this Agreement or otherwise exercise any other remedies pursuant to Section 14 hereof is a contractual right to liquidate, accelerate or terminate such Transaction and/or this Agreement as described in Bankruptcy Code Sections 555 and 561 of the Bankruptcy Code, (ii) right to offset or net out as set forth Section 26 is a contractual right, (iii) right to exercise these contractual rights shall not be subject to the automatic stay as set forth in Bankruptcy Code Sections 362(b)(6) or 362(b)(27) and (iv) right not have transfers made in connection with this Agreement avoided as set forth in Sections 546(e) and 546(j) of the Bankruptcy Code is a contractual right.

(j)The parties agree and acknowledge that the grant of setoff rights as set forth in Section 26 is a contractual right of setoff within the meaning of Section 553 of the Bankruptcy Code.

(k)The parties agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the FDIA, then each Transaction hereunder is a “qualified financial contract,” as that term is defined in the FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

(l)It is understood that this Agreement constitutes a “netting contract” as defined in and subject to FDICIA and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation,” respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).  It is further understood and agreed that either party’s right to cause the termination, liquidation or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with this Agreement or the Transactions hereunder is a contractual right to cause the termination, liquidation or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with this Agreement as described in Section 561 of the Bankruptcy Code.

(m)It is understood that this Agreement constitutes a “netting contract” as defined in and subject to FDICIA and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation,” respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

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(n)The Servicing Rights and other servicing provisions under this Agreement are not severable from or to be separated from the Mortgage Loans under this Agreement, and such Servicing Rights and other servicing provisions of this Agreement constitute (a) “related terms” under this Agreement within the meaning of section 101(47)(A)(i) of the Bankruptcy Code and/or (b) a security agreement or other arrangement or other credit enhancement related to the Transaction Documents.

25.DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

The parties acknowledge that they have been advised that:

(a)in the case of Transactions in which one of the parties is a broker or dealer registered with the SEC under Section 15 of the 1934 Act, the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 (“SIPA”) do not protect the other party with respect to any Transaction hereunder;

(b)in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and

(c)in the case of Transactions in which (i) one of the parties is a financial institution and/or (ii) one of the parties is an “insured depository institution”, as that term is defined in Section 1813(c)(2) of Title 12 of the United States Code, funds held by the financial institution pursuant to a Transaction hereunder may not be a deposit and therefore may not be insured by the Federal Deposit Insurance Corporation.

26.SETOFF RIGHTS

Without limiting any other rights or remedies of Administrative Agent or Buyers, Administrative Agent and Buyers shall have the right, without prior notice to Seller, and any such notice being expressly waived by Seller to the extent permitted by applicable law, to set off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final) in any currency, and any other obligation (including to return excess margin), credits, indebtedness, claims, securities, collateral or other property, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from Administrative Agent, Buyers, or any Affiliate thereof to or for the credit of the account of Seller, to any obligations of Seller hereunder to Administrative Agent or Buyers.  If a sum or obligation is unascertained, Administrative Agent, on behalf of Buyers, may estimate that obligation and set off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained.  This Section 26 shall be without prejudice and in addition to any right of setoff, combination of accounts, lien or other rights to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).

27.ADMINISTRATIVE AGENT

(a)Agent for Buyers.

(i)Each of Seller and each Buyer hereby acknowledges and agrees that Administrative Agent has been appointed the Administrative Agent for the Transactions, and each Buyer hereby irrevocably authorizes and directs Administrative Agent to act as agent for and in the best interest of Buyers and to take such actions as Buyers are obligated or entitled to take under the provisions of this Agreement and the other Transaction Documents and to exercise such powers as are set forth herein or therein, together with such other powers as are reasonably incidental thereto.  

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This Agreement is not intended to be, and shall not be construed to be, the formation of a partnership or joint venture between Administrative Agent and any Buyer.  In performing its functions and duties under the Transaction Documents, Administrative Agent shall act solely as agent of Buyers and does not assume, and shall not be deemed to have assumed, any obligations toward or relationship of agency or trust with or for Seller.

(ii)The agency created pursuant hereto shall in no way impair or affect any of the rights and powers of, or impose any additional duties or obligations upon, any Buyer that becomes Administrative Agent in accordance with the provisions of this Agreement in its individual capacity as a Buyer.  With respect to its interest in the Transactions, except as specifically provided in this Agreement, Administrative Agent shall have the same rights and powers hereunder as a Buyer and may exercise the same as though it were not performing the duties and functions delegated to it, as Administrative Agent, hereunder.  The term “Buyers” or “Buyer” or any similar term shall, unless the context clearly otherwise indicates, include any Buyer that becomes Administrative Agent in accordance with the provisions of this Agreement in its individual capacity as a Buyer and not as Administrative Agent.  Administrative Agent, Buyers and each of their respective Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Seller or any of its Affiliates (in each case not related to the Transactions) as if it were not performing its duties as Administrative Agent or Buyer (as applicable) specified herein, and may accept fees and other consideration from Seller or its Affiliates for services in connection therewith and otherwise without having to account for the same to Administrative Agent or the other Buyers, as applicable.

(iii)In furtherance of the authorizations set forth in this Section 27, each Buyer hereby irrevocably appoints Administrative Agent as its attorney-in-fact, with full power of substitution, for and on behalf of and in the name of each such Buyer (i) to enter into Transaction Documents and any amendments or modifications thereof, (ii) to take action with respect to the Transactions and Transaction Documents to create, perfect, maintain, and preserve Administrative Agent’s, on behalf Buyers, Liens therein, (iii) to take action with respect to the Transactions and the Transaction Documents to transfer the Purchased Assets to Administrative Agent, on behalf of Buyers, and (iv) to execute instruments of release and terminations or to take other action necessary to release liens upon any Purchased Asset.  This power of attorney shall be liberally, not restrictively, construed so as to give the greatest latitude to Administrative Agent’s power, as attorney, under this Agreement and the Transaction Documents.  The powers and authorities herein conferred on Administrative Agent may be exercised by Administrative Agent through any Person who, at the time of the execution of a particular instrument, is an officer of Administrative Agent (or any Person acting on behalf of Administrative Agent pursuant to a valid power of attorney).  The power of attorney conferred by this Section 27(a)(iii) to Administrative Agent is granted for valuable consideration and is coupled with an interest and is irrevocable so long as the Transaction Documents remain in effect.

(iv)Each Buyer acknowledges and agrees that so long as no Event of Default has occurred and is continuing, notwithstanding anything to the contrary contained in any Co-Buyer Agreement, Seller shall be entitled to deal with Administrative Agent as the exclusive representative of Buyers on all matters relating to the Transactions, this Agreement and each of the other Transaction Documents, and, subject to the terms hereof and the terms of the Co-Buyer Agreement, each Buyer shall be bound by the acts of Administrative Agent with respect to the Transactions.

(b)Administrative Agent Standard of Care.  Administrative Agent shall administer and service its obligations under this Agreement and the other Transaction Documents, and shall make such decisions

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and take such actions as it shall in its reasonable judgment deem necessary, desirable or appropriate in connection therewith, in each case consistent with the Standard of Care.

(c)Return of Certain Payments.

(i)Each Buyer (and each Participant of any of the foregoing, by its acceptance of a participation) hereby acknowledges and agrees that if the Administrative Agent notifies such Buyer that the Administrative Agent has determined in its sole discretion that any funds (or any portion thereof) received by such Buyer (any of the foregoing, a “Erroneous Payment Recipient”) from the Administrative Agent (or any of its Affiliates) were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Erroneous Payment Recipient (whether or not known to such Erroneous Payment Recipient) (whether as a payment, prepayment or repayment of any Repurchase Price, Price Differential, Principal Payment, Income, fees or otherwise; individually and collectively, a “Payment”) and demands the return of such Payment, such Erroneous Payment Recipient shall promptly, but in no event later than one (1) Business Day thereafter, return to the Administrative Agent the amount of any such Payment as to which such a demand was made. A notice of the Administrative Agent to any Erroneous Payment Recipient under this Article 27(c) shall be conclusive, absent manifest error.

(ii)Without limitation of clause (i) above, each Erroneous Payment Recipient further acknowledges and agrees that if such Erroneous Payment Recipient receives a Payment from the Administrative Agent (or any of its Affiliates) (x) that is in an amount, or on a date different from the amount and/or date specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such Payment (a “Payment Notice”), (y) that was not preceded or accompanied by a Payment Notice, or (z) that such Erroneous Payment Recipient otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), in each case, it understands and agrees at the time of receipt of such Payment that an error has been made (and that it is deemed to have knowledge of such error) with respect to such Payment. Each Erroneous Payment Recipient agrees that, in each such case, it shall promptly notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event later than one (1) Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made.

(iii)Any Payment required to be returned by an Erroneous Payment Recipient under this Article 27(c) shall be made in immediately available funds in the currency so received, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Erroneous Payment Recipient to the date such amount is repaid to the Administrative Agent at the greater of the federal funds rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect. Each Erroneous Payment Recipient hereby agrees that it shall not assert and, to the fullest extent permitted by applicable law, hereby waives, any right to retain such Payment, and any claim, counterclaim, defense or right of set-off or recoupment or similar right to any demand by the Administrative Agent for the return of any Payment received, including without limitation any defense based on “discharge for value” or any similar doctrine.

(iv)Seller, Guarantor and Pledgor hereby agrees that (x) in the event any Payment (or portion thereof) is not recovered from any Buyer that has received such Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights of such Buyer with respect to such amount and (y) the receipt by any Erroneous Payment Recipient of a Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Repurchase Obligations owed to such Buyer by Seller, Guarantor or Pledgor.

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(d)Ratable Share. The liabilities of each Buyer under this Agreement and the other Transaction Documents shall be several and not joint, no Buyer shall be responsible for the obligations of any other Buyer, and each Buyer shall be liable to Seller only for its respective pro rata share of the Transactions. Notwithstanding anything to the contrary herein, all indemnities by Seller and obligations for costs, expenses, damages or advances set forth herein shall run to and benefit each Buyer in accordance with its share of the Transactions.

(e)Co-Buyer Agreement. Seller hereby acknowledges and agrees that Buyer and Administrative Agent may at any time and from time to time enter into one or more Co-Buyer Agreements governing the relationship among the parties thereto. Seller acknowledges and agrees that Administrative Agent’s discretion under this Agreement or the other Transaction Documents shall be subject to the limitations in any such Co-Buyer Agreements, including the requirement that Administrative Agent obtain approval of Buyer prior to granting certain consents or approvals or taking certain actions under this Agreement and under the other Transaction Documents. Any Co-Buyer Agreements are intended and will be solely for the benefit of Administrative Agent and the applicable parties thereto, and Seller acknowledges and agrees that neither Seller, Guarantor nor any Affiliate of Seller or Guarantor shall be a third-party beneficiary (intended or otherwise) of any of the provisions therein, or have any rights thereunder or be entitled to rely on any of the provisions contained therein. Neither Administrative Agent nor Buyer shall have any obligation to provide a copy of any Co-Buyer Agreement to Seller, Guarantor or any Affiliate of Seller or Guarantor or to disclose to Seller, Guarantor or any Affiliate of Seller or Guarantor the contents of any Co-Buyer Agreement. Administrative Agent and Buyers acknowledge and agree that neither Seller, Guarantor nor any Affiliate of Seller or Guarantor shall have any liabilities, obligations or duties of any kind with respect to any Co-Buyer Agreement, nor any of the provisions contained therein. The obligations of Seller, Guarantor and Pledgor under the Transaction Documents are and will be independent of any Co-Buyer Agreement and shall remain unmodified by the provisions thereof (although Seller acknowledges that with respect to certain approvals, calculations and other decisions hereunder and subject to the Fee Letter, any Co-Buyer Agreement may require Administrative Agent to consult with or receive the approval of Buyer prior to providing its own approval or determination regarding the same).

(f)Successor Administrative Agents. Administrative Agent may resign as Administrative Agent under the Transaction Documents upon notice to Buyers and Seller. If Administrative Agent shall resign or be removed by Buyers, then Buyers shall appoint a successor Administrative Agent; provided that such successor Administrative Agent meets the applicable “know your customer” requirements of the Servicer and Custodian. The term “Administrative Agent” shall mean each such successor Administrative Agent, effective upon its appointment, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any of the Transaction Documents or successors thereto. After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of the Transaction Documents shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Administrative Agent under the Transaction Documents. In no event shall there be more than one Administrative Agent hereunder.

28.MISCELLANEOUS

(a)The Transaction Documents and their respective terms, provisions, supplements and amendments, and transactions and notices thereunder, are proprietary to Administrative Agent and Buyers, and shall be held by Seller in strict confidence and shall not be disclosed to any third party without the consent of Administrative Agent and Buyers, except for disclosure to Seller’s Affiliates, directors, attorneys, agents or accountants (the “Representatives”); provided that Seller shall inform each of its Representatives receiving any Transaction Documents of the confidential nature of the Transaction Documents,  direct its Representatives to treat the Transaction Documents confidentially, and be

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responsible for any improper use of the Transaction Documents by Seller or its Representatives or upon prior written notice to Administrative Agent (if permitted by law), disclosure required by law, rule, regulation or order of a court or other regulatory body or upon prior written notice to Administrative Agent (if permitted by law), disclosure to any Approved Hedge Counterparty to the extent necessary to obtain any Hedging Transaction hereunder or any disclosures or filing required under SEC or state securities’ laws. Seller shall cooperate in Administrative Agent’s or any Buyer’s, efforts to obtain a protective order or other reasonable assurance that confidential treatment will be accorded the Transaction Documents.  If, in the absence of a protective order, Seller or any of its Representatives is compelled as a matter of law to disclose any such information, Seller may disclose to the party compelling disclosure only the part of the Transaction Documents as is required by law to be disclosed (in which case, prior to such disclosure, Seller shall advise and consult with Administrative Agent or any Buyer, and its counsel as to such disclosure and the nature and wording of such disclosure) and Seller shall use its best efforts to obtain confidential treatment therefor.  Administrative Agent and Buyers acknowledge that this Agreement may be filed with the SEC; provided that Seller shall redact any pricing and other confidential provisions, including, without limitation, the amount of any Upfront Fee, Extension Fee, Applicable Spread and Purchase Percentage from such filed copy of this Agreement to the extent permitted to do so by the SEC or such state authority.

(b)[Reserved].

(c)No express or implied waiver of any Event of Default by Administrative Agent shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by Administrative Agent shall constitute a waiver of its right to exercise any other remedy hereunder.  No modification or waiver of any provision of this Agreement and no consent by any party to a departure here from shall be effective unless and until such shall be in writing and duly executed by Seller and Administrative Agent, on behalf of Buyers (in accordance with the Co-Buyer Agreement).

(d)Time is of the essence under the Transaction Documents and all Transactions thereunder, and all references to a time shall mean New York time in effect on the date of the action unless otherwise expressly stated in the Transaction Documents.

(e)All rights, remedies and powers of Administrative Agent or any Buyer hereunder and in connection herewith are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all other rights, remedies and powers of Administrative Agent or any Buyer, whether under law, equity or agreement.  In addition to the rights and remedies granted to it in this Agreement to the extent applicable, Administrative Agent and each Buyer, shall have all rights and remedies of a secured party under the UCC and any other applicable law.

(f)This Agreement and the Transaction Documents may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.  This Agreement and the Transaction Documents may be delivered by facsimile transmission, by electronic mail, or by other electronic transmission, in portable document format (.pdf) or otherwise, and each such executed facsimile, .pdf, or other electronic record shall be considered an original executed counterpart for purposes of this Agreement and any Transaction Document.  Each party to this Agreement (a) agrees that it will be bound by its own Electronic Signature (as such term is defined immediately below), (b) accepts the Electronic Signature of each other party to this Agreement and any Transaction Document, and (c) agrees that such Electronic Signatures shall be the legal equivalent of manual signatures.  The term “Electronic Signature” means (i) the signing party’s manual signature on a signature page, converted by the signing party (or its agent) to facsimile or digital form (such as a .pdf file) and received from the customary email address or customary facsimile number of the signing party (or its counsel or representative), or other mutually agreed-upon authenticated source; or (ii) the signing party’s digital signature executed using a mutually agreed-upon digital signature service provider and digital

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signature process.  The words “execution,”“executed”, “signed,”“signature,” and words of like import in this paragraph shall, for the avoidance of doubt, be deemed to include Electronic Signatures and the use and keeping of records in electronic form, each of which shall have the same legal effect, validity and enforceability as manually executed signatures and the use of paper records and paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, state laws based on the UniformElectronic Transactions Act, or any other state law.

(g)The headings in the Transaction Documents are for convenience of reference only and shall not affect the interpretation or construction of the Transaction Documents.

(h)Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or be invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

(i)This Agreement, the Fee Letter and each Confirmation contains a final and complete integration of all prior expressions by the parties with respect to the subject matter hereof and thereof and shall constitute the entire agreement among the parties with respect to such subject matter, superseding all prior oral or written understandings.

(j)Each party understands that this Agreement is a legally binding agreement that may affect such party’s rights.  Each party represents to the other that such party has received legal advice from counsel of its choice regarding the meaning and legal significance of this Agreement and that it is satisfied with its legal counsel and the advice received from it.

(k)Should any provision of this Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any Person by reason of the rule of construction that a document is to be construed more strictly against the Person who itself or through its agent prepared the same, it being agreed that all parties have participated in the preparation of this Agreement.

(l)Unless the context otherwise requires, whenever the words “including”, “include”, or “includes” are used herein, they shall be deemed to be followed by the phrase “without limitation”.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

ADMINISTRATIVE AGENT:
MORGAN STANLEY CAPITAL HOLDINGS LLC,
a New York limited liability company
By:	/s/ Anthony Preisano
	Name:		Anthony Preisano
	Title:		Executive Director
	BUYER:
	MORGAN STANLEY BANK, N.A.,
		a national banking association
	By:	/s/ Bill Bowman
		Name:		Bill Bowman
		Title:		Authorized Signatory
	SELLER:
	ACRES REAL ESTATE SPE 10, LLC,
		a Delaware limited liability company
	By:	/s/ Jaclyn Jesberger
		Name:		Jaclyn Jesberger
		Title:		Vice President

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Schedule 1

MAXIMUM PURCHASE PERCENTAGE

Eighty Percent (80.0%)

SCHEDULE 1-

Schedule 2

PURCHASED ASSET DOCUMENTS

With respect to each Purchased Asset that is a Mortgage Loan or a Participation Interest, the following documents, as applicable:

(a)the original Mortgage Note bearing all intervening endorsements, endorsed “Pay to the order of _________ without recourse” and signed in the name of the last endorsee (the “Last Endorsee”) by an authorized Person of the Last Endorsee (provided that, in the event that such Purchased Asset was acquired by the Last Endorsee in a merger, the signature must be in the following form:  “[Last Endorsee], successor by merger to [name of predecessor]” and, in the event that such Purchased Asset was acquired or originated by the Last Endorsee while doing business under another name, the signature must be in the following form:  “[Last Endorsee], [formerly known] or [doing business] as [previous name]”) or a lost note affidavit in a form reasonably approved by Administrative Agent, on behalf of Buyers, with a copy of the applicable Mortgage Note attached thereto;

(b)the original loan agreement and guaranty, if any, executed in connection with such Purchased Asset;

(c)the original Mortgage with evidence of recording thereon, or a true and correct copy of the original that has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located;

(d)the originals of all assumption, modification, consolidation or extension agreements with evidence of recording thereon, or true and correct copies of the originals that have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located;

(e)the original Assignment of Mortgage in blank for each Purchased Asset, in form and substance acceptable for recording and signed in the name of the Last Endorsee; provided that, in the event that such Purchased Asset was acquired by the Last Endorsee in a merger, the signature must be in the following form:  “[Last Endorsee], successor by merger to [name of predecessor]” and, in the event that such Purchased Asset was acquired or originated while doing business under another name, the signature must be in the following form:  “[Last Endorsee], [formerly known] or [doing business] as [previous name]”;

(f)the originals of all intervening Assignments of Mortgage (if any) with evidence of recording thereon, or copies thereof;

(g)the original Title Policy (or, if such policy is yet to be issued, by a pro forma policy, a preliminary title policy with escrow instructions or a “marked up” commitment, in each case binding on the title insurer);

(h)the original security agreement, chattel mortgage or equivalent document, if any, executed in connection with such Purchased Asset;

(i)the original Assignment of Leases, if any, with evidence of recording thereon, or a true and correct copy of the original that has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located;

SCHEDULE 2-

(j)originals of all intervening assignments of assignment of leases and rents, if any, or copies thereof, with evidence of recording thereon, or copies thereof;

(k)a copy of the UCC financing statements, certified as true and correct by Seller, and all necessary UCC continuation statements with evidence of filing thereon or copies thereof together with evidence that such UCC financing or continuation statements have been sent for filing, and UCC assignments in blank, which UCC assignments shall be in form and substance acceptable for filing in the applicable jurisdictions;

(l)the original environmental indemnity agreement or similar guaranty or indemnity (if any), whether stand-alone or incorporated into the applicable loan documents;

(m)the original omnibus assignment in blank, or such other document(s) necessary and sufficient to transfer to Administrative Agent, on behalf of Buyers, all of Seller’s right, title and interest in and to such Purchased Asset (if any);

(n)a Survey of the Mortgaged Property (if any), as accepted by the title company in connection with the issuance of the Title Policy;

(o)a copy of all servicing agreements and Servicing Records related to such Purchased Asset, which Seller shall deliver to Servicer (with a copy to Administrative Agent, on behalf of Buyers);

(p)a copy of the Mortgagor’s opinions of counsel, which shall be in form and substance reasonably satisfactory to Administrative Agent, on behalf of Buyers;

(q)in the case of a Purchased Asset that is a Participation Interest, the original Participation Certificate evidencing such Participation Interest and including an assignment in blank;

(r)in the case of a Purchased Asset that is a Participation Interest, the participation agreement and any other documents evidencing such Participation Interest;

(s)an assignment of any management agreements, permits, contracts and any other material agreements;

(t)reports of UCC, tax lien, judgment and litigation searches, conducted by search firms reasonably acceptable to Administrative Agent with respect to such Purchased Asset, Seller and the related underlying obligor, such searches to be conducted in each location Administrative Agent shall reasonably designate and such reports reasonably satisfactory to Administrative Agent;

(u)the original or a copy of the intercreditor or co-lender agreement executed in connection with such Purchased Asset, to the extent the subject borrower or an affiliate thereof, has encumbered its assets with senior, junior or other similar financing, whether mortgage financing or mezzanine loan financing;

(v)copies of all documents relating to the formation and organization of the related obligor under such Purchased Asset, together with all consents and resolutions delivered in connection with such obligor’s obtaining such Purchased Asset; and

(w)all other material documents and instruments evidencing, guaranteeing, insuring, securing or modifying such Purchased Asset, executed and delivered in connection with, or otherwise relating to, such Purchased Asset, including, but not limited to, all documents establishing or implementing any

SCHEDULE 2-

lockbox pursuant to which Seller is entitled to receive any payments from cash flow of the underlying real property.

With respect to each Purchased Asset that is a Mezzanine Loan, the following documents, as applicable:

(a)the original executed Mezzanine Note relating to such Mezzanine Loan, which Mezzanine Note shall (A) be endorsed (either on the face thereof or pursuant to a separate allonge) by the most recent endorsee prior to the applicable Seller, without recourse, to the order of such Seller and further reflect a complete, unbroken chain of endorsement from the related originator to such Seller and (B) be accompanied by a separate allonge pursuant to which such Seller has endorsed such Note, without recourse, in blank;

(b)true and correct copies of the related intercreditor agreement (if any) and the related Mezzanine Pledge Agreement and all other material documents (including, without limitation, opinions of counsel) or agreements relating to such Mezzanine Loan or affecting the rights (including, without limitation, the security interests) of any holder thereof;

(c)as applicable, true and correct copies of any assignment, assumption, modification, consolidation or extension made prior to the related Purchase Date in respect of such Mezzanine Note or any document or agreement referred to in clause (ii) above, in each case, if the document or agreement being assigned, assumed, modified, consolidated or extended is recordable, with evidence of recording thereon (unless the particular item has not been returned from the applicable recording office);

(d)as applicable, an original assignment of each agreement referred to in clause (ii) above, in recordable form if the agreement being assigned is a recordable document, executed in blank by the applicable Seller;

(e)each LLC Certificate, together with an undated power covering each such certificate, duly executed in blank with, if Buyer so requests signature guaranteed;

(f)copies of all UCC financing statements filed in respect of such Mezzanine Loan prior to the related Purchase Date, including all amendments and assignments related thereto, if any, in each case with evidence of filing in the applicable jurisdiction indicated thereon;

(g)an original assignment of each UCC financing statement filed in respect of such Mezzanine Loan, prepared in blank, in form suitable for filing;

(h)the related original omnibus assignment, if any, executed in blank;

(i)the original Title Policy for such Mezzanine Loan (provided that any exception to this item shall note whether the related Purchased Asset File includes a “marked up” commitment or pro forma policy marked as binding and countersigned or evidenced as binding by an escrow letter or closing instructions), if any, together with an original mezzanine endorsement, if any, and date down to owner’s policy, if any;

(j)any additional documents identified on the related Purchased Asset File Checklist delivered to Custodian in accordance with Article II of this Agreement; and

(k)any additional documents required to be added to the related Purchased Asset File pursuant to this Agreement.

SCHEDULE 2-

Schedule 3

PROHIBITED TRANSFEREES

1. Apollo Commercial Real Estate Finance

2. Arbor Realty

3. Ares Commercial Real Estate Corp.

4. Blackstone Group

5. Five Oaks Investment Corp.

6. Granite Point Mortgage Trust

7. KKR & Co.

8. Starwood Property Trust

9. TPG Capital Management.

SCHEDULE 3-

Exhibit I

CONFIRMATION
MORGAN STANLEY BANK, N.A.

Ladies and Gentlemen:

Morgan Stanley Mortgage Capital Holdings LLC, as Administrative Agent, on behalf of Buyers (together with its successors and assigns, “Administrative Agent”) is pleased to deliver our written CONFIRMATION of our agreement (subject to satisfaction of the Transaction Conditions Precedent) to enter into the Transaction pursuant to which Administrative Agent, on behalf of Buyers, shall purchase from ACRES Real Estate SPE 10, LLC (“Seller”), the Purchased Asset identified in Schedule 1 attached hereto, pursuant to the Master Repurchase and Securities Contract Agreement among Administrative Agent, Buyers, and Seller, dated as of November 3, 2021 (as the same may have been or may be amended from time to time, the “Repurchase Agreement”; capitalized terms used herein without definition have the meanings given in the Repurchase Agreement), as follows below and on Schedule 1:

Seller:	ACRES Real Estate SPE 10, LLC
Purchase Date:	[__________], [______]
Purchased Asset:	As identified on attached Schedule 1
Aggregate Principal Amount of Purchased Asset:	$[__________]
Remaining Future Advance Amount (if any):	$[__________]
Buyer Approved Future Funding:	$[___________]
Repurchase Date:	[__________],[_______]
Initial Purchase Price:	$[_______]
Current Purchase Price:	$[_______]
Pricing Rate:	LIBOR + [__]%
Purchase Percentage:	[_]%1
Maximum Purchase Percentage	[_]%
Maximum Asset Exposure Threshold:	[_]%
Type of Funding:	[Table Funded]/[Non-Table Funded]

¹  To reflect actual advance rate for Purchased Loan.

Exhibit I-

Governing Agreement:	As identified on attached Schedule 1
Seller’s Wiring Instructions:	Bank: [_________] ABA: [_________] Account Name: [_________] Account #: [_________]

Name and address for communications:	Buyer:	Morgan Stanley Mortgage Capital Holdings LLC 1585 Broadway, 25th Floor New York, New York 10036 Attention:  Anthony Preisano Telephone:  (212) 761-5688 Email: Anthony.Preisano@morganstanley.com
	with a copy to:	Morgan Stanley Bank, N.A. One Utah Center, 201 South Main Street Salt Lake City, Utah 84111
	and to:	Morgan Stanley Bank, N.A. 1 New York Plaza, 41st Floor New York, New York 10004 Attention:  Tom O’Donnell Telephone:  (212) 276-0616 Email:  wltapes@morganstanley.com
	and to:	Paul Hastings LLP 200 Park Avenue New York, New York 10166 Attention:  Lisa A. Chaney, Esq. Telephone:  (212) 318-6773 Email:  lisachaney@paulhastings.com
	Seller:	ACRES Real Estate SPE 10, LLC c/o ACRES Capital, LLC 390 RXR Plaza Uniondale, NY 11556 Attention:  Mark Fogel Telephone:  (516) 336-8122 Email:  MF@acrescap.com
	with a copy to:	Melissa C. Hinkle, Esq. Partner Cadwalader, Wickersham & Taft LLP 200 Liberty Street 36-117 New York, NY 10281 Telephone:  (212) 504-6972 Email:  melissa.hinkle@cwt.com
	and to:	ACRES Real Estate SPE 10, LLC c/o ACRES Capital, LLC 390 RXR Plaza Uniondale, NY 11556 Attention:  Jaclyn Jesberger Telephone:  (516) 882-1662 Email:  jjesberger@acrescap.com

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Exhibit I-

MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC
a New York limited liability company
By:
	Name:
	Title:

AGREED AND ACKNOWLEDGED:
ACRES REAL ESTATE SPE 10, LLC,
	a Delaware limited liability company
By:
	Name:
	Title:

Exhibit I-

SCHEDULE 1 TO CONFIRMATION STATEMENT

Purchased Asset:	[Asset Type] dated as of [______] in the original principal amount of $[_________], made by [____] to [____] under and pursuant to that certain [loan agreement]/[applicable document], and subsequently assigned to Seller (as amended from time to time, the “Governing Agreement”).
Aggregate Principal Amount:	$[_________] [(plus up to $[______] of future advances under Section [____] of the Governing Agreement).  Buyers obligation to fund any future advances [subject to approval by Administrative Agent, on behalf of Buyers, in its sole discretion exercised in good faith is contingent on (a) Seller’s satisfaction of the conditions contained in Section 3(h) of the Repurchase Agreement and (b) a bringdown by Seller of all representations and warranties made on the date hereof with regard to the Purchased Asset pursuant to Section 10 of the Repurchase Agreement.]
Representations:	Seller acknowledges and agrees that upon funding by Buyers of the Purchase Price for the Purchased Asset [and, in connection with any subsequent funding of the Purchase Percentage of a future advance under the Purchased Asset, (i)] Seller shall be deemed to have confirmed that all of the representations and warranties set forth in Section 10 of the Repurchase Agreement are true and correct as of the Purchase Date with respect to all Purchased Assets [or the applicable funding date, as the case may be,], except such representations and warranties which by their terms speak as of a specified date and except as set forth in the attached Exception Report or in the Exception Report delivered with respect to any other Purchased Asset [and (ii) with respect to the funding of a Future Advance Purchase, Seller shall be deemed to have represented and warranted that all of the conditions to funding of such advance set forth in Section [___] of the Governing Agreement have been satisfied (and no conditions have been waived, except as has been previously disclosed by Seller to Administrative Agent, on behalf of Buyers, in writing)].
Fixed/Floating:	[Fixed]/[Floating]
Coupon:	[___]%
Term of Loan including Extension Options:	[__________],[_______]
Amortization (e.g., IO, full amortization, etc.):	[__]-year amortization[, with [__]-month IO.]

Exhibit I-

EXCEPTION REPORT

Representation numbers referred to below relate to the corresponding Representations and Warranties Regarding the Purchased Assets set forth in Exhibit III to the Repurchase Agreement.

Exhibit I-

Exhibit II-1

FORM OF POWER OF ATTORNEY TO ADMINISTRATIVE AGENT,
ON BEHALF OF BUYERS

Know All Men by These Presents, that ACRES REAL ESTATE SPE 10, LLC (“Seller”), does hereby appoint MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC, a New York limited liability company, as administrative agent on behalf of Buyers (in such capacity, together with its permitted successors and assigns “Administrative Agent”), in connection with the Repurchase Agreement (defined below) its attorney-in-fact to act in Seller’s name, place and stead in any way which Seller could do with respect to, at all times after the occurrence and during the continuance of an Event of Default (i) the completion of the endorsements of the Mortgage Notes and Participation Certificates (as applicable) and the Assignments of Mortgages, (ii) the recordation of the Assignments of Mortgages and (iii) the enforcement of Seller’s rights under the Purchased Assets purchased by Administrative Agent, on behalf of Buyers (as defined below), pursuant to the Master Repurchase and Securities Contract Agreement dated as of November 3, 2021, as amended from time to time, by and among Administrative Agent, on behalf of MORGAN STANLEY BANK, N.A., a national banking association (“MSBNA”), and such other financial institutions from time to time party thereto, as buyers (MSBNA, together with such other financial institutions from time to time party thereto, as buyers, and together with their respective successors and assigns, collectively, “Buyers” and individually, each a “Buyer”) and Seller (the “Repurchase Agreement”) (including, for the avoidance of doubt, the enforcement and exercise of Seller’s rights in respect of any interest reserve account or other deposit account or securities account established by any borrower or any other related obligor in connection with any Purchased Assets (including the enforcement and exercise of Seller’s rights in respect of all funds or other assets deposited in, or credited to, such accounts)) and to take such other steps as may be necessary or desirable to enforce the rights of Administrative Agent, on behalf of Buyers, against such Purchased Assets, the related Purchased Asset Files, the Servicing Records and the Hedging Transactions to the extent that Seller is permitted by law to act through an agent.  Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Repurchase Agreement.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OR SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

Exhibit II-1-

IN WITNESS WHEREOF, Seller has caused this Power of Attorney to be executed this ____ day of __________, 20__.

ACRES REAL ESTATE SPE 10, LLC,
	a Delaware limited liability company
By:
	Name:
	Title:

STATE OF)
)
COUNTY OF)

On this _____ of ____________, before me, the undersigned, a Notary Public in and for said state, personally appeared _______________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person, or the entity upon behalf of which the person acted, executed the instrument.

	___________________________________ Notary Public
(Seal)]

Exhibit II-1-

Exhibit II-2

FORM OF POWER OF ATTORNEY TO SELLER

Know All Men by These Presents, that MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC, a New York limited liability company, as administrative agent no behalf of Buyers (in such capacity, together with its permitted successors and assigns “Administrative Agent”), on behalf of MORGAN STANLEY BANK, N.A., a national banking association (“MSBNA”), and such other financial institutions from time to time party thereto, as buyers (MSBNA, together with such other financial institutions from time to time party thereto, as buyers, and together with their respective successors and assigns, collectively, “Buyers” and individually, each a “Buyer”) does hereby appoint ACRES REAL ESTATE SPE 10, LLC (“Seller”), its attorney-in-fact to act in the name, place and stead of Administrative Agent, on behalf of Buyers in any way which Administrative Agent, on behalf of Buyers, could with respect to modifications described below, to mortgage loan documents with respect to Purchased Assets sold by Seller to Administrative Agent, on behalf of Buyers, under that certain Master Repurchase and Securities Contract Agreement dated as of November 3, 2021, as amended from time to time, among Seller, Administrative Agent, on behalf of Buyers, and Buyers (the “Repurchase Agreement”).  Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Repurchase Agreement.  Seller is permitted to administer and service the Purchased Assets without the consent of Administrative Agent, on behalf of Buyers, any assignee or any other Person, pursuant to this power of attorney delivered by Administrative Agent, on behalf of Buyers, which power of attorney shall not be revoked by Administrative Agent, on behalf of Buyers, unless an Event of Default under the Repurchase Agreement has occurred and is then continuing.  Notwithstanding the foregoing, Seller shall not consent or assent to a Significant Modification without the prior written consent of Administrative Agent, on behalf of Buyers.  All waivers or material actions entered into or taken in respect of the Purchased Assets pursuant to this power of attorney shall be in writing.  Seller shall notify Administrative Agent, on behalf of Buyers, and Custodian, in writing, of any waiver or other action entered into or taken thereby in respect of any such Purchased Asset pursuant to this power of attorney, and shall deliver to Custodian (with a copy to Administrative Agent, on behalf of Buyers) for deposit in the related Purchased Asset File, an original counterpart of the agreement, if any, relating to such waiver or other action, within three (3) Business Days following the execution thereof.  Actions taken under the foregoing power of attorney shall be binding upon each holder of the Purchased Assets.

THIS POWER OF ATTORNEY MAY BE REVOKED BY ADMINISTRATIVE AGENT, ON BEHALF OF BUYERS, BY DELIVERY OF WRITTEN NOTICE TO SELLER DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT UNDER THE REPURCHASE AGREEMENT.  IF THIS POWER OF ATTORNEY HAS NOT BEEN REVOKED AND IF REQUESTED BY SELLER, ADMINISTRATIVE AGENT, ON BEHALF OF BUYERS, WILL PROMPTLY CONFIRM IN WRITING TO SELLER, AND ANY OTHER PERSON OR ENTITY REASONABLY DESIGNATED BY SELLER, THAT THIS POWER OF ATTORNEY HAS NOT BEEN REVOKED AND IS IN FULL FORCE AND EFFECT.

Exhibit II-2-

IN WITNESS WHEREOF, Administrative Agent, on behalf of Buyers, has caused this Power of Attorney to be executed this ____ day of ________, 20__.

MORGAN STANLEY MORTGAGE CAPITAL
	HOLDINGS LLC, a New York limited liability
	company
By:
	Name:
	Title:

STATE OF)
)
COUNTY OF)

On this _____ of ____________, before me, the undersigned, a Notary Public in and for said state, personally appeared _______________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the person, or the entity upon behalf of which the person acted, executed the instrument.

	___________________________________ Notary Public
(Seal)]

Exhibit II-2-

Exhibit III-1

REPRESENTATIONS AND WARRANTIES
REGARDING THE PURCHASED ASSETS

With respect to each Purchased Asset and the related Mortgaged Property or Mortgaged Properties, on the related Purchase Date and at all times while this Agreement and any Transaction contemplated hereunder is in effect, Seller shall be deemed to make the following representations and warranties to Administrative Agent, on behalf of Buyers, as of such date; provided, however, that, with respect to any Purchased Asset+, such representations and warranties shall be deemed to be modified by any Exception Report delivered by Seller to Administrative Agent, on behalf of Buyers, prior to the issuance of a Confirmation with respect thereto.

(1) Whole Loan; Ownership of Purchased Assets.  Each Purchased Asset is an Eligible Asset.  At the time of the sale, transfer and assignment to Administrative Agent, on behalf of Buyers, no Mortgage Note, Mortgage or Participation Certificate was subject to any assignment (other than assignments to Seller), participation (other than with respect to the Participation Interests) or pledge, and Seller had good title to, and was the sole owner of, each Purchased Asset free and clear of any and all liens, charges, pledges, encumbrances, participations (other than with respect to the Participation Interests), any other ownership interests on, in or to such Purchased Asset.  Seller has full right and authority to sell, assign and transfer each Purchased Asset, and the assignment to Administrative Agent, on behalf of Buyers, constitutes a legal, valid and binding assignment of such Purchased Asset free and clear of any and all liens, pledges, charges or security interests of any nature encumbering such Purchased Asset.

(2) Loan Document Status.  Each related Mortgage Note, Mortgage, Assignment of Leases (if a separate instrument), guaranty and other agreement executed by or on behalf of the related Mortgagor, guarantor or other obligor in connection with such Purchased Asset is the legal, valid and binding obligation of the related Mortgagor, guarantor or other obligor (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency, one-action or market value limit deficiency legislation), as applicable, and is enforceable in accordance with its terms, except (a) as such enforcement may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (b) that certain provisions in such Purchased Asset Documents (including, without limitation, provisions requiring the payment of default interest, late fees or prepayment/yield maintenance or prepayment fees, charges and/or premiums) are, or may be, further limited or rendered unenforceable by or under applicable law, but (subject to the limitations set forth in clause (a) above) such limitations or unenforceability will not render such Purchased Asset Documents invalid as a whole or materially interfere with the mortgagee’s realization of the principal benefits and/or security provided thereby (clauses (a) and (b) collectively, the “Standard Qualifications”). Except as set forth in the immediately preceding sentences, there is no valid offset, defense, counterclaim or right of rescission available to the related borrower with respect to any of the related Mortgage Notes, Mortgages or other Purchased Asset Documents, including, without limitation, any such valid offset, defense, counterclaim or right based on intentional fraud by Seller in connection with the origination of the Purchased Asset, that would deny the mortgagee the principal benefits intended to be provided by the Mortgage Note, Mortgage or other Purchased Asset Documents.

Exhibit III-1-

(3) Mortgage Provisions.  The Purchased Asset Documents for each Purchased Asset contain provisions that render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged Property of the principal benefits of the security intended to be provided thereby, including realization by judicial or, if applicable, non-judicial foreclosure subject to the limitations set forth in the Standard Qualifications.

(4) Hospitality Provisions.  The Purchased Asset Documents for each Purchased Asset that is secured by a hospitality property operated pursuant to a franchise agreement includes an executed comfort letter or similar agreement signed by the Mortgagor and franchisor of such property enforceable against such franchisor, either directly or as an assignee of the originator.  The Mortgage or related security agreement for each Purchased Asset secured by a hospitality property creates a security interest in the revenues of such property for which a UCC financing statement has been filed in the appropriate filing office.

(5) Mortgage Status; Waivers and Modifications.  Since origination and except by written instruments set forth in the related Purchased Asset File or as otherwise provided in the related Purchased Asset Documents (a) the material terms of such Mortgage, Mortgage Note, guaranty, participation agreement, if applicable, and related Purchased Asset Documents have not been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect that could have a material adverse effect on Purchased Asset; (b) no related Mortgaged Property or any portion thereof has been released from the lien of the related Mortgage in any manner which materially interferes with the security intended to be provided by such Mortgage or the use or operation of the remaining portion of such Mortgaged Property; and (c) neither the related borrower nor the related guarantor nor the related participating Person has been released from its material obligations under the Purchased Asset Documents.  With respect to each Purchased Asset, except as contained in a written document included in the Purchased Asset File, there have been no modifications, amendments or waivers, that could be reasonably expected to have a material adverse effect on such Purchased Asset consented to by Seller.

(6) Lien; Valid Assignment.  Subject to the Standard Qualifications, each assignment of Mortgage and assignment of Assignment of Leases to Administrative Agent, on behalf of Buyers, constitutes a legal, valid and binding assignment to Administrative Agent, on behalf of Buyers.  Each related Mortgage and Assignment of Leases is freely assignable without the consent of the related Mortgagor.  Each related Mortgage is a legal, valid and enforceable first lien on the related Mortgagor’s fee or leasehold interest in the Mortgaged Property in the principal amount of such Purchased Asset or allocated loan amount (subject only to Permitted Encumbrances, except as the enforcement thereof may be limited by the Standard Qualifications.  Such Mortgaged Property (subject to and excepting Permitted Encumbrances) is free and clear of any recorded mechanics’ liens, recorded materialmen’s liens and other recorded encumbrances, and no rights exist which under law could give rise to any such lien or encumbrance that would be prior to or equal with the lien of the related Mortgage, except those which are bonded over, escrowed for or insured against by a lender’s title insurance policy (as described below).  Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Purchased Asset establishes and creates a valid and enforceable lien on property described therein, except as such enforcement may be limited by Standard Qualifications subject to the limitations described in Paragraph (9) below.  Notwithstanding anything herein to the contrary, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of UCC financing statements is required in order to effect such perfection.

Exhibit III-1-

(7) Permitted Liens; Title Insurance.  Each Mortgaged Property securing a Purchased Asset is covered by a Title Policy in the original principal amount of such Purchased Asset (or with respect to a Purchased Asset secured by multiple properties, an amount equal to at least the allocated loan amount with respect to the Title Policy for each such property) after all advances of principal (including any advances held in escrow or reserves), that insures for the benefit of the owner of the indebtedness secured by the Mortgage, the first priority lien of the Mortgage, which lien is subject only to Permitted Encumbrances.  None of the Permitted Encumbrances are mortgage liens that are senior to or coordinate and co-equal with the lien of the related Mortgage.  Such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid and no claims have been made by Seller thereunder and no claims have been paid thereunder.  Neither Seller, nor to Seller’s knowledge, any other holder of the Purchased Asset, has done, by act or omission, anything that would materially impair the coverage under such Title Policy.  Each Title Policy contains no exclusion for, or affirmatively insures (except for any Mortgaged Property located in a jurisdiction where such affirmative insurance is not available in which case such exclusion may exist), (a) that the area shown on the survey is the same as the property legally described in the Mortgage and (b) to the extent that the Mortgaged Property consists of two or more adjoining parcels, such parcels are contiguous.

(8) Junior Liens.  There are no subordinate mortgages or junior liens securing the payment of money encumbering the related Mortgaged Property (other than Permitted Encumbrances).  Seller has no knowledge of any mezzanine debt secured directly by interests in the related Mortgagor, except as disclosed to Administrative Agent.

(9) Assignment of Leases.  There exists as part of the related Purchased Asset File an Assignment of Leases (either as a separate instrument or incorporated into the related Mortgage).  Subject to the Permitted Encumbrances, each related Assignment of Leases creates a valid first-priority collateral assignment of, or a valid first-priority lien or security interest in, rents and certain rights under the related lease or leases, subject only to a license granted to the related Mortgagor to exercise certain rights and to perform certain obligations of the lessor under such lease or leases, including the right to operate the related leased property, except as the enforcement thereof may be limited by the Standard Qualifications.  No Person other than the related Mortgagor owns any interest in any payments due under such lease or leases that is superior to or of equal priority with the lender’s interest therein.  The related Mortgage or related Assignment of Leases, subject to applicable law, provides that, upon an event of default under the Purchased Asset, a receiver is permitted to be appointed for the collection of rents or for the related mortgagee to enter into possession to collect the rents or for rents to be paid directly to the mortgagee.

(10) UCC Filings.  Seller has filed and/or recorded or caused to be filed and/or recorded (or, if not filed and/or recorded, have been submitted in proper form for filing and/or recording), UCC-1 financing statements in the appropriate public filing and/or recording offices necessary at the time of the origination of the Purchased Asset to perfect a valid security interest in all items of physical personal property reasonably necessary to operate such Mortgaged Property owned by such Mortgagor and located on the related Mortgaged Property (other than any non-material personal property, any personal property subject to a purchase money security interest, a sale and leaseback financing arrangement as permitted under the terms of the related Purchased Asset Documents or any other personal property leases applicable to such personal property), to the extent perfection may be effected pursuant to applicable law by recording or filing, as the case may be.  Subject to the Standard Qualifications, each related Mortgage (or equivalent document) creates a valid and enforceable lien and security interest on the items of personalty described above.  No representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of UCC-1 financing

Exhibit III-1-

statements are required in order to effect such perfection.  Each UCC-1 financing statement, if any, filed with respect to personal property constituting a part of the related Mortgaged Property and each UCC-2 or UCC-3 assignment, if any, of such financing statement to Seller was in suitable form for filing in the filing office in which such financing statement was filed.

(11) Condition of Property.  Seller or the originator of the Purchased Asset inspected or caused to be inspected each related Mortgaged Property within six months of origination of the Purchased Asset and within twelve months of the Purchase Date.  An engineering report or property condition assessment was prepared in connection with the origination of each Purchased Asset no more than twelve months prior to the Purchase Date.  To Seller’s knowledge, based solely upon due diligence customarily performed in connection with the origination of comparable mortgage loans, each related Mortgaged Property was (a) free and clear of any material damage, (b) in good repair and condition and (c) is free of structural defects, except in each case (i) for any damage or deficiencies that would not materially and adversely affect the use, operation or value of such Mortgaged Property as security for the Purchased Asset, (ii) if such repairs have been completed or (iii) if escrows in an aggregate amount consistent with the standards utilized by Seller with respect to similar loans its holds for its own account have been established, which escrows will in all events be in an aggregate amount not less than the estimated cost of such repairs.  Seller has no knowledge of any material issues with the physical condition of the Mortgaged Property that Seller believes would have a material adverse effect on the use, operation or value of the Mortgaged Property other than those disclosed in the engineering report and those addressed in clauses (i), (ii) and (iii) above.

(12) Taxes and Assessments.  All real estate taxes, governmental assessments and other similar outstanding governmental charges (including, without limitation, water and sewage charges), or installments thereof, that could be a lien on the related Mortgaged Property that would be of equal or superior priority to the lien of the Mortgage and that prior to the Purchase Date have become delinquent in respect of each related Mortgaged Property have been paid, or, if the appropriate amount of such taxes or charges is being appealed or is otherwise in dispute, an escrow of funds has been established in an amount sufficient to cover such payments and reasonably estimated interest and penalties, if any, thereon.  For purposes of this Paragraph (12), real estate taxes and governmental assessments and other outstanding governmental charges and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

(13) Condemnation.  As of the date of origination and to Seller’s knowledge as of the Purchase Date, there is no proceeding pending, and, to Seller’s knowledge as of the date of origination and as of the Purchased Date, there is no proceeding threatened, for the total or partial condemnation of such Mortgaged Property that would have a material adverse effect on the value, use or operation of the Mortgaged Property.

(14) Actions Concerning Purchased Asset.  As of the date of origination and to Seller’s knowledge as of the Purchase Date, there was no pending, filed or threatened action, suit or proceeding, arbitration or governmental investigation involving any Mortgagor, guarantor, or the Mortgaged Property, an adverse outcome of which would reasonably be expected to materially and adversely affect (a) such Mortgagor’s title to the Mortgaged Property, (b) the validity or enforceability of the Mortgage, (c) such Mortgagor’s ability to perform under the related Purchased Asset Documents, (d) such guarantor’s ability to perform under the related guaranty, (e) the use, operation or value of the Mortgaged Property, (f) the principal benefit of the security intended to be provided by the Purchased Asset Documents, (g) the current ability of the Mortgaged Property to generate net cash

Exhibit III-1-

flow sufficient to service such Purchased Asset or (h)the current principal use of the Mortgaged Property.

(15) Escrow Deposits.  All escrow deposits and payments required to be escrowed with lender pursuant to the Purchased Asset Documents are in the possession, or under the control, of Seller or its servicer, and there are no deficiencies (subject to any applicable grace or cure periods) in connection therewith, and all such escrows and deposits (or the right thereto) that are required to be escrowed with lender under the related Purchased Asset Documents are being conveyed by Seller to Administrative Agent, on behalf of Buyers, or its servicer.  Any and all requirements under the Purchased Asset Documents as to completion of any material improvements and as to disbursements of any funds escrowed for such purpose, which requirements were to have been complied with on or before the Purchase Date, have been complied with in all material respects or the funds so escrowed have not been released.  No other escrow amounts have been released except in accordance with the terms and conditions of the Purchased Asset Documents.

(16) No Holdbacks.  The principal balance of the Purchased Asset set forth on the Purchased Asset Schedule has been fully disbursed as of the Purchase Date and there is no requirement for future advances thereunder (except in those cases where the full amount of the Purchased Asset has been disbursed but a portion thereof is being held in escrow or reserve accounts pending the satisfaction of certain conditions relating to leasing, repairs or other matters with respect to the related Mortgaged Property, the Mortgagor or other considerations determined by Seller to merit such holdback), and any requirements or conditions to disbursements of any loan proceeds held in escrow have been satisfied with respect to any disbursements of any such escrow fund made on or prior to the date hereof.

(17) Insurance.  Each related Mortgaged Property is, and is required pursuant to the related Mortgage to be, insured by a property insurance policy providing coverage for loss in accordance with coverage found under a “special cause of loss form” or “all risk form” that includes replacement cost valuation issued by an insurer meeting the requirements of the related Purchased Asset Documents and having a claims-paying or financial strength rating of any one of the following:  (i) at least “A-:VII” from A.M. Best Company, Inc., (ii) at least “A3” (or the equivalent) from Moody’s or (iii) at least “A-” from Standard & Poor’s (collectively, the “Insurance Rating Requirements”), in an amount (subject to a customary deductible) not less than the lesser of (1) the original principal balance of the Purchased Asset and (2) the full insurable value on a replacement cost basis of the improvements, furniture, furnishings, fixtures and equipment owned by the Mortgagor and included in the Mortgaged Property (with no deduction for physical depreciation), but, in any event, not less than the amount necessary or containing such endorsements as are necessary to avoid the operation of any coinsurance provisions with respect to the related Mortgaged Property.

Each related Mortgaged Property is also covered, and required to be covered pursuant to the related Loan Documents, by business interruption or rental loss insurance which (subject to a customary deductible) (i) covers a period of not less than 12 months (or with respect to each Purchased Asset on a single asset with a principal balance of $50 million or more, 18 months); (ii) for a Purchased Asset with a principal balance of $50 million or more, contains a 180 day “extended period of indemnity”; and (iii) covers the actual loss sustained during restoration.

If any material part of the improvements, exclusive of a parking lot, located on a Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, the related Mortgagor is required to maintain an insurance policy issued by the National Flood Insurance Program, the Federal Emergency Management Agency, or such similar Federal agency acting in its capacity as an insurer against losses from

Exhibit III-1-

flooding, in the maximum amount available under the National Flood Insurance Program, plus such additional excess flood coverage in an amount as is generally required by prudent institutional commercial mortgage lenders originating mortgage loans for securitization.

If windstorm and/or windstorm related perils and/or “named storms” are excluded from the primary property damage insurance policy, the Mortgaged Property is insured by a separate windstorm insurance policy issued by an insurer meeting the Insurance Rating Requirements or endorsement covering damage from windstorm and/or windstorm related perils and/or named storms in an amount at least equal to 100% of the full insurable value on a replacement cost basis of the improvements and personalty and fixtures included in the related Mortgaged Property by an insurer meeting the Insurance Rating Requirement.

The Mortgaged Property is covered, and required to be covered pursuant to the related Purchased Asset Documents, by a commercial general liability insurance policy issued by an insurer meeting the Insurance Rating Requirements including coverage for property damage, contractual damage and personal injury (including bodily injury and death) in amounts as are generally required by a prudent institutional commercial mortgage lender for loans originated for securitization, and in any event not less than $1 million per occurrence and $2 million in the aggregate.

An architectural or engineering consultant has performed an analysis of each of the Mortgaged Properties located in seismic zones 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing either the scenario expected limit (the “SEL”) or the probable maximum loss (the “PML”) for the Mortgaged Property in the event of an earthquake.  In such instance, the SEL or PML, as applicable, was based on a 475-year return period, an exposure period of 50 years and a 10% probability of exceedance.  If the resulting report concluded that the SEL or PML, as applicable, would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer rated at least “A:VII” by A.M. Best Company, Inc. or “A3” (or the equivalent) from Moody’s or “A-” by Standard & Poor’s in an amount not less than 150% of the SEL or PML, as applicable.

The Purchased Asset Documents require insurance proceeds in respect of a property loss to be applied either (a) to the repair or restoration of all or part of the related Mortgaged Property, with respect to all property losses in excess of 5% of the then outstanding principal amount of the related Purchased Asset, the lender (or a trustee appointed by it) having the right to hold and disburse such proceeds as the repair or restoration progresses, or (b) to the reduction of the outstanding principal balance of such Purchased Asset together with any accrued interest thereon.

All premiums on all insurance policies referred to in this Paragraph (17) required to be paid as of the Purchase Date have been paid, and such insurance policies name the lender under the Purchased Asset and its successors and assigns as a loss payee under a mortgagee endorsement clause or, in the case of the general liability insurance policy, as named or additional insured.  Such insurance policies will inure to the benefit of Administrative Agent, on behalf of Buyers.  Each related Purchased Asset obligates the related Mortgagor to maintain all such insurance and, at such Mortgagor’s failure to do so, authorizes the lender to maintain such insurance at the Mortgagor’s cost and expense and to charge such Mortgagor for related premiums and other related expenses, including reasonable attorney’s fees.  All such insurance policies (other than commercial liability policies) require at least 10 days’ prior notice to the lender of termination or cancellation arising because of nonpayment of a premium and at least 30 days prior notice to the lender of termination or cancellation (or such lesser period, not less than 10 days, as may be required by applicable law)

Exhibit III-1-

arising for any reason other than non-payment of a premium and no such notice has been received by Seller.

(18) Access; Utilities; Separate Tax Lots.  Each Mortgaged Property (a) is located on or adjacent to a public road and has direct legal access to such road, or has access via an irrevocable easement or irrevocable right of way permitting ingress and egress to/from a public road, (b) is served by or has uninhibited access rights to public or private water and sewer (or well and septic) and all required utilities, all of which are appropriate for the current use of the Mortgaged Property, and (c) constitutes one or more separate tax parcels which do not include any property which is not part of the Mortgaged Property or is subject to an endorsement under the related Title Policy insuring the Mortgaged Property, or in certain cases, an application has been, or will be, made to the applicable governing authority for creation of separate tax lots, in which case the Purchased Asset Documents require the Mortgagor to escrow an amount sufficient to pay taxes for the existing tax parcel of which the Mortgaged Property is a part until the separate tax lots are created or the non-recourse carveout guarantor under the Purchased Asset Documents has indemnified the mortgagee for any loss suffered in connection therewith.

(19) No Encroachments.  To Seller’s knowledge based solely on surveys obtained in connection with origination (which may have been a previously existing “as built” survey) and the lender’s Title Policy (or, if such policy is not yet issued, a pro forma title policy, a preliminary title policy with escrow instructions or a “marked up” commitment) obtained in connection with the origination of each Purchased Asset, all material improvements that were included for the purpose of determining the appraised value of the related Mortgaged Property at the time of the origination of such Purchased Asset are within the boundaries of the related Mortgaged Property, except encroachments that do not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy.  No improvements on adjoining parcels encroach onto the related Mortgaged Property except for encroachments that do not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy.  No material improvements encroach upon any easements except for encroachments the removal of which would not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements have been obtained under the Title Policy.

(20) No Contingent Interest or Equity Participation.  No Purchased Asset has a shared appreciation feature, any other contingent interest feature or a negative amortization feature (except that an anticipated repayment date loan may provide for the accrual of the portion of interest in excess of the rate in effect prior to the anticipated Repayment Date) or an equity participation by Seller.

(21) [Reserved].  

(22) Compliance with Usury Laws.  The interest rate (exclusive of any default interest, late charges, yield maintenance charges, exit fees, or prepayment premiums) of such Purchased Asset complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

(23) Authorized to do Business.  To the extent required under applicable law, as of the Purchase Date and as of each date that such entity held the Mortgage Note, each holder of the Mortgage Note was authorized to transact and do business in the jurisdiction in which each related Mortgaged Property is located, or the failure to be so authorized does not materially and adversely affect the enforceability of such Purchased Asset by Administrative Agent, on behalf of Buyers.

Exhibit III-1-

(24) Trustee under Deed of Trust.  With respect to each Mortgage which is a deed of trust, a trustee, duly qualified under applicable law to serve as such, currently so serves and is named in the deed of trust or has been substituted in accordance with the Mortgage and applicable law or may be substituted in accordance with the Mortgage and applicable law by the related mortgagee, and except in connection with a trustee’s sale after a default by the related Mortgagor or in connection with any full or partial release of the related Mortgaged Property or related security for such Purchased Asset, and except in connection with a trustee’s sale after a default by the related Mortgagor, no fees are payable to such trustee except for de minimis fees paid.

(25) Local Law Compliance.  To Seller’s knowledge, based upon any of a letter from any governmental authorities, a legal opinion, an architect’s letter, a zoning consultant’s report, an endorsement to the related Title Policy, or other affirmative investigation of local law compliance consistent with the investigation conducted by Seller for similar commercial, multifamily and manufactured housing community mortgage loans intended for securitization, with respect to the improvements located on or forming part of each Mortgaged Property securing a Purchased Asset, there are no material violations of applicable laws, zoning ordinances, rules, covenants, building codes, restrictions and land laws (collectively, “Zoning Regulations”) other than those which (i) constitute a legal non-conforming use or structure, as to which the Mortgaged Property may be restored or repaired to the full extent necessary to maintain the use of the structure immediately prior to a casualty or the inability to restore or repair to the full extent necessary to maintain the use or structure immediately prior to the casualty would not materially and adversely affect the use or operation of the Mortgaged Property, (ii) are insured by the Title Policy or other insurance policy, (iii) are insured by law and ordinance insurance coverage in amounts customarily required by prudent commercial mortgage lenders for loans originated for securitization that provides coverage for additional costs to rebuild and/or repair the property to current Zoning Regulations or (iv) would not have a material adverse effect on the Purchased Asset.  The terms of the Purchased Asset Documents require the Mortgagor to comply in all material respects with all applicable governmental regulations, zoning and building laws.

(26) Licenses and Permits.  Each Mortgagor covenants in the Purchased Asset Documents that it shall keep all material licenses, permits, franchises, certificates of occupancy, consents and applicable governmental authorizations necessary for its operation of the Mortgaged Property in full force and effect, and to Seller’s knowledge based upon a letter from any government authorities or other affirmative investigation of local law compliance consistent with the investigation conducted by Seller for similar commercial, multifamily and manufactured housing community mortgage loans intended for securitization, all such material licenses, permits and applicable governmental authorizations are in effect.  The Purchased Asset Documents require the related Mortgagor to be qualified to do business in the jurisdiction in which the related Mortgaged Property is located and for the Mortgagor and the Mortgaged Property to be in compliance in all material respects with all regulations, zoning and building laws.

(27) Recourse Obligations.  The Purchased Asset Documents for each Purchased Asset provide that such Purchased Asset is non-recourse to the related parties thereto except that:  (a) the related Mortgagor and a guarantor (which is a natural person or persons, or an entity distinct from the Mortgagor (but may be affiliated with Mortgagor) that has assets other than equity in the related Mortgaged property that are not de minimis) shall be fully liable for losses, liabilities, costs and damages arising from certain acts of the related Mortgagor and/or its principals specified in the related Purchased Asset Documents, which acts generally include the following:  (i) acts of fraud or intentional material misrepresentation, (ii) misappropriation of rents (following an event of default), insurance proceeds or condemnation awards, (iii) intentional material physical waste of the Mortgaged Property, (iv) intentional misconduct and (v) any breach of the environmental

Exhibit III-1-

covenants contained in the related Loan Documents, and (b)the Purchased Asset shall become full recourse to the related Mortgagor and a guarantor (which is a natural person or persons, or an entity distinct from the Mortgagor (but may be affiliated with Mortgagor) that has assets other than equity in the related Mortgaged property that are not de minimis), upon any of the following events:  (i)if any petition for bankruptcy, insolvency, dissolution or liquidation pursuant to federal bankruptcy law, or nay similar federal or state law, shall be filed, consented to, or acquiesced in by the Mortgagor, (ii)Mortgagor and/or its principals shall have colluded with other creditors to cause an involuntary bankruptcy filing with respect to the Mortgagor or (iii)upon the transfer of either the Mortgaged Property or equity interests in Mortgagor made in violation of the Purchased Asset Documents.

(28) Mortgage Releases.  The terms of the related Mortgage or related Purchased Asset Documents do not provide for release of any material portion of the Mortgaged Property from the lien of the Mortgage except (a) a partial release, accompanied by principal repayment of not less than a specified percentage at least equal to the lesser of (i) 110% of the related allocated loan amount of such portion of the Mortgaged Property and (ii) the outstanding principal balance of the Purchased Asset, (b) upon payment in full of such Purchased Asset, (c) releases of out-parcels that are unimproved or other portions of the Mortgaged Property which will not have a material adverse effect on the underwritten value of the Mortgaged Property and which were not afforded any material value in the appraisal obtained at the origination of the Purchased Asset and are not necessary for physical access to the Mortgaged Property or compliance with zoning requirements, or (d) as required pursuant to an order of condemnation or taking by a State or any political subdivision or authority thereof.

No such Purchased Asset that is secured by more than one Mortgaged Property or that is cross-collateralized with another Purchased Asset permits the release of cross-collateralization of the related Mortgaged Properties.

(29) Financial Reporting and Rent Rolls.  The Purchased Asset Documents for each Purchased Asset require the Mortgagor to provide the owner or holder of the Mortgage with quarterly (other than for single-tenant properties) and annual operating statements, and quarterly (other than for single-tenant properties) rent rolls for properties that have leases contributing more than 5% of the in-place base rent and annual financial statements, which annual financial statements with respect to each Purchased Asset with more than one Mortgagor are in the form of an annual combined balance sheet of the Mortgagor entities (and no other entities), together with the related combined statements of operations, members’ capital and cash flows, including a combining balance sheet and statement of income for the Mortgaged Properties on a combined basis.

(30) Acts of Terrorism Exclusion.  With respect to each Purchased Asset over $20 million, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) do not specifically exclude Acts of Terrorism, as defined in the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and 2015 (collectively, the “TRIA”), from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy.  With respect to each other Purchased Asset, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) does not specifically exclude Acts of Terrorism, as defined in TRIA, from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy.  With respect to each Purchased Asset, the related Purchased Asset Documents do not expressly waive or prohibit the mortgagee from requiring coverage for Acts of Terrorism, as defined in the TRIA, or damages related thereto except to the extent that any right to require such coverage may be limited by commercial

Exhibit III-1-

availability on commercially reasonable terms; provided, however, that if the TRIA or a similar or subsequent statute is not in effect, then, provided that terrorism insurance is commercially available, the Mortgagor under each Purchased Asset is required to carry terrorism insurance, but in such event the Mortgagor shall not be required to spend on terrorism insurance coverage more than two times the amount of the insurance premium that is payable in respect of the property and business interruption/rental loss insurance required under the related Purchased Asset Documents (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance) at the time of the origination of the Purchased Asset, and if the cost of terrorism insurance exceeds such amount, the borrower is required to purchase the maximum amount of terrorism insurance available with funds equal to such amount.

(31) Due on Sale or Encumbrance.  Subject to specific exceptions set forth below, each Purchased Asset contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Purchased Asset if, without the consent of the holder of the Mortgage (which consent, in some cases, may not be unreasonably withheld) and/or complying with the requirements of the related Purchased Asset Documents (which provide for transfers without the consent of the lender which are customarily acceptable to prudent commercial and multifamily mortgage lending institutions on the security of property comparable to the related Mortgaged Property, including, without limitation, transfers of worn-out or obsolete furnishings, fixtures, or equipment promptly replaced with property of equivalent value and functionality and transfers by leases entered into in accordance with the Purchased Asset Documents), (a) the related Mortgaged Property, or any equity interest of greater than 50% in the related Mortgagor, is directly or indirectly pledged, transferred or sold, other than as related to (i) family and estate planning transfers or transfers upon death or legal incapacity, (ii) transfers to certain affiliates as defined in the related Purchased Asset Documents, (iii) transfers that do not result in a change of Control of the related Mortgagor or transfers of passive interests so long as the guarantor retains Control, (iv) transfers to another holder of direct or indirect equity in the Mortgagor, a specific Person designated in the related Purchased Asset Documents or a Person satisfying specific criteria identified in the related Purchased Asset Documents, such as a qualified equityholder, (v) transfers of stock or similar equity units in publicly traded companies or (vi) a substitution or release of collateral within the parameters of Paragraph (28) herein, or (vii) to the extent set forth in any Exception Report, by reason of any mezzanine debt that existed at the origination of the related Purchased Asset, or future permitted mezzanine debt in each case as set forth in any Exception Report or (b) the related Mortgaged Property is encumbered with a subordinate lien or security interest against the related Mortgaged Property, other than any Permitted Encumbrances.  The Mortgage or other Purchased Asset Documents provide that to the extent any rating agency fees are incurred in connection with the review of and consent to any transfer or encumbrance, the Mortgagor is responsible for such payment along with all other reasonable fees and expenses incurred by the Mortgagee relative to such transfer or encumbrance.  For purposes of the foregoing representation, “Control” means the power to direct the management and policies of an entity, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise.

(32) Single-Purpose Entity.  Each Purchased Asset requires the borrower to be a Single-Purpose Entity for at least as long as the Purchased Asset is outstanding.  Both the Purchased Asset Documents and the organizational documents of the Mortgagor with respect to each Purchased Asset with a principal amount on the Purchase Date of $5 million or more provide that the borrower is a Single-Purpose Entity, and each Purchased Asset with a principal amount on the Purchase Date of $20 million or more has a counsel’s opinion regarding non-consolidation of the Mortgagor.  For purposes of this Paragraph (32), a “Single-Purpose Entity” shall mean an entity, other than an individual, whose organizational documents provide substantially to the effect that it was formed or organized solely for the purpose of owning and operating one or more of the Mortgaged

Exhibit III-1-

Properties securing the Purchased Assets and prohibit it from engaging in any business unrelated to such Mortgaged Property or Properties, and whose organizational documents further provide, or which entity represented in the related Purchased Asset Documents, substantially to the effect that it does not have any assets other than those related to its interest in and operation of such Mortgaged Property or Properties, or any indebtedness other than as permitted by the related Mortgage(s) or the other related Purchased Asset Documents, that it has its own books and records and accounts separate and apart from those of any other person, and that it holds itself out as a legal entity, separate and apart from any other person or entity.

(33) [Reserved].  

(34) Ground Leases.  For purposes of this Exhibit III, a “Ground Lease” shall mean a lease creating a leasehold estate in real property where the fee owner as the ground lessor conveys for a term or terms of years its entire interest in the land and buildings and other improvements, if any, comprising the premises demised under such lease to the ground lessee (who may, in certain circumstances, own the building and improvements on the land), subject to the reversionary interest of the ground lessor as fee owner and does not include industrial development agency (IDA) or similar leases for purposes of conferring a tax abatement or other benefit.

With respect to any Purchased Asset where the Purchased Asset is secured by a leasehold estate under a Ground Lease in whole or in part, and the related Mortgage does not also encumber the related lessor’s fee interest in such Mortgaged Property, based upon the terms of the Ground Lease and any estoppel or other agreement received from the ground lessor in favor of Seller, its successors and assigns, Seller represents and warrants that:

(a) (i) the Ground Lease or a memorandum regarding such Ground Lease has been duly recorded or submitted for recordation in a form that is acceptable for recording in the applicable jurisdiction; (ii) the Ground Lease or an estoppel or other agreement received from the ground lessor permits the interest of the lessee to be encumbered by the related Mortgage and does not restrict the use of the related Mortgaged Property by such lessee, its successors or assigns in a manner that would materially adversely affect the security provided by the related Mortgage and (iii) no material change in the terms of the Ground Lease had occurred since its recordation, except by any written instrument which are included in the related Purchased Asset File;

(b) the lessor under such Ground Lease has agreed in a writing included in the related Purchased Asset File (or in such Ground Lease) that the Ground Lease may not be amended or modified, or canceled or terminated, without the prior written consent of the lender (except termination or cancellation if (i) notice of a default under the Ground Lease is provided to lender and (ii) such default is curable by lender as provided in the Ground Lease but remains uncured beyond the applicable cure period), and no such consent has been granted by Seller since the origination of the Purchased Asset except as reflected in any written instruments which are included in the related Purchased Asset File;

(c) the Ground Lease has an original term (or an original term plus one or more optional renewal terms, which, under all circumstances, may be exercised, and will be enforceable, by either Mortgagor or the mortgagee) that extends not less than 20 years beyond the stated maturity of the related Purchased Asset, or 10 years past the stated maturity if such Purchased Asset fully amortizes by the stated maturity (or with respect to a Purchased Asset that accrues on an actual 360 basis, substantially amortizes);

Exhibit III-1-

(d) the Ground Lease either (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, except for the related fee interest of the ground lessor and the Permitted Encumbrances, or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the mortgagee on the lessor’s fee interest in the Mortgaged Property is subject;

(e) the Ground Lease does not place commercially unreasonable restrictions on the identity of the mortgagee and the Ground Lease is assignable to the holder of the Purchased Asset and its successors and assigns without the consent of the lessor thereunder, and in the event it is so assigned, it is further assignable by the holder of the Purchased Asset and its successors and assigns without the consent of the lessor;

(f) Seller has not received any written notice of material default under or notice of termination of such Ground Lease and, to Seller’s knowledge, there is no material default under such Ground Lease and no condition that, but for the passage of time or giving of notice, would result in a material default under the terms of such Ground Lease and to Seller’s knowledge, such Ground Lease is in full force and effect;

(g) the Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give to the lender written notice of any default, and provides that no notice of default or termination is effective against the lender unless such notice is given to the lender;

(h) a lender is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease through legal proceedings) to cure any default under the Ground Lease which is curable after the lender’s receipt of notice of any default before the lessor may terminate the Ground Lease;

(i) the Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial mortgage lender;

(j) under the terms of the Ground Lease, an estoppel or other agreement received from the ground lessor and the related Mortgage (taken together), any related insurance proceeds or the portion of the condemnation award allocable to the ground lessee’s interest (other than (i) de minimis amounts for minor casualties or (ii) in respect of a total or substantially total loss or taking as addressed in Paragraph (34)(k) below) will be applied either to the repair or to restoration of all or part of the related Mortgaged Property with (so long as such proceeds are in excess of the threshold amount specified in the related Purchased Asset Documents) the lender or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment of the outstanding principal balance of the Purchased Asset, together with any accrued interest;

(k) in the case of a total or substantially total taking or loss, under the terms of the Ground Lease, an estoppel or other agreement and the related Mortgage (taken together), any related insurance proceeds, or portion of the condemnation award allocable to ground lessee’s interest in respect of a total or substantially total loss or taking of the related Mortgaged Property to the extent not applied to restoration, will be applied first to the payment of the outstanding principal balance of the Purchased Asset, together with any accrued interest; and

Exhibit III-1-

(l) provided that the lender cures any defaults which are susceptible to being cured, the ground lessor has agreed to enter into a new lease with the lender upon termination of the Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding.

(35) Servicing.  The servicing and collection practices used by Seller with respect to the Purchased Asset have been, in all material respects, legal and have met customary industry standards for servicing of similar commercial loans.

(36) Origination and Underwriting.  The origination practices of Seller (or the related originator if Seller was not the originator) with respect to each Purchased Asset have been, in all material respects, legal and as of the date of its origination, such Purchased Asset and the origination thereof complied in all material respects with, or was exempt from, all requirements of federal, state or local laws and regulations relating to the origination of such Purchased Asset.  At the time of origination of such Purchased Asset, the origination, due diligence and underwriting performed by or on behalf of Seller in connection with each Purchased Asset complied in all material respects with the terms, conditions and requirements of Seller’s origination, due diligence, underwriting procedures, guidelines and standards for similar commercial and multifamily loans.

(37) Rent Rolls; Operating Histories.  Seller has obtained a rent roll (other than with respect to hospitality properties) certified by the related Mortgagor or the related guarantor(s) as accurate and complete in all material respects as of a date within 180 days of the date of origination of the related Purchased Asset.  Seller has obtained operating histories (the “Certified Operating Histories”) with respect to each Mortgaged Property certified by the related Mortgagor or the related guarantor(s) as accurate and complete in all material respects as of a date within 180 days of the date of origination of the related Purchased Asset.  The Certified Operating Histories collectively report on operations for a period equal to (a) at least a continuous three-year period or (b) in the event the Mortgaged Property was owned, operated or constructed by the Mortgagor or an affiliate for less than three years then for such shorter period of time.

(38) No Material Default; Payment Record.  No Purchased Asset has been more than 30 days delinquent, without giving effect to any grace or cure period, in making required payments since origination, and as of the Purchased Date, no Purchased Asset is delinquent (beyond any applicable grace or cure period) in making required payments.  To Seller’s knowledge, there is (a) no, and since origination there has been no, material default, breach, violation or event of acceleration existing under the related Purchased Asset Documents, or (b) no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, which default, breach, violation or event of acceleration, in the case of either clause (a) or (b), materially and adversely affects the value of the Purchased Asset, or the value, use or operation of the related Mortgaged Property, provided, however, that this Paragraph (38) does not cover any default, breach, violation or event of acceleration that specifically pertains to or arises out of an exception scheduled to any other representation and warranty made by Seller in any Exception Report.  No person other than the holder of such Purchased Asset may declare any event of default under the Purchased Asset or accelerate any indebtedness under the Purchased Asset Documents.

(39) Bankruptcy.  As of the date of origination of the related Purchased Asset and to Seller’s knowledge as of the Purchase Date, neither the Mortgaged Property nor any portion thereof is the subject of, and no Mortgagor, guarantor or tenant occupying a single-tenant property is a debtor in state or federal bankruptcy, insolvency or similar proceeding.

Exhibit III-1-

(40) Organization of Mortgagor.  With respect to each Purchased Asset, in reliance on certified copies of the organizational documents of the Mortgagor delivered by the Mortgagor in connection with the origination of such Purchased Asset, the Mortgagor is an entity organized under the laws of a state of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico.  No Purchased Asset has a Mortgagor that is an Affiliate of another borrower.

Seller has obtained an organizational chart or other description of each Mortgagor which identifies all beneficial controlling owners of the Mortgagor (i.e., managing members, general partners or similar controlling person for such Mortgagor) (the “Controlling Owner”) and all owners that hold a 20% or greater direct ownership share (the “Major Sponsors”).  Seller (a) required questionnaires to be completed by each Controlling Owner and guarantor or performed other processes designed to elicit information from each Controlling Owner and guarantor regarding such Controlling Owner’s or guarantor’s prior history regarding any bankruptcies or other insolvencies, any felony convictions, and (b) performed or caused to be performed searches of the public records or services such as Lexis/Nexis, or a similar service designed to elicit information about each Controlling Owner, Major Sponsor and guarantor regarding such Controlling Owner’s, Major Sponsor’s or guarantor’s prior history regarding any bankruptcies or other insolvencies, any felony convictions, and provided, however, that manual public records searches were limited to the last 10 years (clauses (a) and (b) collectively, the “Sponsor Diligence”).  Based solely on the Sponsor Diligence, to the knowledge of Seller, no Major Sponsor or guarantor (i) was in a state or federal bankruptcy or insolvency proceeding, (ii) had a prior record of having been in a state of federal bankruptcy or insolvency, or (iii) had been convicted of a felony.

(41) Environmental Conditions.  At origination, each Mortgagor represented and warranted that to its knowledge no hazardous materials or any other substances or materials which are included under or regulated by Environmental Laws are located on, or have been handled, manufactured, generated, stored, processed, or disposed of on or released or discharged from the Mortgaged Property, except for those substances commonly used in the operation and maintenance of properties of kind and nature similar to those of the Mortgaged Property in compliance with all Environmental Laws and in a manner that does not result in contamination of the Mortgaged Property or in a material adverse effect on the value, use or operations of the Mortgaged Property.

A Phase I environmental site assessment (or update of a previous Phase I and or Phase II site assessment) and, with respect to certain Purchased Assets, a Phase II environmental site assessment (collectively, an “ESA”) meeting ASTM requirements was conducted by a reputable environmental consultant in connection with such Purchased Asset within 12 months prior to its origination date (or an update of a previous ESA was prepared), and such ESA either (i) did not identify the existence of recognized “environmental conditions” as such term is defined in ASTM E1527-05 or its successor (the “Environmental Conditions”) at the related Mortgaged Property or the need for further investigation with respect to any Environmental Condition that was identified, or (ii) if the existence of an Environmental Condition or need for further investigation was indicated in any such ESA, then at least one of the following statements is true:  (A) an amount reasonably estimated by a reputable environmental consultant to be sufficient to cover the estimated cost to cure any material noncompliance with applicable environmental laws or the Environmental Condition has been escrowed by the related Mortgagor and is held or controlled by the related lender; (B) if the only Environmental Condition relates to the presence of asbestos-containing materials, radon in indoor air, lead based paint or lead in drinking water, and the only recommended action in the ESA is the institution of such a plan, an operations or maintenance plan has been required to be instituted by the related Mortgagor that can reasonably be expected to mitigate the identified risk; (C) the Environmental Condition identified in the related environmental report was remediated or abated in all material respects prior to the date hereof, and, if and as appropriate, a no further action or

Exhibit III-1-

closure letter was obtained from the applicable governmental regulatory authority (or the Environmental Condition affecting the related Mortgaged Property was otherwise listed by such governmental authority as “closed” or a reputable environmental consultant has concluded that no further action is required); (D)a secured creditor environmental policy or a pollution legal liability insurance policy that covers liability for the Environmental Condition was obtained from an insurer rated no less than “A-” (or the equivalent) by Moody’s, Standard & Poor’s and/or Fitch, Inc.; (E)a party not related to the Mortgagor was identified as the responsible party for such Environmental Condition and such responsible party has financial resources reasonably estimated to be adequate to address the situation; or (F)a party related to the Mortgagor having financial resources reasonably estimated to be adequate to address the situation is required to take action.  To Seller’s actual knowledge, except as set forth in the ESA, there is no Environmental Condition (as such term is defined in ASTM E1527-05 or its successor) at the related Mortgaged Property.

In the case of each Purchased Asset with respect to which there is an environmental insurance policy (the “Environmental Insurance Policy”), (i) such Environmental Insurance Policy has been issued by the issuer set forth in the related Exception Report (the “Policy Issuer”) and is effective as of the Purchase Date, (ii) as of origination and to Seller’s knowledge as of the Purchase Date the Environmental Insurance Policy is in full force and effect, there is no deductible and Seller is a named insured under such policy, (iii) (A) a property condition or engineering report was prepared, if the related Mortgaged Property was constructed prior to 1985, with respect to asbestos-containing materials (“ACM”) and, if the related Mortgaged Property is a multifamily property, with respect to radon gas (“RG”) and lead-based paint (“LBP”), and (B) if such report disclosed the existence of a material and adverse LBP, ACM or RG environmental condition or circumstance affecting the related Mortgaged Property, the related Mortgagor (1) was required to remediate the identified condition prior to closing the Purchased Asset or provide additional security or establish with the mortgagee a reserve in an amount deemed to be sufficient by Seller, for the remediation of the problem, and/or (2) agreed in the Purchased Asset Documents to establish an operations and maintenance plan after the closing of the Purchased Asset that should reasonably be expected to mitigate the environmental risk related to the identified LBP, ACM or RG condition, (iv) on the effective date of the Environmental Insurance Policy, Seller as originator had no knowledge of any material and adverse environmental condition or circumstance affecting the Mortgaged Property (other than the existence of LBP, ACM or RG) that was not disclosed to the Policy Issuer in one or more of the following:  (A) the application for insurance, (B) a Mortgagor questionnaire that was provided to the Policy Issuer, or (C) an engineering or other report provided to the Policy Issuer, and (v) the premium of any Environmental Insurance Policy has been paid through the maturity of the policy’s term and the term of such policy extends at least five years beyond the maturity of the Purchased Asset.

(42) Lease Estoppels.  With respect to each Purchased Asset secured by retail, office or industrial properties, Seller requested the related Mortgagor to obtain estoppels from each commercial tenant with respect to the rent roll delivered as of the origination date.  With respect to each Purchased Asset predominantly secured by a retail, office or industrial property leased to a single tenant, Seller reviewed such estoppel obtained from such tenant no earlier than 90 days prior to the origination date of the related Purchased Asset, and to Seller’s knowledge, (i) the related lease is in full force and effect and (ii) there exists no default under such lease, either by the lessee thereunder or by the lessor subject, in each case, to customary reservations of tenant’s rights, such as with respect to common area maintenance (“CAM”) and pass-through audits and verification of landlord’s compliance with co-tenancy provisions.  With respect to each Purchased Asset predominantly secured by a retail, office or industrial property, Seller has received lease estoppels executed within 90 days of the origination date of the related Purchased Asset that collectively account for at least 65% of the in-place base rent for the Mortgaged Property that secure a Purchased Asset that

Exhibit III-1-

is represented as of the origination date.  To Seller’s knowledge,  (i)each lease represented on the rent roll delivered as of the origination date is in full force and effect and (ii)there exists no material default under any such related lease that represents20% or more of the in-place base rent for the Mortgaged Property either by the lessee thereunder or by the related Mortgagor, subject, in each case, to customary reservations of tenant’s rights, such as with respect to CAM and pass-through audits and verification of landlord’s compliance with co-tenancy provisions.

(43) Appraisal.  The Purchased Asset File contains an appraisal of the related Mortgaged Property with an appraisal date within six months of the Purchased Asset origination date, and within 12 months of the Purchase Date.  The appraisal is signed by an appraiser who is a Member of the Appraisal Institute.  Each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation and has certified that such appraiser had no interest, direct or indirect, in the Mortgaged Property or the borrower or in any loan made on the security thereof, and its compensation is not affected by the approval or disapproval of the Purchased Asset.

(44) Purchased Asset Schedule.  The information pertaining to each Purchased Asset which is set forth in the Purchased Asset Schedule is true and correct in all material respects as of the Purchased Date and contains all information required by the Repurchase Agreement to be contained therein.

(45) Cross-Collateralization.  No Purchased Asset is cross-collateralized or cross-defaulted with any other mortgage loan that is not held by Administrative Agent.

(46) Advance of Funds by Seller.  After origination, no advance of funds has been made by Seller to the related Mortgagor other than in accordance with the Purchased Asset Documents, and, to Seller’s knowledge, no funds have been received from any person other than the related Mortgagor or an affiliate for, or on account of, payments due on the Purchased Asset (other than as contemplated by the Purchased Asset Documents, such as, by way of example and not in limitation of the foregoing, amounts paid by the tenant(s) into a lender-controlled lockbox if required or contemplated under the related lease or Purchased Asset Documents).  Neither Seller nor any affiliate thereof has any obligation to make any capital contribution to any Mortgagor under a Purchased Asset, other than contributions made on or prior to the date hereof.

(47) Compliance with Anti-Money Laundering Laws.  Seller has complied in all material respects with the Prescribed Laws.  Seller has established an anti-money laundering compliance program as required by the Prescribed Laws, has conducted the requisite due diligence in connection with the origination of the Purchased Asset for purposes of the Prescribed Laws, including with respect to the legitimacy of the applicable Mortgagor and the origin of the assets used by the said Mortgagor to purchase the property in question, and maintains, and will maintain, sufficient information to identify the applicable Mortgagor for purposes of the Prescribed Laws.

(48) OFAC.  (a) No Purchased Asset is (i) subject to nullification pursuant to Executive Order 13224 or the regulations promulgated by OFAC (the “OFAC Regulations”) or (ii) in violation of Executive Order 13224 or the OFAC Regulations, and (b) no Mortgagor is (i) subject to the provisions of Executive Order 13224 or (ii) listed as a “blocked person” for purposes of the OFAC Regulations.

(49) Floating Interest Rates.  Each Purchased Asset bears interest at a floating rate of interest that is based on LIBOR plus a margin (which interest rate may be subject to a minimum or “floor” rate).

Exhibit III-1-

(50) Senior Participations.  With respect to each Purchased Asset that is a Participation Interest:  (i) either (A) the Participation Interest is treated as a real estate asset for purposes of Section 856(c) of the Code, and the interest payable pursuant to such Participation Interest is treated as interest on an obligation secured by a mortgage on real property or on an interest in real property for purposes of Section 856(c) of the Code, or (B) the Participation Interest qualifies as a security that would not otherwise cause any parent REIT to fail to qualify as a REIT under the Code (including after the sale, transfer and assignment to Administrative Agent, on behalf of Buyers, of such Participation Interest); (ii) to the actual knowledge of Seller, as of the Purchase Date, the related participating Person was not a debtor in any outstanding proceeding pursuant to the federal bankruptcy code; and (iii) Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such Participation Interest is or may become obligated.

Exhibit III-1-

Exhibit III-2

REPRESENTATIONS AND WARRANTIES
REGARDING EACH PURCHASED ASSET THAT IS A MEZZANINE LOAN

With respect to each Purchased Asset that is a Mezzanine Loan and the related Mortgaged Property or Mortgaged Properties, on the related Purchase Date and at all times while this Agreement and any Transaction contemplated hereunder is in effect, Seller shall be deemed to make the following representations and warranties to Administrative Agent, on behalf of Buyers, as of such date; provided, however, that, with respect to any Purchased Asset, such representations and warranties shall be deemed to be modified by any Exception Report delivered by Seller to Administrative Agent, on behalf of Buyers, prior to the issuance of a Confirmation with respect thereto.

(1) The representations and warranties set forth in Exhibit III-1 regarding Mortgage Loans shall be deemed incorporated herein in respect of each underlying Mortgage Loan and the related Mortgaged Property and Mortgagor related to the Purchased Asset; provided that if such representation is duplicative of any specific representation regarding the underlying Mortgage Loan, underlying Mortgaged Property or the Mortgagor, the representation hereunder shall control.

(2) The Mezzanine Loan is a performing mezzanine loan secured by a pledge of all of the Capital Stock of a Mortgagor on the performing underlying Mortgage Loan that owns income producing commercial real estate.

(3) Whole Loan; Ownership of Purchased Assets.  Each Purchased Asset is an Eligible Asset.  At the time of the sale, transfer and assignment to Administrative Agent, on behalf of Buyers, no Mezzanine Note was subject to any assignment (other than assignments to Seller), participation or pledge, and Seller had good title to, and was the sole owner of, each Purchased Asset free and clear of any and all liens, charges, pledges, encumbrances, participations, any other ownership interests on, in or to such Purchased Asset, but subject to any related intercreditor agreement provided to Administrative Agent, on behalf of Buyers, prior to the Purchase Date.  Seller has full right and authority to sell, assign and transfer each Purchased Asset, and the assignment to Administrative Agent, on behalf of Buyers, constitutes a legal, valid and binding assignment of such Purchased Asset free and clear of any and all liens, pledges, charges or security interests of any nature encumbering such Purchased Asset, but subject to any related intercreditor agreement provided to Administrative Agent, on behalf of Buyers, prior to the Purchase Date.

(4) Loan Document Status.  Each related Mezzanine Note, Mezzanine Pledge Agreement, guaranty and other agreement executed by or on behalf of the Mezzanine Borrower, guarantor or other obligor in connection with such Purchased Asset is the legal, valid and binding obligation of the Mezzanine Borrower, guarantor or other obligor (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency, one-action or market value limit deficiency legislation), as applicable, and is enforceable in accordance with its terms, except (a) as such enforcement may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (b) that certain provisions in such Purchased Asset Documents (including, without limitation, provisions requiring the payment of default interest, late fees or prepayment/yield maintenance or prepayment fees, charges and/or premiums) are, or may be, further limited or rendered unenforceable by or under applicable law, but (subject to the limitations set forth in clause (a) above) such limitations or unenforceability will not render such Purchased Asset Documents invalid as a whole or materially interfere with the lender’s

Exhibit III-2-

realization of the principal benefits and/or security provided thereby (clauses(a) and (b)collectively, the “Standard Qualifications”).  Except as set forth in the immediately preceding sentences, there is no valid offset, defense, counterclaim or right of rescission available to Mezzanine Borrower with respect to any of the related Mezzanine Notes or other Purchased Asset Documents, including, without limitation, any such valid offset, defense, counterclaim or right based on intentional fraud by Seller in connection with the origination of the Purchased Asset, that would deny the lender the principal benefits intended to be provided by the Mezzanine Note, or other Purchased Asset Documents.

(5) Purchased Asset Document Provisions.  The Purchased Asset Documents for each Purchased Asset contain provisions that render the rights and remedies of the holder thereof adequate for the practical realization against the Capital Stock of the principal benefits of the security intended to be provided thereby, including realization by foreclosure subject to the limitations set forth in the Standard Qualifications.

(6) Hospitality Provisions.  The Purchased Asset Documents for each Purchased Asset for which the underlying Mortgage Loan is secured by a hospitality property operated pursuant to a franchise agreement includes an executed comfort letter or similar agreement signed by the Mortgagor and franchisor of such property enforceable against such franchisor, either directly or as an assignee of the originator.

(7) Waivers and Modifications.  Since origination and except by written instruments set forth in the related Purchased Asset File or as otherwise provided in the related Purchased Asset Documents (a) the material terms of such Mezzanine Note, guaranty, Mezzanine Pledge Agreement and related Purchased Asset Documents have not been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect that could have a material adverse effect on the Purchased Asset, (b) no related Capital Stock or any portion thereof has been released from the lien of the related Mezzanine Pledge Agreement in any manner which materially interferes with the security intended to be provided by such Mezzanine Pledge Agreement, and (c) neither Mezzanine Borrower nor the related guarantor nor the related participating Person has been released from its material obligations under the Purchased Asset Documents.  With respect to each Purchased Asset, except as contained in a written document included in the Purchased Asset File, there have been no modifications, amendments or waivers, that could be reasonably expected to have a material adverse effect on such Purchased Asset consented to by Seller.

(8) Lien.  Any security agreement, Mezzanine Pledge Agreement or equivalent document related to and delivered in connection with the Purchased Asset establishes and creates a valid and enforceable lien on property described therein, except as such enforcement may be limited by Standard Qualifications.

(9) Permitted Liens; Title Insurance.  Seller’s security interest in the collateral for the Mezzanine Loan is covered by a Title Policy in the original principal amount of such Purchased Asset after all advances of principal (including any advances held in escrow or reserves), that insures for the benefit of the owner of the Mezzanine Loan the first priority lien on the collateral for the Mezzanine Loan, which lien is subject only to the liens created by the Purchased Asset Documents.  Such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid and no claims have been made by Seller thereunder and no claims have been paid thereunder.  Neither Seller, nor to Seller’s knowledge, any other holder of the Purchased Asset, has done, by act or omission, anything that would materially impair the coverage under such Title Policy.

Exhibit III-2-

(10) UCC Filings.  Seller has filed or caused to be filed and (or, if not filed, have been submitted in proper form for filing), UCC-1 financing statements in the appropriate public filing offices necessary at the time of the origination of the Purchased Asset to perfect a valid security interest in all items of personal property owned by Mezzanine Borrower, to the extent perfection may be effected pursuant to applicable law by filing.  Subject to the Standard Qualifications, each related Mezzanine Pledge Agreement (or equivalent document) creates a valid and enforceable lien and security interest on the items of personalty described above.  No representation is made as to the perfection of any security interest in personal property to the extent that possession or control of such items or actions other than the filing of UCC-1 financing statements are required in order to effect such perfection.  Each UCC-1 financing statement, if any, filed with respect to personal property owned by such Mezzanine Borrower and each UCC-2 or UCC-3 assignment, if any, of such financing statement to Seller was in suitable form for filing in the filing office in which such financing statement was filed.

(11) Actions Concerning Purchased Asset.  As of the date of origination and to Seller’s knowledge as of the Purchase Date, there was no pending, filed or threatened action, suit or proceeding, arbitration or governmental investigation involving any Mezzanine Borrower, guarantor or Mortgagor, an adverse outcome of which would reasonably be expected to materially and adversely affect (a) such Mezzanine Borrower’s ownership of the Capital Stock in Mortgagor, (b) the validity or enforceability of the Purchased Asset Documents, (c) such Mezzanine Borrower’s or Mortgagor’s ability to perform under the related Purchased Asset Documents, (d) such guarantor’s ability to perform under the related guaranty, (e) the principal benefit of the security intended to be provided by the Purchased Asset Documents or (f) the current ability of the Mortgaged Property to generate net cash flow sufficient to service such Purchased Asset.

(12) Escrow Deposits.  All escrow deposits and payments required to be escrowed with lender pursuant to the Purchased Asset Documents are in the possession, or under the control, of Seller or its servicer, and there are no deficiencies (subject to any applicable grace or cure periods) in connection therewith, and all such escrows and deposits (or the right thereto) that are required to be escrowed with lender under the related Purchased Asset Documents are being conveyed by Seller to Administrative Agent, on behalf of Buyers, or its servicer.  Any and all requirements under the Purchased Asset Documents as to disbursements of any funds escrowed, which requirements were to have been complied with on or before the Purchase Date, have been complied with in all material respects or the funds so escrowed have not been released.  No other escrow amounts have been released except in accordance with the terms and conditions of the Purchased Asset Documents.

(13) No Holdbacks.  The principal balance of the Purchased Asset set forth on the Purchased Asset Schedule has been fully disbursed as of the Purchase Date and there is no requirement for future advances thereunder (except in those cases where the full amount of the Purchased Asset has been disbursed but a portion thereof is being held in escrow or reserve accounts pending the satisfaction of certain conditions relating to leasing, repairs or other matters with respect to the related Mortgaged Property, the Mortgagor or other considerations determined by Seller to merit such holdbacks), and any requirements or conditions to disbursements of any loan proceeds held in escrow have been satisfied with respect to any disbursements of any such escrow fund made on or prior to the date hereof.

(14) Insurance.  The Purchased Asset Documents require insurance proceeds in respect of a property loss to be applied either (a) to the repair or restoration of all or part of the underlying Mortgaged Property, with respect to all property losses in excess of 5% of the then outstanding principal amount of the related underlying Mortgage Loan, the mortgage lender (or a trustee appointed by it)

Exhibit III-2-

having the right to hold and disburse such proceeds as the repair or restoration progresses, or (b)to the reduction of the outstanding principal balance of the underlying Mortgage Loan together with any accrued interest thereon, with any excess applied to the existing outstanding principal balance of the Mezzanine Loan.  All premiums on all insurance policies referred to in this Paragraph(14) required to be paid as of the Purchase Date have been paid, and such insurance policies name the lender under the Purchased Asset and its successors and assigns as a loss payee under a mortgagee endorsement clause or, in the case of the general liability insurance policy, as named or additional insured.  Such insurance policies will inure to the benefit of Administrative Agent, on behalf of Buyers.  Each related Purchased Asset obligates the underlying Mortgagor to maintain all such insurance and, at such Mortgagor’s failure to do so, authorizes the lender to maintain such insurance at the Mortgagor’s cost and expense and to charge such Mortgagor for related premiums and other related expenses, including reasonable attorney’s fees.  All such insurance policies (other than commercial liability policies) require at least10days’ prior notice to the lender of termination or cancellation and no such notice has been received by Seller.

(15) No Contingent Interest or Equity Participation.  No Purchased Asset has a shared appreciation feature, any other contingent interest feature or a negative amortization feature (except that an anticipated repayment date loan may provide for the accrual of the portion of interest in excess of the rate in effect prior to the anticipated Repayment Date) or an equity participation by Seller.

(16) Compliance with Usury Laws.  The interest rate (exclusive of any default interest, late charges, yield maintenance charges, exit fees, or prepayment premiums) of such Purchased Asset complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

(17) Authorized to do Business.  To the extent required under applicable law, as of the Purchase Date and as of each date that such entity held the Mezzanine Note, each holder of the Mezzanine Note was authorized to transact and do business in the jurisdiction in which the underlying Mortgaged Property is located, or the failure to be so authorized does not materially and adversely affect the enforceability of such Purchased Asset by Administrative Agent, on behalf of Buyers.

(18) Compliance With Laws.  The Mezzanine Loan complies in all material respects with, or is exempt from, all requirements of federal, state or local law relating to such Mezzanine Loan.  The terms of the Purchased Asset Documents require Mezzanine Borrower and the underlying Mortgagor to comply in all material respects with all applicable governmental regulations, zoning and building laws.

(19) Licenses and Permits.  The Purchased Asset Documents require that Mezzanine Borrower shall cause each underlying Mortgagor to keep all material licenses, permits, franchises, certificates of occupancy, consents and applicable governmental authorizations necessary for its operation of the underlying Mortgaged Property in full force and effect, and to Seller’s knowledge based upon a letter from any government authorities or other affirmative investigation of local law compliance consistent with the investigation conducted by Seller for similar commercial, multifamily and manufactured housing community mortgage loans intended for securitization, all such material licenses, permits and applicable governmental authorizations are in effect.  The Purchased Asset Documents require the related underlying Mortgagor to be qualified to do business in the jurisdiction in which the related underlying Mortgaged Property is located and for Mezzanine Borrower, the underlying Mortgagor and the Mortgaged Property to be in compliance in all material respects with all regulations, zoning and building laws.

Exhibit III-2-

(20) Recourse Obligations.  The Purchased Asset Documents for each Purchased Asset provide that such Purchased Asset is non-recourse to the related parties thereto except that:  (a) Mezzanine Borrower and a guarantor (which is a natural person or persons, or an entity distinct from Mezzanine Borrower (but may be affiliated with Mezzanine Borrower) that has assets other than equity in the underlying Mortgagor that are not de minimis) shall be fully liable for losses, liabilities, costs and damages arising from certain acts of Mezzanine Borrower and/or its principals specified in the related Purchased Asset Documents, which acts generally include the following:  (i) acts of fraud or intentional material misrepresentation, (ii) misappropriation of rents (following an event of default), insurance proceeds or condemnation awards, (iii) intentional material physical waste of the underlying Mortgaged Property, (iv) intentional misconduct and (v) any breach of the environmental covenants contained in the related Purchased Asset Documents, and (b) the Purchased Asset shall become full recourse to Mezzanine Borrower and a guarantor (which is a natural person or persons, or an entity distinct from Mezzanine Borrower (but may be affiliated with Mezzanine Borrower) that has assets other than equity in the underlying Mortgagor that are not de minimis), upon any of the following events:  (i) if any petition for bankruptcy, insolvency, dissolution or liquidation pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed or consented to by Mezzanine Borrower, (ii) Mezzanine Borrower and/or its principals shall have colluded with other creditors to cause an involuntary bankruptcy filing with respect to Mezzanine Borrower or (iii) upon the transfer of the equity interests in the underlying Mortgagor made in violation of the Purchased Asset Documents.

(21) Collateral Release.  The terms of the related Mezzanine Pledge Agreement or related Purchased Asset Documents do not provide for release of any material portion of the collateral securing the Mezzanine Loan from the lien of the Mezzanine Pledge Agreement except (a) a partial release, accompanied by principal repayment of not less than a specified percentage at least equal to the lesser of (i) 110% of the related allocated loan amount of such portion of the collateral securing the Mezzanine Loan and (ii) the outstanding principal balance of the Purchased Asset, or (b) upon payment in full of such Purchased Asset.

(22) Financial Reporting and Rent Rolls.  The Purchased Asset Documents for each Purchased Asset require Mezzanine Borrower to provide the mezzanine lender with quarterly (other than for single-tenant properties) and annual operating statements, and quarterly (other than for single-tenant properties) rent rolls for properties that have leases contributing more than 5% of the in-place base rent and annual financial statements, which annual financial statements with respect to each Purchased Asset with more than one underlying Mortgagor or more than one Mezzanine Borrower are in the form of an annual combined balance sheet, as applicable, of the Mezzanine Borrower entities and the underlying Mortgagor entities (and no other entities), together with the related combined statements of operations, members’ capital and cash flows, including a combining balance sheet and statement of income for the underlying Mortgaged Properties on a combined basis.

(23) Acts of Terrorism Exclusion.  With respect to each Purchased Asset over $20 million, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) do not specifically exclude Acts of Terrorism, as defined in the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (collectively, the “TRIA”), from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy.  With respect to each other Purchased Asset, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) does not specifically exclude Acts of Terrorism, as defined in TRIA, from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy.  With respect to each Purchased Asset, the

Exhibit III-2-

related Purchased Asset Documents do not expressly waive or prohibit the mezzanine lender from requiring coverage for Acts of Terrorism, as defined in the TRIA, or damages related thereto except to the extent that any right to require such coverage may be limited by commercial availability on commercially reasonable terms; provided, however, that if the TRIA or a similar or subsequent statute is not in effect, then, provided that terrorism insurance is commercially available, the underlying Mortgagor under each Purchased Asset is required to carry terrorism insurance, but in such event the underlying Mortgagor shall not be required to spend on terrorism insurance coverage more than two times the amount of the insurance premium that is payable in respect of the property and business interruption/rental loss insurance required under the related Purchased Asset Documents (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance) at the time of the origination of the Purchased Asset, and if the cost of terrorism insurance exceeds such amount, the borrower is required to purchase the maximum amount of terrorism insurance available with funds equal to such amount.

(24) Due on Sale or Encumbrance.  Subject to specific exceptions set forth below, each Purchased Asset contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Purchased Asset if, without the consent of the mezzanine lender (which consent, in some cases, may not be unreasonably withheld) and/or complying with the requirements of the related Purchased Asset Documents (which provide for transfers without the consent of the lender which are customarily acceptable to prudent commercial and multifamily mortgage lending institutions on the security of property comparable to the collateral for the Mezzanine Loan, including, without limitation, transfers of worn-out or obsolete furnishings, fixtures, or equipment promptly replaced with property of equivalent value and functionality and transfers by leases entered into in accordance with the Purchased Asset Documents), (a) the related underlying Mortgaged Property or equity interest of greater than 50% in the related underlying Mortgagor, is directly or indirectly pledged, transferred or sold, other than as related to (i) family and estate planning transfers or transfers upon death or legal incapacity, (ii) transfers to certain affiliates as defined in the related Purchased Asset Documents, (iii) transfers that do not result in a change of Control of Mezzanine Borrower or the related underlying Mortgagor or transfers of passive interests so long as the guarantor retains Control, (iv) transfers to another holder of direct or indirect equity in the underlying Mortgagor, a specific Person designated in the related Purchased Asset Documents or a Person satisfying specific criteria identified in the related Purchased Asset Documents, such as a qualified equityholder, (v) transfers of stock or similar equity units in publicly traded companies, or (vi) to the extent set forth in any Exception Report, by reason of any mezzanine debt that existed at the origination of the related Purchased Asset, or future permitted mezzanine debt in each case as set forth in any Exception Report or (b) the related underlying Mortgaged Property is encumbered with a subordinate lien or security interest against the related underlying Mortgaged Property, other than any Permitted Encumbrances, or the collateral for the Mezzanine Loan is encumbered with a subordinate lien or security interest against such collateral, other than any liens granted pursuant to the Purchased Asset Documents.  The Purchased Asset Documents provide that to the extent any rating agency fees are incurred in connection with the review of and consent to any transfer or encumbrance, the Mezzanine Borrower is responsible for such payment along with all other reasonable fees and expenses incurred by the mezzanine lender relative to such transfer or encumbrance.  For purposes of the foregoing representation, “Control” means the power to direct the management and policies of an entity, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise.

(25) Single-Purpose Entity.  Each Purchased Asset requires Mezzanine Borrower to be a Single-Purpose Entity for at least as long as the Purchased Asset is outstanding.  Both the Purchased Asset Documents and the organizational documents of Mezzanine Borrower with respect to each

Exhibit III-2-

Purchased Asset with a principal amount on the Purchase Date of $5million or more provide that Mezzanine Borrower is a Single-Purpose Entity, and each Purchased Asset with a principal amount on the Purchase Date of $20million or more has a counsel’s opinion regarding non-consolidation of Mezzanine Borrower.  For purposes of this Paragraph(32), a “Single-Purpose Entity” shall mean an entity, other than an individual, whose organizational documents provide substantially to the effect that it was formed or organized solely for the purpose of owning the Capital Stock of the underlying Mortgagor securing the Purchased Assets and prohibit it from engaging in any business unrelated to owning such Capital Stock, and whose organizational documents further provide, or which entity represented in the related Purchased Asset Documents, substantially to the effect that it does not have any assets other than those related to its interest in the underlying Mortgagor, or any indebtedness other than as permitted by the related Mezzanine Pledge Agreement or the other related Purchased Asset Documents, that it has its own books and records and accounts separate and apart from those of any other person, and that it holds itself out as a legal entity, separate and apart from any other person or entity.

(26) Ground Leases.  With respect to any Purchased Asset where the underlying Mortgage Loan is secured by a leasehold estate under a Ground Lease in whole or in part, and the related underlying Mortgage does not also encumber the related lessor’s fee interest in such Mortgaged Property, based upon the terms of the Ground Lease and any estoppel or other agreement received from the ground lessor in favor of Seller, its successors and assigns, Seller represents and warrants that:

(a) (i) the Ground Lease or a memorandum regarding such Ground Lease has been duly recorded or submitted for recordation in a form that is acceptable for recording in the applicable jurisdiction; (ii) the Ground Lease or an estoppel or other agreement received from the ground lessor permits the interest of the lessee to be encumbered by the related Mortgage and does not restrict the use of the related Mortgaged Property by such lessee, its successors or assigns in a manner that would materially adversely affect the security provided by the related Mortgage and (iii) no material change in the terms of the Ground Lease had occurred since its recordation, except by any written instrument which are included in the related Purchased Asset File;

(b) the lessor under such Ground Lease has agreed in a writing included in the related Purchased Asset File (or in such Ground Lease) that the Ground Lease may not be amended or modified in any material respect, or canceled or terminated, without the prior written consent of the mezzanine lender (except termination or cancellation if (i) notice of a default under the Ground Lease is provided to mezzanine lender and (ii) such default is curable by mezzanine lender as provided in the Ground Lease but remains uncured beyond the applicable cure period), and no such consent has been granted by Seller since the origination of the Purchased Asset except as reflected in any written instruments which are included in the related Purchased Asset File;

(c) the Ground Lease has an original term (or an original term plus one or more optional renewal terms, which, under all circumstances, may be exercised, and will be enforceable, by either the underlying Mortgagor or the mortgagee) that extends not less than 20 years beyond the stated maturity of the related Purchased Asset, or 10 years past the stated maturity if such Purchased Asset fully amortizes by the stated maturity (or with respect to a Purchased Asset that accrues on an actual 360 basis, substantially amortizes);

(d) the Ground Lease either (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the underlying Mortgage, except for the related fee interest of the ground lessor and the Permitted Encumbrances, or (ii) is subject to a subordination, non-

Exhibit III-2-

disturbance and attornment agreement to which the mortgagee on the lessor’s fee interest in the underlying Mortgaged Property is subject;

(e) the Ground Lease does not place commercially unreasonable restrictions on the identity of the mortgagee and the Ground Lease is assignable to the holder of the Purchased Asset and its successors and assigns without the consent of the lessor thereunder, and in the event it is so assigned, it is further assignable by the holder of the Purchased Asset and its successors and assigns without the consent of the lessor;

(f) Seller has not received any written notice of material default under or notice of termination of such Ground Lease and, to Seller’s knowledge, there is no material default under such Ground Lease and no condition that, but for the passage of time or giving of notice, would result in a material default under the terms of such Ground Lease and to Seller’s knowledge, such Ground Lease is in full force and effect;

(g) the Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give to the lender written notice of any default, and provides that no notice of default or termination is effective against the lender unless such notice is given to the lender;

(h) a lender is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease through legal proceedings) to cure any default under the Ground Lease which is curable after the lender’s receipt of notice of any default before the lessor may terminate the Ground Lease;

(i) the Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial mortgage lender;

(j) under the terms of the Ground Lease, an estoppel or other agreement received from the ground lessor and the related underlying Mortgage (taken together), any related insurance proceeds or the portion of the condemnation award allocable to the ground lessee’s interest (other than (i) de minimis amounts for minor casualties or (ii) in respect of a total or substantially total loss or taking as addressed in Paragraph (26)(k) below) will be applied either to the repair or to restoration of all or part of the related underlying Mortgaged Property with (so long as such proceeds are in excess of the threshold amount specified in the related Purchased Asset Documents) the lender or a trustee appointed by it having the right to hold and disburse such proceeds as repair and restoration progresses, or, to the payment of the outstanding principal balance of the underlying Mortgage Loan, together with any accrued interest, with excess, if any, applied to the Mezzanine Loan;

(k) in the case of a total or substantially total taking or loss, under the terms of the Ground Lease, an estoppel or other agreement and the related underlying Mortgage (taken together), any related insurance proceeds, or portion of the condemnation award allocable to ground lessee’s interest in respect of a total or substantially total loss or taking of the related underlying Mortgaged Property to the extent not applied to restoration, will be applied first, pro rata, to the payment of the outstanding principal balance of the underlying Mortgage Loan and the Purchased Asset, together with any accrued interest; and

(l) provided that the lender cures any defaults which are susceptible to being cured, the ground lessor has agreed to enter into a new lease with the lender upon termination of the Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding.

Exhibit III-2-

If applicable, the ground lessor consented to and acknowledged that (i) the Mezzanine Loan is permitted / approved, (ii) any foreclosure of the Mezzanine Loan and related change in ownership of the ground lessee will not require the consent of the ground lessor or constitute a default under the ground lease, (iii) copies of default notices would be sent to mezzanine lender (or, in the alternative, mortgage lender has agreed to send such notice to mezzanine lender pursuant to the related intercreditor agreement) and (iv) it would accept cure from mezzanine lender on behalf of the ground lessee (or, in the alternative, mortgage lender has agreed to tender such cure on behalf of mezzanine lender pursuant to the related intercreditor agreement).

(27) Servicing.  The servicing and collection practices used by Seller with respect to the Purchased Asset have been, in all material respects, legal and have met customary industry standards for servicing of similar commercial loans.

(28) Origination and Underwriting.  The origination practices of Seller (or the related originator if Seller was not the originator) with respect to each Purchased Asset have been, in all material respects, legal and as of the date of its origination, such Purchased Asset and the origination thereof complied in all material respects with, or was exempt from, all requirements of federal, state or local laws and regulations relating to the origination of such Purchased Asset.  At the time of origination of such Purchased Asset, the origination, due diligence and underwriting performed by or on behalf of Seller in connection with each Purchased Asset complied in all material respects with the terms, conditions and requirements of Seller’s origination, due diligence, underwriting procedures, guidelines and standards for similar commercial and multifamily loans.

(29) Rent Rolls; Operating Histories.  Seller has obtained a rent roll (other than with respect to hospitality properties) certified by the related Mezzanine Borrower or the related guarantor(s) as accurate and complete in all material respects as of a date within 180 days of the date of origination of the related Purchased Asset.  Seller has obtained operating histories (the “Certified Operating Histories”) with respect to each underlying Mortgaged Property certified by the related Mezzanine Borrower or the related guarantor(s) as accurate and complete in all material respects as of a date within 180 days of the date of origination of the related Purchased Asset.  The Certified Operating Histories collectively report on operations for a period equal to (a) at least a continuous three-year period or (b) in the event the underlying Mortgaged Property was owned, operated or constructed by the underlying Mortgagor or an affiliate for less than three years then for such shorter period of time.

(30) No Material Default; Payment Record.  No Purchased Asset has been more than 30 days delinquent, without giving effect to any grace or cure period, in making required payments since origination, and as of the Purchased Date, no Purchased Asset is delinquent (beyond any applicable grace or cure period) in making required payments.  To Seller’s knowledge, there is (a) no, and since origination there has been no, material default, breach, violation or event of acceleration existing under the related Purchased Asset Documents, or (b) no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, which default, breach, violation or event of acceleration, in the case of either clause (a) or (b), materially and adversely affects the value of the Purchased Asset or the collateral for the Mezzanine Loan, or the value, use or operation of the underlying Mortgaged Property, provided, however, that this Paragraph (30) does not cover any default, breach, violation or event of acceleration that specifically pertains to or arises out of an exception scheduled to any other representation and warranty made by Seller in any Exception Report.  No person other than the holder of such Purchased Asset may declare any event of default under the Purchased Asset or accelerate any indebtedness under the Purchased Asset Documents.

Exhibit III-2-

(31) Bankruptcy.  As of the date of origination of the related Purchased Asset and to Seller’s knowledge as of the Purchase Date, no Mezzanine Borrower, guarantor or issuer is a debtor in state or federal bankruptcy, insolvency or similar proceeding.

(32) Organization of Mezzanine Borrower.  With respect to each Purchased Asset, in reliance on certified copies of the organizational documents of Mezzanine Borrower delivered by Mezzanine Borrower in connection with the origination of such Purchased Asset, Mezzanine Borrower is an entity organized under the laws of a state of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico.  No Purchased Asset has a Mezzanine Borrower that is an Affiliate of another Mezzanine Borrower.  Seller has obtained an organizational chart or other description of each Mezzanine Borrower which identifies all beneficial controlling owners of the Mezzanine Borrower (i.e., managing members, general partners or similar controlling person for such Mezzanine Borrower) (the “Controlling Owner”) and all owners that hold a 20% or greater direct ownership share (the “Major Sponsors”).  Seller (a) required questionnaires to be completed by each Controlling Owner and guarantor or performed other processes designed to elicit information from each Controlling Owner and guarantor regarding such Controlling Owner’s or guarantor’s prior history regarding any bankruptcies or other insolvencies, any felony convictions, and (b) performed or caused to be performed searches of the public records or services such as Lexis/Nexis, or a similar service designed to elicit information about each Controlling Owner, Major Sponsor and guarantor regarding such Controlling Owner’s, Major Sponsor’s or guarantor’s prior history regarding any bankruptcies or other insolvencies, any felony convictions, and provided, however, that manual public records searches were limited to the last 10 years (clauses (a) and (b) collectively, the “Sponsor Diligence”).  Based solely on the Sponsor Diligence, to the knowledge of Seller, no Major Sponsor or guarantor (i) was in a state or federal bankruptcy or insolvency proceeding, (ii) had a prior record of having been in a state of federal bankruptcy or insolvency, or (iii) had been convicted of a felony.

(33) Environmental Conditions.  In the case of each Purchased Asset with respect to which there is an environmental insurance policy (the “Environmental Insurance Policy”), (i) such Environmental Insurance has been issued by the issuer set forth in the related Exception Report (the “Policy Issuer”) and is effective as of the Purchase Date, (ii) as of origination and to Seller’s knowledge as of the Purchase Date the Environmental Insurance Policy is in full force and effect, there is no deductible and Seller is a named insured under such policy, (iii) (A) a property condition or engineering report was prepared, if the related underlying Mortgaged Property was constructed prior to 1985, with respect to asbestos-containing materials (“ACM”) and, if the related underlying Mortgaged Property is a multifamily property, with respect to radon gas (“RG”) and lead-based paint (“LBP”), and (B) if such report disclosed the existence of a material and adverse LBP, ACM or RG environmental condition or circumstance affecting the related underlying Mortgaged Property, the related underlying Mortgagor (1) was required to remediate the identified condition prior to closing the Purchased Asset or provide additional security or establish with the mortgagee a reserve in an amount deemed to be sufficient by Seller, for the remediation of the problem, and/or (2) agreed in the Purchased Asset Documents to establish an operations and maintenance plan after the closing of the Purchased Asset that should reasonably be expected to mitigate the environmental risk related to the identified LBP, ACM or RG condition, (iv) on the effective date of the Environmental Insurance Policy, Seller as originator had no knowledge of any material and adverse environmental condition or circumstance affecting the underlying Mortgaged Property (other than the existence of LBP, ACM or RG) that was not disclosed to the Policy Issuer in one or more of the following:  (A) the application for insurance, (B) an underlying Mortgagor questionnaire that was provided to the Policy Issuer, or (C) an engineering or other report provided to the Policy Issuer, and (v) the premium of any Environmental Insurance Policy has been paid through the

Exhibit III-2-

maturity of the policy’s term and the term of such policy extends at least five years beyond the maturity of the Purchased Asset.

(34) Lease Estoppels.  With respect to each Purchased Asset for which the underlying Mortgage Loan is secured by retail, office or industrial properties, Seller requested the related underlying Mortgagor to obtain estoppels from each commercial tenant with respect to the rent roll delivered as of the origination date.  With respect to each Purchased Asset for which the underlying Mortgage Loan is predominantly secured by a retail, office or industrial property leased to a single tenant, Seller reviewed such estoppel obtained from such tenant no earlier than 90 days prior to the origination date of the related Purchased Asset, and to Seller’s knowledge, (i) the related lease is in full force and effect and (ii) there exists no default under such lease, either by the lessee thereunder or by the lessor subject, in each case, to customary reservations of tenant’s rights, such as with respect to common area maintenance (“CAM”) and pass-through audits and verification of landlord’s compliance with co-tenancy provisions.  With respect to each Purchased Asset for which the underlying Mortgage Loan is predominantly secured by a retail, office or industrial property, Seller has received lease estoppels executed within 90 days of the origination date of the related Purchased Asset that collectively account for at least 65% of the in-place base rent for the underlying Mortgaged Property related to the Purchased Asset that is represented as of the origination date.  To Seller’s knowledge, (i) each lease represented on the rent roll delivered as of the origination date is in full force and effect and (ii) there exists no material default under any such related lease that represents 20% or more of the in-place base rent for the underlying Mortgaged Property either by the lessee thereunder or by the related underlying Mortgagor, subject, in each case, to customary reservations of tenant’s rights, such as with respect to CAM and pass-through audits and verification of landlord’s compliance with co-tenancy provisions.

(35) Appraisal.  The Purchased Asset File contains an appraisal of the related underlying Mortgaged Property with an appraisal date within six months of the Purchased Asset origination date, and within 12 months of the Purchase Date.  The appraisal is signed by an appraiser who is a Member of the Appraisal Institute.  Each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation and has certified that such appraiser had no interest, direct or indirect, in the underlying Mortgaged Property or the borrower or in any loan made on the security thereof, and its compensation is not affected by the approval or disapproval of the Purchased Asset.

(36) Purchased Asset Schedule.  The information pertaining to each Purchased Asset which is set forth in the Purchased Asset Schedule is true and correct in all material respects as of the Purchased Date and contains all information required by the Repurchase Agreement to be contained therein.

(37) Cross-Collateralization.  No Purchased Asset is cross-collateralized or cross-defaulted with any other loan, other than the related Mortgage Loan.

(38) Advance of Funds by Seller.  After origination, no advance of funds has been made by Seller to Mezzanine Borrower other than in accordance with the Purchased Asset Documents, and, to Seller’s knowledge, no funds have been received from any person other than Mezzanine Borrower or an affiliate for, or on account of, payments due on the Purchased Asset (other than as contemplated by the Purchased Asset Documents).  Neither Seller nor any affiliate thereof has any obligation to make any capital contribution to any Mezzanine Borrower under a Purchased Asset, other than contributions made on or prior to the date hereof.

Exhibit III-2-

(39) Compliance with Anti-Money Laundering Laws.  Seller has complied in all material respects with the Prescribed Laws.  Seller has established an anti-money laundering compliance program as required by the Prescribed Laws, has conducted the requisite due diligence in connection with the origination of the Purchased Asset for purposes of the Prescribed Laws, including with respect to the legitimacy of the applicable Mezzanine Borrower and the origin of the assets used by said Mezzanine Borrower to acquire the Capital Stock, and maintains, and will maintain, sufficient information to identify the applicable Mezzanine Borrower for purposes of the Prescribed Laws.

(40) OFAC.  (a) No Purchased Asset is (i) subject to nullification pursuant to Executive Order 13224 or the regulations promulgated by OFAC (the “OFAC Regulations”) or (ii) in violation of Executive Order 13224 or the OFAC Regulations, and (b) no Mezzanine Borrower is (i) subject to the provisions of Executive Order 13224 or (ii) listed as a “blocked person” for purposes of the OFAC Regulations.

(41) Floating Interest Rates.  Each Purchased Asset bears interest at a floating rate of interest that is based on LIBOR plus a margin (which interest rate may be subject to a minimum or “floor” rate).

(42) No consent or approval by any Person is required in connection with Seller’s sale and/or Administrative Agent’s acquisition of such Mezzanine Loan, for Administrative Agent’s exercise of any rights or remedies in respect of such Mezzanine Loan or for Administrative Agent’s, sale, pledge or other disposition of such Mezzanine Loan.  No third party holds any “right of first refusal”, “right of first negotiation”, “right of first offer”, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies.

(43) The related Purchased Asset Documents provide for the acceleration of the payment of the unpaid principal balance of the Mezzanine Loan if (i) Mezzanine Borrower voluntarily transfers or encumbers all or any portion of any related Capital Stock, or (ii) any direct or indirect interest in Mezzanine Borrower is voluntarily transferred or assigned, other than, in each case, as permitted under the terms and conditions of the related loan documents.

(44) Pursuant to the terms of the related Purchased Asset Documents:  (a) no material terms of any related underlying Mortgage Loan may be waived, canceled, subordinated or modified in any material respect and no material portion of such Mortgage or the underlying Mortgaged Property may be released without the consent of the holder of the Mezzanine Loan; (b) no material action may be taken by the Mortgagor with respect to the underlying Mortgaged Property without the consent of the holder of the Mezzanine Loan; and (c) the holder of the Mezzanine Loan’s consent is required prior to the Mortgagor incurring any additional indebtedness.

(45) Article 8 Opt-In.  The LLC Certificate of the issuer of the Capital Stock securing the Purchased Asset constitutes a “security” within the meaning of Article 8 of the UCC, and no amendment of the issuer’s operating agreement that amends the opt-in may be effected without the consent of the holder of the Mezzanine Loan.

Exhibit III-2-

Exhibit IV

FORM OF BAILEE AGREEMENT

[SELLER’S NAME AND ADDRESS]

_______________ __, 20__

[                                             ]

Re: Bailee Agreement (this “Bailee Agreement”) in connection with the sale of [description of Purchased Asset] by ACRES Real Estate SPE 10, LLC, as seller (“Seller”) to Morgan Stanley Mortgage Capital Holdings LLC, as administrative agent, on behalf of Buyers (together with its permitted successors and assigns, “Administrative Agent”)

Ladies and Gentlemen:

In consideration of the mutual premises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller, Administrative Agent, on behalf of Buyers, and [_________] (“Bailee”) hereby agree as follows:

1.Seller shall deliver to Bailee in connection with any Purchased Assets delivered to Bailee hereunder a Custodial Delivery Certificate in the form of Attachment 1 attached hereto (the “Custodial Delivery Certificate”) to which shall be attached a Purchased Asset Schedule identifying the Purchased Asset(s) being delivered to Bailee hereunder.  Such Purchased Asset Schedule shall contain the following fields of information:  (a) the loan identifying number; (b) the obligor’s name; (c) the street address, city, state and zip code for the applicable real property; (d) the original balance; and (e) the current principal balance if different from the original balance and such other information as Administrative Agent, on behalf of Buyers, shall require.

2.On or prior to the date indicated on the Custodial Delivery Certificate (the “Purchase Date”), Seller shall have delivered to Bailee, as bailee for hire, the original Purchased Asset File (as set forth on Exhibit B to Attachment 1) for each of the Purchased Assets listed in Exhibit A to Attachment 1.

3.Bailee shall issue and deliver to Administrative Agent, on behalf of Buyers, and Custodian (as defined in Section 5 below) on or prior to the Purchase Date by facsimile or other electronic transmission, in the name of Administrative Agent, on behalf of Buyers, an initial trust receipt and certification in the form of Attachment 1 attached hereto (the “Trust Receipt”), which Trust Receipt shall state that Bailee has received the original documents comprising the Purchased Asset File as set forth in the Custodial Delivery Certificate, in addition to such other documents required to be delivered to Administrative Agent, on behalf of Buyers, and/or Custodian pursuant to the Master Repurchase and Securities Contract Agreement dated as of November 3, 2021, among by and among Administrative Agent, on behalf of Morgan Stanley Bank, N.A., a national banking association (“MSBNA”), and such other financial institutions from time to time party thereto, as buyers (MSBNA, together with such other financial institutions from time to time party thereto, as buyers, and together with their respective successors and assigns, collectively, “Buyers” and individually, each a “Buyer”) and Seller (as the same may have been or may be amended from time to time, the “Repurchase Agreement”).

4.On the applicable Purchase Date, in the event that Administrative Agent, on behalf of Buyers, fails to purchase any New Asset from Seller that is identified in the related Custodial Delivery Certificate, Administrative Agent shall deliver by facsimile or other electronic transmission to Bailee at

Exhibit IV-

[_______] to the attention of [________], an authorization (the “Electronic Authorization”) to release the Purchased Asset Files with respect to the Purchased Assets identified therein to Seller.  Upon receipt of such Electronic Authorization, Bailee shall release the Purchased Asset Files to Seller in accordance with Seller’s instructions.

5.Following the Purchase Date, Bailee shall forward the Purchased Asset Files to [________________] (“Custodian”) by insured overnight courier for receipt by Custodian no later than 1:00 p.m. on the third (3rd) Business Day following the applicable Purchase Date (the “Delivery Date”).

6.From and after the applicable Purchase Date until the time of receipt of the Electronic Authorization or the applicable Delivery Date, as applicable, Bailee (a) shall maintain continuous custody and control of the related Purchased Asset Files as bailee for Administrative Agent, on behalf of Buyers, and (b) is holding the related Purchased Asset Files as sole and exclusive bailee for Administrative Agent, on behalf of Buyers, unless and until otherwise instructed in writing by Administrative Agent.

7.Seller agrees to indemnify and hold Bailee and its partners, directors, officers, agents and employees harmless against any and all actual and out-of-pocket third party liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including reasonable attorney’s fees, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of this Bailee Agreement or any action taken or not taken by it or them hereunder unless such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (other than special, indirect, punitive or consequential damages, which shall in no event be paid by Seller) were imposed on, incurred by or asserted against Bailee because of the breach by Bailee of its obligations hereunder, which breach was caused by negligence, lack of good faith or willful misconduct on the part of Bailee or any of its partners, directors, officers, agents or employees.  The foregoing indemnification shall survive any resignation or removal of Bailee or the termination or assignment of this Bailee Agreement.

8.In the event that the Bailee fails to produce any document in a Purchased Asset File related to a Purchased Asset that is (or was required to be) then in its possession within three (3) Business Days after required or requested by Seller or Administrative Agent, on behalf of Buyers (a “Bailee Delivery Failure”), the Bailee shall indemnify and hold Administrative Agent and Buyers harmless against actual out of pocket liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including reasonable attorneys fees, that may be imposed on, incurred by, or asserted against it in any way relating to or arising out of such Bailee Delivery Failure (but excluding special, indirect, punitive or consequential damages).

9.Seller agrees to indemnify and hold Administrative Agent and Buyers and their respective affiliates and designees harmless against any and all actual and out-of-pocket third party liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including reasonable attorneys fees, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of a Custodial Delivery Failure (as defined in the Custodial Agreement) or the Bailee’s negligence, lack of good faith or willful misconduct.  The foregoing indemnification shall survive any termination or assignment of this Bailee Agreement.

10.Seller hereby represents, warrants and covenants that Bailee is not an affiliate of or otherwise controlled by Seller.  Notwithstanding the foregoing, the parties hereby acknowledge that Bailee hereunder may act as counsel to Seller in connection with a proposed transaction.

11.This Bailee Agreement may not be modified, amended or altered, except by written instrument, executed by all of the parties hereto.

Exhibit IV-

12.This Bailee Agreement may not be assigned by Seller or Bailee without the prior written consent of Administrative Agent.

13.For the purpose of facilitating the execution of this Bailee Agreement as herein provided and for other purposes, this Bailee Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute and be one and the same instrument.  Each party to this Bailee Agreement (a) agrees that it will be bound by its own Electronic Signature, (b) accepts the Electronic Signature of each other party to this Bailee Agreement, and (c) agrees that such Electronic Signatures shall be the legal equivalent of manual signatures.

14.This Bailee Agreement shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

15.Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Repurchase Agreement.

[SIGNATURES COMMENCE ON NEXT PAGE]

Very truly yours,
ACRES REAL ESTATE SPE 10, LLC,
	a Delaware limited liability company, Seller
By:
	Name:
	Title:

Exhibit IV-

ACCEPTED AND AGREED:
[_______], Bailee
By:
	Name:
	Title:
ACCEPTED AND AGREED:
MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC,
a New York limited liability company, Administrative Agent
By:
	Name:
	Title:

ATTACHMENT 1 TO BAILEE AGREEMENT

CUSTODIAL DELIVERY CERTIFICATE²

²  Note:  EXHIBIT A – Purchased Asset Schedule; EXHIBIT B – Purchased Asset Documents.

Exhibit IV-

ATTACHMENT 2 TO BAILEE AGREEMENT

FORM OF BAILEE’S TRUST RECEIPT

____________, 20__
Morgan Stanley Mortgage Capital Holdings LLC
1585 Broadway, 2nd Floor
New York, New York 10036
Attention:  Anthony Preisano

Re: Bailee Agreement, dated __________, 20___ (the “Bailee Agreement”) among ACRES Real Estate SPE 10, LLC (“Seller”), Morgan Stanley Mortgage Capital Holdings LLC, as administrative agent, on behalf of Buyers (together with its permitted successors and assigns, “Administrative Agent”) and _______________ (“Bailee”)

Ladies and Gentlemen:

In accordance with the provisions of Section 3 of the Bailee Agreement, the undersigned, as Bailee, hereby certifies that as to the Purchased Asset described in the Purchased Asset Schedule (Exhibit A to Attachment 1 to the Bailee Agreement), it has reviewed the Purchased Asset File (Exhibit B to Attachment 1 to the Bailee Agreement) and has determined that (i) all documents listed in the Purchased Asset File attached to the Bailee Agreement are in its possession and (ii) such documents have been reviewed by it and appear regular on their face and relate to the Purchased Asset.

Bailee hereby confirms that it is holding the Purchased Asset File as agent and bailee for the exclusive use and benefit of Administrative Agent, on behalf of Buyers, pursuant to the terms of the Bailee Agreement.

All capitalized terms used herein and not defined herein shall have the meanings ascribed to them in the Bailee Agreement.

__________________________________________
Bailee

By:________________________________________
Name:
Title:

Exhibit IV-

Exhibit V

AUTHORIZED REPRESENTATIVES OF SELLER

Name	Specimen Signature
Kyle Brengel	/s/ Kyle Brengel
Jaclyn Jesberger	/s/ Jaclyn Jesberger
Michael Pierro	/s/ Michael Pierro
[●]
[●]

Exhibit V-

Exhibit VI

FORM OF FINANCIAL COVENANT COMPLIANCE CERTIFICATE

[_____________], 20[__]

Morgan Stanley Mortgage
Capital Holdings LLC
1585 Broadway, 25th Floor
New York, New York 10036
Attention:  Anthony Preisano

This Financial Covenant Compliance Certificate is furnished pursuant to that certain Master Repurchase and Securities Contract Agreement, dated as of November 3, 2021 (as amended, restated, supplemented, or otherwise modified and in effect from time to time, the “Master Repurchase and Securities Contract Agreement”), by and among Morgan Stanley Mortgage Capital Holdings LLC, a New York limited liability company, as administrative agent (in such capacity, together with its permitted successors and assigns, the “Administrative Agent”) for Morgan Stanley Bank, N.A., a national banking association (“MSBNA”), as Buyer (MSBNA, together with its successors and assigns, and together with such other financial institutions from time to time party thereto, collectively “Buyers” and individually, each a “Buyer”), and ACRES Real Estate SPE 10, LLC, a Delaware limited liability company, as seller (“Seller”).  Unless otherwise defined in the Master Repurchase and Securities Contract Agreement, capitalized terms used in this Financial Covenant Compliance Certificate have the respective meanings ascribed thereto in the Guaranty.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

(1) The Person executing this Financial Covenant Compliance Certificate on behalf of Seller is a duly elected responsible officer of Seller and such Person provides this Financial Covenant Compliance Certificate solely in such Person’s capacity as an officer of Seller and not in such Person’s individual capacity.

(2) All of the financial statements, calculations and other information set forth in this Financial Covenant Compliance Certificate, including, without limitation, in any exhibit or other attachment hereto, are true, complete and correct as of the date hereof.

(3) The Seller and Guarantor have reviewed the terms of the Master Repurchase and Securities Contract Agreement and have made, or have caused to be made under its supervision, a detailed review of the transactions and financial condition of Seller, and Guarantor during the accounting period covered by the financial statements attached (or most recently delivered to Buyer if none are attached).

(4) I am not aware of any facts, or pending developments that have caused, or may in the future cause the Market Value of any Purchased Asset to decline at any time within the reasonably foreseeable future.

(5) Each of Seller and Guarantor has, during the period since the delivery of the immediately preceding Financial Covenant Compliance Certificate, observed or performed all of its covenants, duties and agreements in all material respects, and satisfied in all material respects every condition contained in the Master Repurchase and Securities Contract Agreement and the related documents to be observed, performed or satisfied by it, and Seller and Guarantor have no knowledge of the occurrence during such period, or present existence, of any condition or event which constitutes an

Exhibit VI-

Event of Default or Default (including after giving effect to any pending Transactions requested to be entered into), except as set forth below.

(6) Attached as Exhibit 1 hereto are the financial statements required to be delivered pursuant to the Master Repurchase and Securities Contract Agreement (or, if none are required to be delivered as of the date of this Financial Covenant Compliance Certificate, the financial statements most recently delivered pursuant to the Master Repurchase and Securities Contract Agreement), which financial statements, to the best knowledge of Seller and Guarantor after due inquiry, fairly and accurately present in all material respects, the consolidated financial condition and operations of Guarantor, Guarantor’s Consolidated Subsidiaries and the consolidated results of their operations as of the date or with respect to the period therein specified, determined in accordance with GAAP.

(7) Guarantor is in compliance in all respects with the financial covenants set forth in Section 9 of the Guaranty (the “Financial Covenants”).  Attached as Exhibit 2 hereto are the calculations demonstrating compliance with the Financial Covenants.

(8) Except as otherwise set forth herein, all representations and warranties made by Seller, and Guarantor in, pursuant to or in connection with the Master Repurchase and Securities Contract Agreement or any other document, agreement, statement, affirmation, certificate, notice, report or financial or other statement delivered in connection herewith or therewith, are true, correct and complete on and as of the date of this Financial Covenant Compliance Certificate as though made on and as of such day and shall be deemed to be made on such day, except as to the extent disclosed in an Exception Report.

To the extent that financial statements are being delivered in connection with this Financial Covenant Compliance Certificate, Seller hereby makes the following representations and warranties:  (i) it is in compliance with all of the terms and conditions of the Master Repurchase and Securities Contract Agreement and (ii) it has no claim or offset against Administrative Agent and/or any Buyer under the Transaction Documents.

Described below are the exceptions, if any, to the above paragraphs, setting forth in detail the nature of the condition or event, the period during which it has existed and the action which Seller and/or Guarantor has taken, is taking, or proposes to take with respect to each such condition or event:

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

The foregoing certifications, together with the financial statements, updates, reports, materials, calculations and other information set forth in any exhibit or other attachment hereto, or otherwise covered by this Financial Covenant Compliance Certificate, are made and delivered this [__________], 20[__].

Exhibit VI-

SELLER:
ACRES REAL ESTATE SPE 10, LLC,
a Delaware limited liability company
By:
	Name:
	Title:
	Date:
GUARANTOR:
ACRES COMMERCIAL REALTY CORP.,
a Maryland corporation
By:
	Name:
	Title:
	Date:

Exhibit VI-

Annex I

NOTICE INSTRUCTIONS

ADMINISTRATIVE AGENT: Morgan Stanley Mortgage Capital Holdings LLC
1585 Broadway, 25th Floor
New York, New York 10036
Attention:  Anthony Preisano
Telephone:  (212) 761-5688
Email:  Anthony.Preisano@morganstanley.com

with a copy to: Morgan Stanley Bank, N.A.
One Utah Center, 201 South Main Street
Salt Lake City, Utah 84111

and to: Morgan Stanley Bank, N.A.
1 New York Plaza, 41st Floor
New York, New York 10004
Attention:  Tom O’Donnell
Telephone:  (212) 276-0616
Email:  wltapes@morganstanley.com

and to: Paul Hastings LLP
200 Park Avenue
New York, New York 10166
Attention:  Lisa A. Chaney, Esq.
Telephone:  (212) 318-6773
Email:  lisachaney@paulhastings.com

SELLER: ACRES Real Estate SPE 10, LLC
c/o ACRES Capital, LLC
390 RXR Plaza
Uniondale, NY 11556
Attention:  Mark Fogel
Telephone:  (516) 336-8122
Email:  MF@acrescap.com

with a copy to: Melissa C. Hinkle, Esq., Partner
Cadwalader, Wickersham & Taft LLP
200 Liberty Street, 36-117
New York, NY 10281
Telephone:  (212) 504-6972
Email:  melissa.hinkle@cwt.com

and to: ACRES Real Estate SPE 10, LLC
c/o ACRES Capital, LLC
390 RXR Plaza
Uniondale, NY 11556
Attention:  Jaclyn Jesberger
Telephone:  (516) 882-1662
Email:  jjesberger@acrescap.com

Annex I

Annex II

WIRING INSTRUCTIONS

Payments to Administrative Agent, on behalf of Buyers:  Payments to Administrative Agent, on behalf of Buyers under this Agreement shall be made by transfer, via wire transfer, to the following account of Administrative Agent, on behalf of Buyers:

Bank Name:  [_________]
ABA #:  [_________]
Account #:  [_________]
Account Name:  [_________]
Ref:  [_________]

Administrative Agent, on behalf of Buyers, may consider on a case-by-case-basis in its sole and absolute discretion alternative funding arrangements.

Payments to Seller:  Payments to Seller under this Agreement shall be made by transfer, via wire transfer, to the following account of Seller:

Bank: [_________]

ABA: [_________]

Account Name: [_________]

Account #: [_________]

Annex II

EX-99.4(B)

Exhibit 99.4(b)

GUARANTY

THIS GUARANTY, dated as of November 3, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, this “Guaranty”), made by ACRES COMMERCIAL REALTY CORP., a Maryland corporation (“Guarantor”), in favor of MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC, a New York limited liability company, as administrative agent (in such capacity, together with its permitted successors and assigns, the “Administrative Agent”) for MORGAN STANLEY BANK, N.A., a national banking association (“MSBNA”), and such other financial institutions from time to time party to the Repurchase Agreement (as defined below) as buyers (MSBNA, together with its successors and assigns, and together with such other financial institutions from time to time party to the Repurchase Agreement and their respective successors and assigns, collectively “Buyers” and individually, each a “Buyer”).

RECITALS

A.Pursuant to that certain Master Repurchase and Securities Contract Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the “Repurchase Agreement”), between Administrative Agent, on behalf of Buyers, Buyers, and ACRES REAL ESTATE SPE 10, LLC, a Delaware limited liability company (“Seller”), Seller has agreed to sell to Administrative Agent, on behalf of Buyers certain Purchased Assets (as defined in the Repurchase Agreement) upon the terms and subject to the conditions as set forth therein.  Pursuant to the terms of that certain Custodial Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the “Custodial Agreement”), by and among Administrative Agent, on behalf of Buyers, Seller and Wells Fargo Bank, N.A. (“Custodian”), Custodian is required to take possession of the Purchased Assets, along with certain other documents specified in the Custodial Agreement, as Custodian of Administrative Agent, on behalf of Buyers, and any future purchaser, on several delivery dates, in accordance with the terms and conditions of the Custodial Agreement.  Pursuant to the terms of that certain Pledge and Security Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the “Pledge Agreement”), made by ACRES Realty Funding, Inc., a Delaware corporation (“Pledgor”) in favor of Administrative Agent, on behalf of Buyers, Pledgor has pledged to Administrative Agent, on behalf of Buyers, all of the Pledged Collateral (as defined in the Pledge Agreement).  The Repurchase Agreement, the Custodial Agreement, the Blocked Account Agreement, the Servicing Agreement and Servicer Acknowledgment, the Fee Letter, the Pledge Agreement, the Power of Attorney to Administrative Agent, on behalf of Buyers, the Power of Attorney to Seller, all Transfer Documents, all Confirmations executed pursuant to the Repurchase Agreement and all other documents executed in connection herewith and therewith, and this Guaranty shall be referred to herein as the “Transaction Documents”.

B.Guarantor directly or indirectly owns one hundred percent (100%) of the legal and beneficial limited liability company interest in, and controls, Seller and Pledgor, and Guarantor will derive benefits, directly and indirectly, from the execution, delivery and performance by Seller of the Transaction Documents and the transactions contemplated by the Repurchase Agreement.

C.It is a condition precedent to Administrative Agent, on behalf of Buyers, acquiring the Purchased Assets pursuant to the Repurchase Agreement that Guarantor shall have executed and delivered this Guaranty.

NOW, THEREFORE, in consideration of the foregoing premises, to induce Administrative Agent, on behalf of Buyers, to enter into the Transaction Documents and to enter into the transactions contemplated thereunder, Guarantor hereby agrees with Administrative Agent, on behalf of Buyers, as follows:

1.Defined Terms.  Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings given them in the Repurchase Agreement.

“Adjusted Total Indebtedness” shall mean, with respect to Guarantor and its Consolidated Subsidiaries and any date, the Total Indebtedness of Guarantor minus the sum of Convertible Debt, Trust Preferred Securities, Senior Unsecured Notes and CRE Securitizations.

“Cash Equivalents” shall mean, with respect to any Person, any of the following, to the extent owned by such Person or any of its Consolidated Subsidiaries free and clear of all liens and having a maturity of not greater than thirty (30) days from the date of issuance thereof, readily marketable direct obligations of the government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States.

“CECL” shall have the meaning ascribed to such term in the definition of “Total Equity” in this Section 1.

“Convertible Debt” shall mean any security convertible or exchangeable for any Equity Interest at the option of the holder thereof for a pre-determined price.

“Consolidated Subsidiaries” shall mean, as of any date and any Person, any and all Subsidiaries or other entities that are consolidated with such Person in accordance with GAAP.

“CRE Securitizations” shall mean an investment-grade security backed by a pool of bonds, loans or other assets that has been issued by Guarantor or an Affiliate of Guarantor.

“EBITDA” shall mean, with respect to Guarantor and its Consolidated Subsidiaries and any period, determined without duplication on a consolidated basis in accordance with GAAP, an amount equal to the sum of (a) net income (or loss) of such Person (prior to any impact from minority interests and before deduction of any dividends on preferred stock of such Person), plus the following (but only to the extent actually included in determination of such net income (or loss)):  (i) depreciation and amortization expense, (ii) interest expense, (iii) income tax expense, (iv)  extraordinary or non-recurring gains and losses and (v) the CECL reserve, plus (b) Guarantor and its Consolidated Subsidiaries’ proportionate share of EBITDA of its unconsolidated Affiliates, all with respect to such period.

“Equity Interests” shall mean, with respect to Guarantor and its Consolidated Subsidiaries, (a) any share, interest, participation and other equivalent (however denominated) of capital stock of (or other ownership, equity or profit interests in) such Person, (b) any warrant, option or other

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right for the purchase or other acquisition from such Person of any of the foregoing, (c) any security convertible into or exchangeable for any of the foregoing, and (d) any other ownership or profit interest in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such share, warrant, option, right or other interest is authorized or otherwise existing on any date.

“Intangible Assets” shall mean all intangible assets of a Person, including, without limitation, capitalized servicing rights, goodwill, patents, tradenames, trademarks, copyrights, franchises, any organizational expenses, prepaid expenses, prepaid assets, receivables from Affiliates and any other asset as shown as an intangible asset on the balance sheet of such Person on a consolidated basis as determined at a particular date in accordance with GAAP; provided however that Intangible Assets shall exclude any intangible assets arising from the purchase price allocation of net lease assets by such Person as required by GAAP up to a maximum amount equal to the lesser of (x) $30,000,000, (y) 5% of the fair market value of real estate on the balance sheet of Guarantor and its consolidated Subsidiaries, as determined in accordance with GAAP, and (z) 5% of shareholders’ equity of Guarantor and its consolidated Subsidiaries as determined in accordance with GAAP.

“Interest Expense” shall mean, with respect to Guarantor and its Consolidated Subsidiaries and any period, determined without duplication on a consolidated basis, the amount of total interest expense incurred by Guarantor and its Consolidated Subsidiaries, including capitalized or accruing interest (but excluding (i) excess amortization of issuance costs of CRE Securitizations assets (a) early payoffs of any underlying assets in the CRE Securitizations or (b) issuer electing to early terminate the securities; (ii) the non-cash interest expense associated with Senior Unsecured Notes non-market discount, Convertible Debt and similar debt obligations with equity conversion or option features; (iii) non-cash amortization from terminated interest rate swaps or (iv) termination costs from indebtedness that is deemed non-recurring), plus Guarantor and its Consolidated Subsidiaries’ proportionate shares of interest expense from the joint venture investments in unconsolidated Affiliates of Guarantor and its Consolidated Subsidiaries, all with respect to such period.

“Liquidity” shall mean, with respect to Guarantor on any date, the amount of cash and Cash Equivalents (in each case, other than restricted cash) held by Guarantor.

“RRBM” shall have the meaning ascribed to such term in the definition of “Total Equity” in this Section 1.

“Senior Unsecured Notes” shall mean debt in the form of unsecured senior or senior subordinated notes issued by the Guarantor or an Affiliate of Guarantor.

“Tangible Net Worth” shall mean with respect to Guarantor and its Consolidated Subsidiaries, and as of any date (a) all amounts which would be included under shareholder’s equity of Guarantor and its Consolidated Subsidiaries on the balance sheet of Guarantor and its Consolidated Subsidiaries, as of such date, determined in accordance with GAAP, less (b) Intangible Assets of Guarantor and its Consolidated Subsidiaries.

“Test Period” shall mean the most recently completed calendar quarter.

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“Total Equity” shall mean, with respect to Guarantor and its Consolidated Subsidiaries as of any date, Guarantor’s consolidated shareholder’s equity as of such date of determination, as determined in accordance with GAAP, provided, however, that such determination in accordance with GAAP (a) shall not measure credit losses on Guarantor’s and its Consolidated Subsidiaries’ portfolio of loans in accordance with the Current Expected Credit Losses model (“CECL”); and (b) in lieu of CECL, such determination of credit losses on Guarantor’s and its Consolidated Subsidiaries’ portfolio of loans shall be determined in accordance with a risk rating-based methodology (“RRBM”) as disclosed in the financing receivables footnotes of Guarantor’s quarterly and annual financial reports filed with the Securities and Exchange Commission on Form 10-Q and Form 10-K, respectively, with the reserve being calculated by applying a credit loss to the face amount of the loan of 1.5% for loans rated 3, 5% for loans rated 4 and a specific loan credit loss for loans rated a 5, as amended from time to time as set forth in such financial reports, consistently applied.

“Total Indebtedness” shall mean, with respect to Guarantor and its Consolidated Subsidiaries as of any date, determined without duplication on a consolidated basis in accordance with GAAP, all amounts of Indebtedness of Guarantor and its Consolidated Subsidiaries plus their respective proportionate share of all Indebtedness of unconsolidated Affiliates in which any of them are an investor, on or as of such date.

“Trust Preferred Securities” shall mean REIT trust preferred securities that have been issued by Guarantor or an Affiliate of Guarantor.

2.Guaranty.  (a) Subject to Sections 2(b), 2(c) and 2(d) below, Guarantor hereby unconditionally and irrevocably guarantees to Administrative Agent, on behalf of Buyers, the prompt and complete payment and performance when due, whether at stated maturity, by acceleration of the Repurchase Date or otherwise, of all of the following:  (i) all payment obligations owing by Seller to Administrative Agent, on behalf of Buyers, under or in connection with the Repurchase Agreement or any of the other Transaction Documents or other agreements relating thereto, (ii) any and all extensions, renewals, modifications, amendments or substitutions of the foregoing, and (iii) any other obligations of Seller and Pledgor with respect to Administrative Agent, on behalf of Buyers, under each of the Transaction Documents (collectively, the “Obligations”).

(b)Notwithstanding anything herein to the contrary, but subject to Sections 2(c) and 2(d) below, which shall control, the maximum liability of Guarantor hereunder and under the Transaction Documents shall in no event exceed twenty-five percent (25%) of the Obligations.

(c)Notwithstanding the foregoing, or any other provision herein to the contrary, the limitation on recourse liability as set forth in Section 2(b) above SHALL BECOME NULL AND VOID and shall be of no further force and effect, and the Obligations shall be full recourse to Seller and Guarantor, jointly and severally, upon the occurrence of any of the following:  

(i)a voluntary bankruptcy or insolvency proceeding is commenced by Seller, Pledgor or Guarantor under the Bankruptcy Code or any similar federal or state law;

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(ii)an involuntary bankruptcy or insolvency proceeding is commenced against Seller, Pledgor or Guarantor in connection with which Seller, Pledgor, Guarantor, or any of their respective Affiliates has or have colluded in any way with the creditors commencing or filing such proceedings; and

(iii)any breach of the separateness covenants set forth in Article 13 of the Repurchase Agreement that results in the legal or equitable consolidation of any of the assets and/or liabilities of Seller or Pledgor with any other Person (including, without limitation, in connection with any proceeding under any Insolvency Law).

(d)In addition to the foregoing, and notwithstanding the limitations on recourse liability set forth in Section 2(b) above, Guarantor shall be liable to Administrative Agent, on behalf of Buyers, for any losses, costs, claims, expenses or other liabilities actually incurred by Administrative Agent, on behalf of Buyers, which are in any way attributable to:

(i)any material breach of the separateness covenants set forth in Article 13 of the Repurchase Agreement (other than as set forth in Section 2(c)(iii) above);

(ii)fraud, misrepresentation, willful misconduct or gross negligence by Seller, Pledgor or Guarantor, or any Affiliate of Seller, Pledgor or Guarantor in connection with the execution and delivery of this Guaranty, the Repurchase Agreement or any of the other Transaction Documents, or any certificate, report, financial statement or other instrument or document furnished to Administrative Agent, on behalf of Buyers, at the time of the closing of the Repurchase Agreement or during the term of the Repurchase Agreement;

(iii)Seller’s failure to obtain Administrative Agent’s, on behalf of Buyers, prior written consent to any subordinate financing or voluntary liens in each case that encumber any or all of the Purchased Assets that are not permitted under the Transaction Documents; and

(iv)any material breach of any representations and warranties by Guarantor contained in any Transaction Document or herein and any breach by Seller, Guarantor or any of their respective Affiliates, of any representations and warranties relating to Environmental Laws, or any indemnity for costs incurred in connection with the violation of any Environmental Law, the correction of any environmental condition, or the removal of any materials of environmental concern, in each case in any way affecting Seller’s or Guarantor’s properties or any of the Purchased Assets.

(e)Nothing herein shall be deemed a waiver of any right which Administrative Agent, on behalf of Buyers, may have under Sections 506(a), 506(b), 1111(b) or any other provision of the Bankruptcy Code to file a claim for the full amount of the outstanding obligations under the Repurchase Agreement or to require that all Purchased Assets shall continue to secure all of the outstanding obligations owing to Administrative Agent, on behalf of Buyers, in accordance with the Repurchase Agreement or any other Transaction Documents.

(f)Guarantor further agrees to pay any and all expenses (including, without limitation, all reasonable fees and disbursements of counsel) which may be paid or incurred by

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Administrative Agent, on behalf of Buyers, in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, Guarantor under this Guaranty.  This Guaranty shall remain in full force and effect until the date upon which the Obligations are paid in full.

(g)No payment or payments made by Seller, Pledgor or any other Person or received or collected by Administrative Agent, on behalf of Buyers, from Seller, Pledgor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of Guarantor hereunder which shall, notwithstanding any such payment or payments, remain liable for the amount of the Obligations under this Agreement until the Obligations are paid in full, but subject to the limitations on Guarantor’s liability under Section 2(b) above; provided that this provision is not intended to allow Administrative Agent, on behalf of Buyers, to recover an amount greater than  the amount of the Obligations.

(h)Guarantor agrees that whenever, at any time, or from time to time, Guarantor shall make any payment to Administrative Agent, on behalf of Buyers, on account of any liability hereunder, Guarantor will notify Administrative Agent, on behalf of Buyers, in writing that such payment is made under this Guaranty for such purpose.

(i)Notwithstanding anything to the contrary contained herein, in no event shall Guarantor have any liability under Sections 2(c) or 2(d) hereof for matters that relate to facts or circumstances that first arise from and after Administrative Agent, on behalf of Buyers, or its nominee or any third party takes title to, or ownership of (free and clear of any repurchase or redemption rights of Seller or Pledgor, or obligations of Buyers with respect to such rights under the Transaction Documents), the Purchased Assets or the collateral pledged under the Pledge Agreement, as applicable, in connection with the exercise by Administrative Agent, on behalf of Buyers, of remedies under the Repurchase Agreement or the Pledge Agreement, as applicable.

3. Subrogation.  Upon making any payment hereunder, Guarantor shall be subrogated to the rights of Administrative Agent, on behalf of Buyers, against Seller and Pledgor and any collateral for any Obligations with respect to such payment; provided, that Guarantor shall not seek to enforce any right or receive any payment by way of subrogation until all amounts due and payable by Seller or Pledgor to Administrative Agent, on behalf of Buyers, under the Transaction Documents or any related documents have been paid in full; provided, further, that such subrogation rights shall be subordinate in all respects to all amounts owing to Administrative Agent, on behalf of Buyers, under the Transaction Documents.  If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all of the Repurchase Obligations shall not have been paid in full, such amount shall be held by Guarantor in trust for Administrative Agent, on behalf of Buyers, segregated from other funds of Guarantor, and shall, forthwith upon receipt by Guarantor, be turned over to Administrative Agent, on behalf of Buyers, in the exact form received by Guarantor (duly indorsed by Guarantor to Administrative Agent, on behalf of Buyers, if required), to be applied against the Repurchase Obligations, whether matured or unmatured, in such order as Administrative Agent, on behalf of Buyers, may determine.

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4. Amendments, etc. with Respect to the Obligations.  Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against Guarantor, and without notice to or further assent by Guarantor, any demand for payment of any of the Obligations made by Administrative Agent, on behalf of Buyers, may be rescinded by Administrative Agent, on behalf of Buyers, and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by Administrative Agent, on behalf of Buyers, and any Transaction Document and any other document in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as Administrative Agent, on behalf of Buyers, may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by Administrative Agent, on behalf of Buyers, for the payment of the Obligations may be sold, exchanged, waived, surrendered or released.  Administrative Agent, on behalf of Buyers, shall have no obligation to protect, secure, perfect or insure any lien at any time held by it as security for the Obligations or for this Guaranty or any property subject thereto.  When making any demand hereunder against Guarantor, Administrative Agent, on behalf of Buyers, may, but shall be under no obligation to, make a similar demand on Seller or any other guarantor, and any failure by Administrative Agent, on behalf of Buyers, to make any such demand or to collect any payments from Seller or any such other guarantor or any release of Seller or such other guarantor shall not relieve Guarantor of its Obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of Administrative Agent, on behalf of Buyers, against Guarantor.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

5. Guaranty Absolute and Unconditional.  (a) Guarantor hereby agrees that its obligations under this Guaranty constitute a guarantee of payment when due and not of collection.  Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by Administrative Agent, on behalf of Buyers, upon this Guaranty or acceptance of this Guaranty; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guaranty; and all dealings between Seller and Guarantor, on the one hand, and Administrative Agent, on behalf of Buyers, on the other hand, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty.  Guarantor waives promptness, diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Seller or the Guaranty with respect to the Obligations.  This Guaranty shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (i) the validity, regularity or enforceability of any agreement, any of the Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by Administrative Agent, on behalf of Buyers, (ii) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by Seller against Administrative Agent, on behalf of Buyers, (iii) any requirement that Administrative Agent, on behalf of Buyers, exhaust any right to take any action against Seller or any other Person prior to or contemporaneously with proceeding to exercise any right against Guarantor under this Guaranty or (iv) any other circumstance whatsoever (with or without notice to or knowledge of Seller and Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of Seller for the Obligations or of Guarantor under this Guaranty, in bankruptcy or in

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any other instance.  When pursuing its rights and remedies hereunder against Guarantor, Administrative Agent, on behalf of Buyers, may, but shall be under no obligation, to pursue such rights and remedies that Administrative Agent, on behalf of Buyers, may have against Seller or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by Administrative Agent, on behalf of Buyers, to pursue such other rights or remedies or to collect any payments from Seller or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of Seller or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of Administrative Agent, on behalf of Buyers, against Guarantor.  This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon Guarantor and its successors and assigns thereof, and shall inure to the benefit of Administrative Agent, on behalf of Buyers, and its permitted successors, endorsees, transferees and assigns, until all the Obligations and the obligations of Guarantor under this Guaranty shall have been satisfied by payment in full.

(b) Without limiting the generality of the foregoing, Guarantor hereby agrees, acknowledges, and represents and warrants to Administrative Agent, on behalf of Buyers, as follows:

(i)Guarantor hereby waives any defense arising by reason of, and any and all right to assert against Administrative Agent, on behalf of Buyers, any claim or defense based upon, an election of remedies by Administrative Agent, on behalf of Buyers, which in any manner impairs, affects, reduces, releases, destroys and/or extinguishes Guarantor’s subrogation rights, rights to proceed against Seller, Pledgor or any other guarantor for reimbursement or contribution, and/or any other rights of Guarantor to proceed against Seller, Pledgor any other guarantor or any other person or security.

(ii)Guarantor is presently informed of the financial condition of Seller and of all other circumstances which diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations.  Guarantor hereby covenants that it will make its own investigation and will continue to keep itself informed about the financial condition of Seller and Pledgor, the status of other guarantor, if any, of all other circumstances which bear upon the risk of nonpayment and that it will continue to rely upon sources other than Administrative Agent, on behalf of Buyers, for such information and will not rely upon Administrative Agent, on behalf of Buyers, for any such information.  Absent a written request for such information by Guarantor to Administrative Agent, on behalf of Buyers, Guarantor hereby waives the right, if any, to require Administrative Agent, on behalf of Buyers, to disclose to Guarantor any information which Administrative Agent, on behalf of Buyers, may now or hereafter acquire concerning such condition or circumstances including, but not limited to, the release of or revocation by any other guarantor.

(iii)Guarantor has independently reviewed the Transaction Documents and related agreements and has made an independent determination as to the validity and enforceability thereof, and in executing and delivering this Guaranty to Administrative Agent, on behalf of Buyers, Guarantor is not in any manner relying upon the validity, and/or enforceability, and/or attachment, and/or perfection of any liens or security interests of any kind or nature granted by

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Seller, Pledgor or any other guarantor to Administrative Agent, on behalf of Buyers, now or at any time and from time to time in the future.

6. Reinstatement.  This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by Administrative Agent, on behalf of Buyers, upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Seller or Pledgor or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for Seller or any substantial part of the property of Seller or Pledgor, or otherwise, all as though such payments had not been made.

7. Payments.  Guarantor hereby agrees that the Obligations will be paid to Administrative Agent, on behalf of Buyers, without set-off or counterclaim in United States Dollars at the address specified in writing by Administrative Agent, on behalf of Buyers.

8. Representations and Warranties.  Guarantor represents and warrants that:

(a) It is duly incorporated, validly existing and in good standing under the laws and regulations of its jurisdiction of incorporation or organization, as the case may be.  It is duly licensed, qualified, and in good standing in every state where such licensing or qualification is necessary for the transaction of its business.  It has the power to own and hold the assets it purports to own and hold, and to carry on its business as now being conducted and proposed to be conducted, and has the power to execute, deliver, and perform its obligations under this Guaranty;

(b) This Guaranty has been duly executed by it, for good and valuable consideration.  This Guaranty constitutes a legal, valid and binding obligation of Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether enforcement is sought in proceedings in equity or at law);

(c) Guarantor does not believe, nor does it have any reason or cause to believe, that it cannot perform in all respects all covenants and obligations contained in this Guaranty applicable to it;

(d) The execution, delivery and performance of this Guaranty will not violate (i) its organizational documents, (ii) any contractual obligation to which it is now a party or constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of its assets, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to it, or (iv) any applicable Requirement of Law;

(e) There is no action, suit, proceeding, litigation, investigation, arbitration or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of Guarantor, threatened by or against Guarantor, Pledgor or Seller or against their respective assets (i) with respect to any of the Transaction Documents or any of the transactions contemplated hereby or thereby or (ii) in each case, to the extent that the same shall not be reasonably expected to have a Material Adverse Effect.  Guarantor is in compliance in all material respects with all Requirements of Law.  None of Guarantor, Pledgor or Seller is in default in any respect with

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respect to any judgment, order, writ, injunction, decree, rule, or regulation of any arbitrator or Governmental Authority;

(f) Guarantor has timely filed (taking into account all applicable extensions) all required federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes, assessments, fees, and other governmental charges payable by it, or with respect to any of its properties or assets, that have become due and payable except to the extent such amounts are being contested in good faith by appropriate proceedings for which appropriate reserves have been established in accordance with GAAP, and there is no claim relating to any such taxes now pending that was made in writing by any Governmental Authority and that is not being contested in good faith as provided above;

(g) No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority or any other Person is required to authorize, or is required in connection with, (i) the execution and performance of this Guaranty, (ii) the legality, validity, binding effect or enforceability of this Guaranty against it or (iii) the consummation of the transactions contemplated by this Guaranty, except filing obligations with the Securities and Exchange Commission arising in the ordinary course of Guarantor’s business as a public company, including, without limitation, 8K, 10Q and 10K filings, which have been obtained and are in full force and effect; and

(h) There are no judgments against Guarantor unsatisfied of record or docketed in any court located in the United States of America and no Act of Insolvency has ever occurred with respect to it.

Guarantor agrees that the foregoing representations and warranties shall be deemed to have been made by Guarantor on the date of each Transaction under the Repurchase Agreement, on and as of such date of the Transaction, as though made hereunder on and as of such date.

9. Financial Covenants.  

(a)Guarantor hereby agrees that, until the Repurchase Obligations have been paid in full, Guarantor shall not, with respect to itself and its Subsidiaries, directly or indirectly:

(i)permit its Liquidity at any time to be less than the greater of (A) Ten Million and NO/00 Dollars ($10,000,000.00) and (B) five percent (5%) of the aggregate outstanding Repurchase Price of all Purchased Assets as of such time;

(ii)permit its Tangible Net Worth at any time to be less than the sum of (1) Three Hundred Fifty Million and NO/00 Dollars ($350,000,000.00) plus, in each case, (2) seventy-five percent (75%) of the aggregate net proceeds received by Guarantor or any of its Affiliates from any equity capital raised following the date hereof;

(iii)permit, as of the end of any Test Period, the ratio of its (A) Total Indebtedness as of the end of such Test Period to (B) Total Equity as of the end of such  Test Period to exceed 6.00 to 1.00.  For the avoidance of doubt, any calculation of Total Indebtedness will include any and all recourse and non-recourse debt of any Consolidated Subsidiary of Guarantor;

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(iv)permit, as of the end of any Test Period, the ratio of its Adjusted Total Indebtedness as of the end of such Test Period to its Total Equity as of the end of such Test Period to be greater than 2.50 to 1.00; and

(v)permit, for any Test Period, the ratio of (i) the sum of the of the trailing four (4) fiscal quarters EBITDA for itself and its Consolidated Subsidiaries for such Test Period to (ii) the trailing four (4) fiscal quarters Interest Expense for itself and its Consolidated Subsidiaries for such Test Period to be less than 1.50 to 1.00.

(b)Guarantor’s compliance with the covenants set forth in this Section 9 must be evidenced by the financial statements and by a Financial Covenant Compliance Certificate in the form of Exhibit VI to the Repurchase Agreement furnished together therewith, as provided by Seller to Administrative Agent, on behalf of Buyers, pursuant to Sections 3(f) and 12(g) of the Repurchase Agreement and compliance with all such covenants are subject to continuing verification of Administrative Agent, on behalf of Buyers, and Guarantor shall provide (to the extent permitted by applicable law) information that is reasonably requested by Administrative Agent, on behalf of Buyers, with respect to any lawsuits and/or other matters disclosed in any financial statements of Guarantor delivered to Administrative Agent, on behalf of Buyers, or disclosed in any Form 8-K filed by Guarantor with the Securities and Exchange Commission which would reasonably be expected to have a material  adverse effect  on Guarantor’s ability to comply with the covenants set forth in this Section 9; provided, that, for the avoidance of doubt, such continued verification shall not obligate Guarantor or Seller to provide additional financial statements or Financial Covenant Compliance Certificates other than those required under Sections 3(f) and 12(g) of the Repurchase Agreement.

(c)Notwithstanding anything to the contrary contained in this Guaranty, in the event that Guarantor, Seller or any Affiliate thereof that is a Subsidiary of Guarantor has entered into or shall enter into or amend any other commercial real estate loan repurchase agreement, warehouse facility or credit facility with any other lender or repurchase buyer with terms more restrictive financial covenants thereunder than the covenants in Section 9(a) above (a “More Favorable Agreement”), then Guarantor or Seller shall (i) give notice to Administrative Agent of such more favorable terms promptly, and in no event less than five (5) Business Days’ prior the execution of such More Favorable Agreement, and (ii) enter into such amendments to the Transaction Documents as may be required by Administrative Agent to reflect such more favorable terms, which shall be deemed to be effective as of the date of Guarantor’s or Seller’s execution of such More Favorable Agreement.

10. Further Covenants of Guarantor:  

(a) Reserved.

(b) Anti-Money Laundering, Anti-Corruption and Economic Sanctions.

(i) Guarantor is in compliance, in all material respects, with (A) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and the United States

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Treasury Department of State, and any other applicable enabling legislation or executive order relating thereto, (B) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act of 2001), and (C) the United States Foreign Corrupt Practices Act of 1977, as amended, and any other applicable anti-bribery laws and regulations.  No part of the proceeds of any Transaction will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

(ii) Guarantor agrees that, from time to time upon the prior written request of Administrative Agent, on behalf of Buyers, it shall (A) execute and deliver such further documents, provide such additional information and reports and perform such other acts as Administrative Agent, on behalf of Buyers, may reasonably request in order to ensure compliance with the provisions hereof (including, without limitation, compliance with the USA PATRIOT Act of 2001 and to fully effectuate the purposes of this Agreement) and (B) provide such opinions of counsel concerning matters relating to this Guaranty as Administrative Agent, on behalf of Buyers, may reasonable request; provided, however, that nothing in this Section 10(b)(ii) shall be construed as requiring Administrative Agent, on behalf of Buyers, to conduct any inquiry or decreasing Guarantor’s responsibility for its statements, representations, warranties or covenants hereunder.  In order to enable Administrative Agent, on behalf of Buyers, and each of their respective Affiliates to comply with any anti-money laundering program and related responsibilities including, but not limited to, any obligations under the USA PATRIOT Act of 2001 and regulations thereunder, Guarantor on behalf of itself and its Affiliates makes the following representations and covenants to Administrative Agent, on behalf of Buyers, and each of their respective Affiliates, that neither Guarantor, nor, any of its Affiliates, is a Prohibited Person and  Guarantor is not acting on behalf of or on behalf of any Prohibited Person.  Guarantor agrees to promptly notify Administrative Agent, on behalf of Buyers, or a person appointed by Administrative Agent, on behalf of Buyers, to administer their anti-money laundering program, if applicable, of any change in information affecting this representation and covenant.

(c) Office of Foreign Assets Control.  Guarantor warrants, represents and covenants that neither Seller, any of its Affiliates or the Assets are or will be an entity or Person that is or is owned or controlled by a Prohibited Person or any Person that is the target of any Sanctions.  Guarantor covenants and agrees that, with respect to the Transactions under this Agreement, none of Guarantor or, to Guarantor’s Knowledge, any of its Affiliates will conduct any business, nor engage in any transaction, Assets or dealings, with any Prohibited Person or any Person who is the target of Sanctions.  Guarantor further covenants and agrees that it will not, directly or indirectly, use the proceeds of the facility, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the target of Sanctions.

(d) Financial Reporting.  Upon Administrative Agent’s, on behalf of Buyers, request, Guarantor shall provide, or cause to be provided, to Administrative Agent, on behalf of Buyers, copies of Guarantor’s consolidated Federal Income Tax returns, if any, delivered within thirty (30) days after the earlier of (A) filing or (B) the last filing extension period.

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(e) Limitation on Distributions.  After the occurrence and during the continuation of any monetary or material non-monetary Default or any Event of Default, Guarantor shall not declare or make any payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity or partnership interest of Guarantor, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Guarantor; provided, however, that notwithstanding the occurrence or continuance of any monetary or material non-monetary Default or any Event of Default, Guarantor may distribute the minimum amount of cash required to be distributed so that Guarantor can maintain its status as a “real estate investment trust” under Sections 856 through 860 of the Code and avoid the payment of any income or excise taxes imposed under Section 857(b)(1), 857 (b)(3) or 4981 of the Code.

(f) Compliance with Obligations and Laws.  Guarantor shall at all times (i) comply with all contractual obligations, (ii) comply in all material respects with all laws, ordinances, rules, regulations and orders, and comply in all respects with Environmental Laws, ordinances, rules, regulations and orders, in each case, of any Governmental Authority or any other federal, state, municipal or other public authority having jurisdiction over Guarantor or any of its assets, (iii) maintain and preserve its legal existence, and (iv) preserve all of its rights, privileges, licenses and franchises necessary for the operation of its business.  

(g) Books and Records.  Guarantor shall at all times keep proper books of records and accounts in which full, true and correct entries shall be made of its transactions fairly in accordance with GAAP, and set aside on its books from its earnings for each fiscal year all such proper reserves in accordance with GAAP.

(h)Change of Name; Place of Business.  Guarantor shall advise Administrative Agent, on behalf of Buyers, in writing of the opening of any new chief executive office or the closing of any such office of Guarantor and of any change in Guarantor’s name or jurisdiction of organization not less than fifteen (15) Business Days prior to taking any such action.  

(i)Accuracy of Information.  No information with respect to the Purchased Assets furnished in writing on behalf of Guarantor shall prove to have been false or misleading in any respect as of the time made or furnished.  

11. Right of Set-Off.  Guarantor hereby irrevocably authorizes Administrative Agent, and Buyers, and their Affiliates, without notice to Guarantor, any such notice being expressly waived by Guarantor to the extent permitted by applicable law, upon any Obligations becoming due and payable by Guarantor (whether at stated maturity, by acceleration or otherwise), to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Administrative Agent and Buyers to or for the credit or the account of Guarantor, or any part thereof in such amounts as Administrative Agent and Buyers may elect, against and on account of the obligations and liabilities of Guarantor to Administrative Agent, on behalf of Buyers, hereunder and claims of every nature and description of Administrative Agent, on behalf of Buyers, against Guarantor, in any currency, arising under any Transaction Document,

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as Administrative Agent and Buyers may elect, whether or not Administrative Agent, on behalf of Buyers, has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. Administrative Agent, on behalf of Buyers, shall notify Guarantor promptly of any such set-off and the application made by Administrative Agent or Buyer, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Administrative Agent and Buyers under this Section 11 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that each party may have.

12. Severability.  Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

13. Section Headings.  The section headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

14. No Waiver; Cumulative Remedies.  Administrative Agent, on behalf of Buyers, shall not by any act (except by a written instrument pursuant to Section 15 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default or event of default or in any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in exercising, on the part of Administrative Agent, on behalf of Buyers, of any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by Administrative Agent, on behalf of Buyers, of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Administrative Agent, on behalf of Buyers, would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.

15. Waivers and Amendments; Successors and Assigns; Governing Law.  None of the terms or provisions of this Guaranty may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Guarantor and Administrative Agent, on behalf of Buyers.  This Guaranty shall be binding upon the heirs, personal representatives, successors and assigns of Guarantor and shall inure to the benefit of Administrative Agent, on behalf of Buyers, and their respective successors and permitted assigns; provided, however, that Guarantor may not, without the prior written consent of Administrative Agent, on behalf of Buyers, assign any of Guarantor’s rights, powers, duties or obligations hereunder.  THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTIONS 5‑1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

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16. Notices.  Unless otherwise provided in this Agreement, all notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of delivery, (b) certified or registered United States mail, postage prepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of delivery or (d) by telecopier (with answerback acknowledged) or e-mail provided that such telecopied or e-mailed notice must also be delivered by one of the means set forth above, to the address specified below or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 16.  A notice shall be deemed to have been given: (w) in the case of hand delivery, at the time of delivery, (x) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day, (y) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day, or (z) in the case of email, upon receipt of confirmation, provided that such email notice was also delivered as required in this Section 16.  A party receiving a notice that does not comply with the technical requirements for notice under this Section 16may elect to waive any deficiencies and treat the notice as having been properly given.

Administrative Agent:	Morgan Stanley Mortgage Capital Holdings LLC 1585 Broadway, 25th Floor New York, New York 10036 Attention:  Mr. Anthony Preisano Email:Anthony.Preisano@morganstanley.com
with copies to:	Paul Hastings LLP 200 Park Avenue New York, New York 10166 Attention:  Lisa A. Chaney, Esq. Telephone:  (212) 318-6773 Email:  lisachaney@paulhastings.com
Guarantor:	ACRES Commercial Realty Corp. c/o ACRES Capital, LLC 390 RXR Plaza Uniondale, NY 11556 Attention:  Mark Fogel Telephone:  (516) 336-8122 Email:  MF@acrescap.com
with a copy to:	Melissa C. Hinkle, Esq. Partner Cadwalader, Wickersham & Taft LLP 200 Liberty Street 36-117 New York, NY 10281 Telephone:  (212) 504-6972 Email:  melissa.hinkle@cwt.com

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and to: ACRES Real Estate SPE 10, LLC c/o ACRES Capital, LLC
390 RXR Plaza
Uniondale, NY 11556
Attention:  Jaclyn Jesberger
Telephone:  (516) 882-1662
Email:  jjesberger@acrescap.com

17. SUBMISSION TO JURISDICTION; WAIVERS.  EACH OF GUARANTOR AND ADMINISTRATIVE AGENT, ON BEHALF OF BUYERS, HEREBY IRREVOCABLY AND UNCONDITIONALLY:

(A)SUBMITS TO THE NON- EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF, solely for the purpose of any suit, action or proceeding brought to enforce its obligations under this Guaranty or relating in any way to this Guaranty, the Repurchase Agreement or any Transaction under the Repurchase Agreement;

(B)CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY defense of an inconvenient forum to the maintenance of such action or proceeding in any such court and any right of jurisdiction on account of its place of residence or domicile;

(C)AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 16 HEREOF OR AT SUCH OTHER ADDRESS OF WHICH ADMINISTRATIVE AGENT, ON BEHALF OF BUYERS, SHALL HAVE BEEN NOTIFIED; AND

(D)AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

18. Integration.  This Guaranty represents the agreement of Guarantor with respect to the subject matter hereof and there are no promises or representations by Administrative Agent, on behalf of Buyers, relative to the subject matter hereof not reflected herein.

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19. Counterparts.  This Guaranty may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. This Guaranty and the Transaction Documents may be delivered by facsimile transmission, by electronic mail, or by other electronic transmission, in portable document format (.pdf) or otherwise, and each such executed facsimile, .pdf, or other electronic record shall be considered an original executed counterpart for purposes of this Guaranty and any Transaction Document. Each party to this Guaranty (a) agrees that it will be bound by its own Electronic Signature, (b) accepts the Electronic Signature of each other party to this Guaranty and any Transaction Document, and (c) agrees that such Electronic Signatures shall be the legal equivalent of manual signatures.

20. Acknowledgments.  Guarantor hereby acknowledges that:

(a) Guarantor has been advised by counsel in the negotiation, execution and delivery of this Guaranty and the related documents;

(b) Administrative Agent, on behalf of Buyers, does not have any fiduciary relationship to Guarantor, and the relationship between Administrative Agent, on behalf of Buyers,, on the one hand, and Guarantor, on the other, is solely that of creditor and surety; and

(c) no joint venture exists between or among any of Administrative Agent, on behalf of Buyers, Guarantor and/or Seller.

21. Intent.  Guarantor intends and acknowledges that (a) this Guaranty is “a security agreement or arrangement or other credit enhancement” that is “related to” and provided “in connection with” the Repurchase Agreement and each Transaction is within the meaning of Sections 101(38A)(A), 101(47)(a)(v) and 741(7)(A)(xi) of the Bankruptcy Code and is, therefore, (i) a “repurchase agreement” as that term is defined in Section 101(47)(A)(v) of the Bankruptcy Code, (ii) a “securities contract” as that term is defined in Section 741 (7)(A)(xi) of the Bankruptcy Code and (iii) a “master netting agreement” as that term is defined in Section 101 of the Bankruptcy Code, and (b) any party’s right to cause the termination, liquidation or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with the Repurchase Agreement and this Guaranty is in each case a contractual right to cause the termination, liquidation or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with this Guaranty as described in Sections 555, 559 and 561 of the Bankruptcy Code.  Guarantor agrees that it shall not challenge, and hereby waives to the fullest extent available under applicable law its right to challenge, the characterization of this Guaranty, the Repurchase Agreement or any Transaction thereunder as a “repurchase agreement,” “securities contract” and/or “master netting agreement,” within the meaning of the Bankruptcy Code.

22. WAIVERS OF JURY TRIAL.  EACH OF GUARANTOR AND, BY ACCEPTANCE OF THIS GUARANTY, ADMINISTRATIVE AGENT, ON BEHALF OF BUYERS, EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY RELATED DOCUMENT AND FOR ANY COUNTERCLAIM HEREIN OR THEREIN.

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IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered as of the date first above written.

GUARANTOR:
ACRES COMMERCIAL REALTY CORP., a
Maryland corporation
By:	/s/ Jaclyn Jesberger
	Name:	Jaclyn Jesberger
	Title:	Senior Vice President

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2021	Nov. 04, 2021
Document Information [Line Items]
Entity Registrant Name	ACRES COMMERCIAL REALTY CORP.
Entity Central Index Key	0001332551
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding (in shares)		9,423,608
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity File Number	1-32733
Entity Tax Identification Number	20-2287134
Entity Address, Address Line One	390 RXR Plaza
Entity Address, City or Town	Uniondale
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	11556
City Area Code	516
Local Phone Number	535-0015
Entity Interactive Data Current	Yes
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	MD
Former Address
Document Information [Line Items]
Entity Address, Address Line One	865 Merrick Avenue
Entity Address, Address Line Two	Suite 200 S
Entity Address, City or Town	Westbury
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	11590
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	ACR
Security Exchange Name	NYSE
8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock
Document Information [Line Items]
Title of 12(b) Security	8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock
Trading Symbol	ACRPrC
Security Exchange Name	NYSE
7.875% Series D Cumulative Redeemable Preferred Stock
Document Information [Line Items]
Title of 12(b) Security	7.875% Series D Cumulative Redeemable Preferred Stock
Trading Symbol	ACRPrD
Security Exchange Name	NYSE

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
ASSETS:
Cash and cash equivalents	$ 109,949	$ 29,355
Restricted cash	32,406	38,386
Accrued interest receivable	6,678	7,372
CRE loans	1,845,688	1,541,992
Less: allowance for credit losses	(18,863)	(34,310)
CRE loans, net	1,826,825	1,507,682
Investment securities available-for-sale		2,080
Principal paydowns receivable	25,010	4,250
Loan receivable - related party	11,675	11,875
Investments in unconsolidated entities	1,548	1,548
Investments in real estate	32,799	33,806
Right of use assets	5,984	5,592
Intangible assets	3,041	3,294
Other assets	5,835	8,783
Assets held for sale		61
Total assets	2,061,750	1,654,084
LIABILITIES
Accounts payable and other liabilities	3,987	2,068
Management fee payable - related party	1,128	442
Accrued interest payable	2,521	6,036
Borrowings	1,602,602	1,304,727
Lease liabilities	3,560	3,107
Distributions payable	3,260	1,725
Accrued tax liability	1	57
Liabilities held for sale	1,422	1,540
Total liabilities	1,618,481	1,319,702
STOCKHOLDERS’ EQUITY
Common stock, par value $0.001: 41,666,666 and 125,000,000 shares authorized; 9,423,608 and 10,162,289 shares issued and outstanding (including 333,329 and 11,610 of unvested restricted shares)	9	10
Additional paid-in capital	1,182,706	1,085,941
Accumulated other comprehensive loss	(8,594)	(9,978)
Distributions in excess of earnings	(730,862)	(741,596)
Total stockholders’ equity	443,269	334,382
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	2,061,750	1,654,084
8.625% Series C Preferred Stock
STOCKHOLDERS’ EQUITY
Preferred stock, value	5	$ 5
7.875% Series D Preferred Stock
STOCKHOLDERS’ EQUITY
Preferred stock, value	$ 5

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	41,666,666	125,000,000
Common stock, shares issued (in shares)	9,423,608	10,162,289
Common stock, shares outstanding (in shares)	9,423,608	10,162,289
Common stock, shares issued, non-vested restricted shares (in shares)	333,329	11,610
Assets of consolidated variable interest entities (VIEs) included in total assets above:
Restricted cash	$ 32,406	$ 38,386
Accrued interest receivable	6,678	7,372
Principal paydowns receivable	25,010	4,250
Other assets	5,835	8,783
Total assets of consolidated VIEs	2,061,750	1,654,084
Accounts payable and other liabilities	3,987	2,068
Accrued interest payable	2,521	6,036
Borrowings	1,602,602	1,304,727
Total liabilities of consolidated VIEs	$ 1,618,481	$ 1,319,702
8.625% Series C Preferred Stock
Assets of consolidated variable interest entities (VIEs) included in total assets above:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, liquidation preference (in dollars per share)	$ 25.00	$ 25.00
Preferred stock, coupon authorized	8.625%	8.625%
Preferred stock, shares issued (in shares)	4,800,000	4,800,000
Preferred stock, shares outstanding (in shares)	4,800,000	4,800,000
7.875% Series D Preferred Stock
Assets of consolidated variable interest entities (VIEs) included in total assets above:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	6,800,000	6,800,000
Preferred stock, liquidation preference (in dollars per share)	$ 25.00	$ 25.00
Preferred stock, coupon authorized	7.875%	7.875%
Preferred stock, shares issued (in shares)	4,600,000	0
Preferred stock, shares outstanding (in shares)	4,600,000	0
VIE, Primary Beneficiary
Assets of consolidated variable interest entities (VIEs) included in total assets above:
Restricted cash	$ 32,385	$ 38,353
Accrued interest receivable	4,089	5,398
CRE loans, pledged as collateral	1,169,809	1,231,184
Principal paydowns receivable	25,010	4,250
Other assets	314	114
Total assets of consolidated VIEs	1,231,607	1,279,299
Accounts payable and other liabilities	129	136
Accrued interest payable	679	806
Borrowings	960,709	1,027,929
Total liabilities of consolidated VIEs	$ 961,517	$ 1,028,871

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Interest income:
CRE loans	$ 23,946	$ 24,482	$ 74,294	$ 78,482
Securities	0	100	161	6,521
Other	40	56	73	168
Total interest income	23,986	24,638	74,528	85,171
Interest expense	14,534	13,033	46,960	43,974
Net interest income	9,452	11,605	27,568	41,197
Real estate income	2,627	0	7,013	0
Other revenue	$ 17	$ 19	$ 49	$ 62
Type of Revenue [Extensible List]	us-gaap:ProductAndServiceOtherMember	us-gaap:ProductAndServiceOtherMember	us-gaap:ProductAndServiceOtherMember	us-gaap:ProductAndServiceOtherMember
Total revenues	$ 12,096	$ 11,624	$ 34,630	$ 41,259
OPERATING EXPENSES
Management fees - related party	1,700	1,284	4,405	4,728
Equity compensation - related party	771	1,905	961	3,118
Real estate operating expenses	2,401	0	6,713	0
General and administrative	2,664	5,295	8,533	11,552
Depreciation and amortization	16	12	75	34
Provision for (reversal of) credit losses, net	537	(8,172)	(15,447)	49,449
Total operating expenses	8,089	324	5,240	68,881
Net interest and other revenues less operating expenses	4,007	11,300	29,390	(27,622)
OTHER INCOME (EXPENSE)
Net realized and unrealized gain (loss) on investment securities available-for-sale and loans and derivatives	0	96	878	(186,243)
Fair value and other adjustments on asset held for sale	0	(3,371)	0	(8,089)
Loss on extinguishment of debt	(9,006)	0	(9,006)	0
Other income	71	134	505	192
Total other income (expense)	(8,935)	(3,141)	(7,623)	(194,140)
(LOSS) INCOME BEFORE TAXES	(4,928)	8,159	21,767	(221,762)
Income tax benefit	0	0	0	0
NET (LOSS) INCOME	(4,928)	8,159	21,767	(221,762)
Net income allocated to preferred shares	(4,877)	(2,588)	(11,033)	(7,763)
NET (LOSS) INCOME ALLOCABLE TO COMMON SHARES	$ (9,805)	$ 5,571	$ 10,734	$ (229,525)
NET (LOSS) INCOME PER COMMON SHARE - BASIC	$ (1.03)	$ 0.51	$ 1.09	$ (21.47)
NET (LOSS) INCOME PER COMMON SHARE - DILUTED	$ (1.03)	$ 0.51	$ 1.09	$ (21.47)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC (in shares)	9,553,412	10,964,604	9,818,138	10,692,743
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED (in shares)	9,553,412	10,966,286	9,836,603	10,692,743

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement Of Income And Comprehensive Income [Abstract]
Net (loss) income	$ (4,928)	$ 8,159	$ 21,767	$ (221,762)
Other comprehensive income (loss):
Reclassification adjustments for realized losses on investment securities available-for-sale included in net (loss) income		106		185,463
Unrealized losses on investment securities available-for-sale, net				(191,283)
Reclassification adjustments associated with net unrealized losses from interest rate swaps included in net (loss) income	466	467	1,384	788
Unrealized losses on derivatives, net				(7,233)
Total other comprehensive income (loss)	466	573	1,384	(12,265)
Comprehensive (loss) income before allocation to preferred shares	(4,462)	8,732	23,151	(234,027)
Net income allocated to preferred shares	(4,877)	(2,588)	(11,033)	(7,763)
Comprehensive (loss) income allocable to common shares	$ (9,339)	$ 6,144	$ 12,118	$ (241,790)

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Cumulative Effect, Period of Adoption, Adjusted Balance	Common Stock	Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Preferred Stock 8.625% Series C Preferred Stock	Preferred Stock 8.625% Series C Preferred Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Preferred Stock 7.875% Series D Preferred Stock	Additional Paid-in Capital	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive (Loss) Income	Accumulated Other Comprehensive (Loss) Income Cumulative Effect, Period of Adoption, Adjusted Balance	Retained Earnings (Distributions In Excess of Earnings)	Retained Earnings (Distributions In Excess of Earnings) Cumulative Effect, Period of Adoption, Adjustment	Retained Earnings (Distributions In Excess of Earnings) Cumulative Effect, Period of Adoption, Adjusted Balance
Beginning balance at Dec. 31, 2019	$ 556,398	$ (3,032)	$ 553,366	$ 11	$ 11	$ 5	$ 5		$ 1,085,062	$ 1,085,062	$ 1,821	$ 1,821	$ (530,501)	$ (3,032)	$ (533,533)
Beginning balance (in shares) at Dec. 31, 2019				10,626,864	10,626,864
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation (in shares)				63,818
Amortization of stock-based compensation	498								498
Forfeiture of unvested stock (in shares)				(9,996)
Net (loss) income	(196,521)												(196,521)
Distributions and accrual of cumulative preferred stock dividends	(2,588)												(2,588)
Securities available-for-sale without an allowance for credit losses, fair value adjustment, net	(5,926)										(5,926)
Designated derivatives, fair value adjustment	(6,772)										(6,772)
Ending balance at Mar. 31, 2020	342,057			$ 11		5			1,085,560		(10,877)		(732,642)
Ending balance (in shares) at Mar. 31, 2020				10,680,686
Beginning balance at Dec. 31, 2019	556,398	$ (3,032)	$ 553,366	$ 11	$ 11	5	$ 5		1,085,062	$ 1,085,062	1,821	$ 1,821	(530,501)	$ (3,032)	$ (533,533)
Beginning balance (in shares) at Dec. 31, 2019				10,626,864	10,626,864
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(221,762)
Ending balance at Sep. 30, 2020	317,801			$ 11		5			1,091,287		(10,444)		(763,058)
Ending balance (in shares) at Sep. 30, 2020				10,697,774
Beginning balance at Mar. 31, 2020	342,057			$ 11		5			1,085,560		(10,877)		(732,642)
Beginning balance (in shares) at Mar. 31, 2020				10,680,686
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation (in shares)				5,477
Amortization of stock-based compensation	715								715
Net (loss) income	(33,400)												(33,400)
Accrual of cumulative preferred stock dividends	(2,587)												(2,587)
Designated derivatives, fair value adjustment	(140)										(140)
Ending balance at Jun. 30, 2020	306,645			$ 11		5			1,086,275		(11,017)		(768,629)
Ending balance (in shares) at Jun. 30, 2020				10,686,163
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity component of 12% Senior Unsecured Notes	3,108								3,108
Stock-based compensation	(1)								(1)
Stock-based compensation (in shares)				11,611
Amortization of stock-based compensation	1,905								1,905
Net (loss) income	8,159												8,159
Accrual of cumulative preferred stock dividends	(2,588)												(2,588)
Securities available-for-sale without an allowance for credit losses, fair value adjustment, net	106										106
Designated derivatives, fair value adjustment	467										467
Ending balance at Sep. 30, 2020	317,801			$ 11		5			1,091,287		(10,444)		(763,058)
Ending balance (in shares) at Sep. 30, 2020				10,697,774
Beginning balance at Dec. 31, 2020	$ 334,382			$ 10		5			1,085,941		(9,978)		(741,596)
Beginning balance (in shares) at Dec. 31, 2020	10,162,289			10,162,289
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Purchase and retirement of common stock	$ (9,519)			$ (1)					(9,518)
Purchase and retirement of common stock (in shares)				(744,778)
Amortization of stock-based compensation	19								19
Net (loss) income	13,056												13,056
Distributions and accrual of cumulative preferred stock dividends	(2,588)												(2,588)
Amortization of terminated derivatives	456										456
Ending balance at Mar. 31, 2021	335,806			$ 9		5			1,076,442		(9,522)		(731,128)
Ending balance (in shares) at Mar. 31, 2021				9,417,511
Beginning balance at Dec. 31, 2020	$ 334,382			$ 10		5			1,085,941		(9,978)		(741,596)
Beginning balance (in shares) at Dec. 31, 2020	10,162,289			10,162,289
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	$ 21,767
Ending balance at Sep. 30, 2021	$ 443,269			$ 9		5		$ 5	1,182,706		(8,594)		(730,862)
Ending balance (in shares) at Sep. 30, 2021	9,423,608			9,423,608
Beginning balance at Mar. 31, 2021	$ 335,806			$ 9		5			1,076,442		(9,522)		(731,128)
Beginning balance (in shares) at Mar. 31, 2021				9,417,511
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Proceeds from issuance of preferred stock	115,000							5	114,995
Offering costs	(4,235)								(4,235)
Purchase and retirement of common stock	(4,317)								(4,317)
Purchase and retirement of common stock (in shares)				(273,789)
Stock-based compensation (in shares)				333,329
Amortization of stock-based compensation	171								171
Net (loss) income	13,639												13,639
Distributions and accrual of cumulative preferred stock dividends	(3,568)												(3,568)
Amortization of terminated derivatives	462										462
Ending balance at Jun. 30, 2021	452,958			$ 9		5		5	1,183,056		(9,060)		(721,057)
Ending balance (in shares) at Jun. 30, 2021				9,477,051
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Offering costs	(232)								(232)
Purchase and retirement of common stock	(889)								(889)
Purchase and retirement of common stock (in shares)				(53,443)
Amortization of stock-based compensation	771								771
Net (loss) income	(4,928)												(4,928)
Distributions and accrual of cumulative preferred stock dividends	(4,877)												(4,877)
Amortization of terminated derivatives	466										466
Ending balance at Sep. 30, 2021	$ 443,269			$ 9		$ 5		$ 5	$ 1,182,706		$ (8,594)		$ (730,862)
Ending balance (in shares) at Sep. 30, 2021	9,423,608			9,423,608

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical)	Sep. 30, 2020
12% Senior Unsecured Notes
Debt instrument, interest rate, stated percentage	12.00%

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$ 21,767	$ (221,762)
Adjustments to reconcile net income (loss) from operations to net cash provided by operating activities:
(Reversal of) provision for credit losses, net	(15,447)	49,449
Depreciation, amortization and accretion	11,943	4,298
Amortization of stock-based compensation	961	3,118
Net realized and unrealized (gain) loss on investment securities available-for-sale and loans and derivatives	(878)	186,177
Fair value and other adjustments on asset held for sale	0	8,089
Loss on extinguishment of debt	4,043
Changes in operating assets and liabilities	3,105	(9,080)
Net cash provided by operating activities	25,494	20,289
CASH FLOWS FROM INVESTING ACTIVITIES:
Origination and purchase of loans	(964,357)	(209,102)
Principal payments received on loans	644,954	340,462
Proceeds from sale of loans		17,453
Purchase of investment securities available-for-sale		(24,610)
Principal payments on investment securities available-for-sale		4,733
Proceeds from sale of investment securities available-for-sale	2,958	37,764
Investment in loan - related party		(12,000)
Principal payments received on loan - related party	200	25
Purchase of furniture and fixtures	(176)
Net cash (used in) provided by investing activities	(316,421)	154,725
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock (net of $4,467 of underwriting discounts and offering costs)	110,533
Repurchase of common stock	(14,725)
Proceeds from borrowings:
Securitizations	675,223	639,074
Senior secured financing facility	131,878	128,495
Warehouse financing facilities and repurchase agreements	591,890	275,039
Senior unsecured notes	150,000	50,000
Payments on borrowings:
Securitizations	(745,386)	(319,418)
Senior secured financing facility	(124,056)
Warehouse financing facilities and repurchase agreements	(284,890)	(827,684)
Convertible senior notes	(55,736)	(21,182)
Senior unsecured notes	(50,000)
Payment of debt issuance costs	(9,692)	(14,774)
Settlement of derivative instruments		(11,762)
Distributions paid on preferred stock	(9,498)	(2,588)
Distributions paid on common stock		(8,767)
Net cash provided by (used in) financing activities	365,541	(113,567)
NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	74,614	61,447
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEG. OF PERIOD	67,741	94,434
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$ 142,355	$ 155,881

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical)	9 Months Ended
	Sep. 30, 2021 USD ($)
Statement Of Cash Flows [Abstract]
Underwriting discounts and offering costs	$ 4,467

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ORGANIZATION

9 Months Ended

Sep. 30, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

ORGANIZATION

NOTE 1 - ORGANIZATION

ACRES Commercial Realty Corp., a Maryland corporation, along with its subsidiaries (collectively, the “Company”), is a real estate investment trust (“REIT”) that is primarily focused on originating, holding and managing commercial real estate (“CRE”) mortgage loans and other commercial real estate-related debt investments. On July 31, 2020, the Company’s management contract was acquired from Exantas Capital Manager Inc. (the “Prior Manager”), a subsidiary of C-III Capital Partners LLC (“C-III”), by ACRES Capital, LLC (the “Manager”), a subsidiary of ACRES Capital Corp. (collectively, “ACRES”), a private commercial real estate lender exclusively dedicated to nationwide middle market CRE lending with a focus on multifamily, student housing, hospitality, office and industrial property in top United States (“U.S.”) markets (the “ACRES acquisition”).

The Company has qualified, and expects to qualify in the current fiscal year, as a REIT.

The Company conducts its operations through the use of subsidiaries that it consolidates into its financial statements. The Company’s core assets are consolidated through its investment in ACRES Realty Funding, Inc. (“ACRES RF”), a wholly-owned subsidiary that holds CRE loans, CRE-related securities and investments in CRE securitizations, which are consolidated as VIEs as discussed in Note 3, and special purpose entities.

Reverse Stock Split

Effective February 16, 2021, the Company completed a one-for-three reverse stock split of its outstanding common stock. The accompanying financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented. In addition, the Company adopted articles of amendment to its charter, which provided that the par value of the Company’s common stock remained $0.001 immediately after effect was given for the reverse stock split. No fractional shares were issued in connection with the reverse stock split. Stockholders who otherwise held fractional shares of the Company’s common stock as a result of the reverse stock split received a cash payment in lieu of such fractional shares. In May 2021, the Company adopted articles of amendment to its charter to decrease its authorized shares of capital stock from 225,000,000 shares, consisting of 125,000,000 shares of common stock and 100,000,000 shares of preferred stock to 141,666,666 shares, consisting of 41,666,666 shares of common stock and 100,000,000 shares of preferred stock.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the accounting policies set forth in Note 2 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The consolidated financial statements include the accounts of the Company, majority-owned or controlled subsidiaries and VIEs for which the Company is considered the primary beneficiary. All inter-company transactions and balances have been eliminated in consolidation.

Basis of Presentation

All adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows have been made.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management 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 within the period of financial results. Actual results could differ from those estimates. Estimates affecting the accompanying consolidated financial statements include but are not limited to the net realizable and fair values of the Company’s investments and derivatives, the estimated useful lives used to calculate depreciation, the expected lives over which to amortize premiums and accrete discounts, reversals of or provisions for expected credit losses and the disclosure of contingent liabilities.

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified. The resulting global proliferation of the virus led the World Health Organization to designate COVID-19 as a pandemic and numerous countries, including the U.S., to declare national emergencies. Many countries responded to the outbreak by instituting quarantines and restrictions on travel, which resulted in the closure or remote operation of non-essential businesses. Such actions produced material and previously unforeseeable shocks to global markets, disruptions to global supply chains and adversity to many industries and economies as whole. While the U.S. and certain countries around the world have eased restrictions and financial markets have stabilized to some degree in connection with the discovery and distribution of vaccines, the pandemic, exacerbated by virus variants, continues to cause uncertainty on the U.S. and global economies generally, and the CRE business in particular, that make estimates and assumptions as of September 30, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19. The Company believes the estimates and assumptions underlying the consolidated financial statements are reasonable and supportable based on the information available at September 30, 2021. Actual results may ultimately differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid investments with original maturities of three months or less at the time of purchase. At September 30, 2021 and December 31, 2020, approximately $108.4 million and $27.3 million, respectively, of the reported cash balances exceeded the Federal Deposit Insurance Corporation and Securities Investor Protection Corporation deposit insurance limits of $250,000 per respective depository or brokerage institution. However, all of the Company’s cash deposits are held at multiple, established financial institutions, in multiple accounts associated with its parent and respective consolidated subsidiaries, to minimize credit risk exposure.

Restricted cash includes required account balance minimums primarily for the Company’s CRE debt securitizations, term warehouse financing facilities and repurchase agreements as well as cash held in the syndicated corporate loan collateralized debt obligations (“CDOs”).

The following table provides a reconciliation of cash, cash equivalents and restricted cash on the consolidated balance sheets to the total amount shown on the consolidated statements of cash flows (in thousands):

	September 30,
	2021		2020
Cash and cash equivalents	$	109,949	$	122,105
Restricted cash		32,406		33,776
Total cash, cash equivalents and restricted cash shown on the Company’s consolidated statements of cash flows	$	142,355	$	155,881

Hotel Operating Revenue

Hotel operating revenue, which is presented in real estate income on the consolidated statements of operations, consists of amounts derived from hotel operations, including room sales and other hotel revenues. The Company recognizes hotel operating revenue when guest rooms are occupied, services have been provided or fees have been earned. Revenues are recorded net of any sales, occupancy or other taxes collected from customers on behalf of third parties. The following provides additional detail on room revenue and other operating revenue:

• Room revenue is recognized when the Company’s hotel satisfies its performance obligation of providing a hotel room. The hotel reservation defines the terms of the agreement including an agreed-upon rate and length of stay. Payment is typically due and paid in full at the end of the stay with some customers prepaying for their rooms prior to the stay. Payments received from a customer prior to arrival are recorded as an advance deposit and are recognized as revenue at the time of occupancy.

• Other operating revenue is recognized at the time when the goods or services are provided to the customer or when the performance obligation is satisfied. Payment is due at the time that goods or services are rendered or billed.

Investment in Real Estate

The Company amortizes the value allocated to lease right of use assets and related in-place lease liabilities, when determined to be operating leases, using the straight-line method over the remaining lease term. The value allocated to any associated above or below market lease intangible asset or liability is amortized to lease expense over the remaining lease term. The estimated useful lives of the right of use assets and lease liabilities are each 66.3 years.

Leases

The value of the operating leases are determined through the discounted cash flow method and are recognized on the consolidated balance sheet as offsetting right of use assets and lease liabilities. The operating lease for the Company’s office space is amortized over the lease term, or 7.3 years, using the effective-interest method. The Company’s operating lease for office equipment is amortized over the lease term, or three years, using the straight-line method.

Income Taxes

The Company recorded a full valuation allowance against its net deferred tax assets of $63.0 million (tax effected expense of $21.2 million) at September 30, 2021, as the Company believes it is more likely than not that the deferred tax assets will not be realized. This assessment was based on the Company’s cumulative historical losses and uncertainties as to the amount of taxable income that would be generated in future years by the Company’s taxable REIT subsidiaries.

Earnings per Share

The Company presents both basic and diluted earnings per share (“EPS”). Basic EPS excludes dilution and is computed by dividing net income (loss) allocable to common shareholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.

Recent Accounting Standards

Accounting Standards Adopted in 2021

In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance that provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives and other contracts, related to the expected market transition from the London Interbank Offered Rate (“LIBOR”), and certain other floating-rate benchmark indices to alternative reference rates. The guidance generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination.

In June 2021, Exantas Capital Corp. 2020-RSO8, Ltd.’s (“XAN 2020-RSO8”) and Exantas Capital Corp. 2020-RSO9, Ltd.’s (“XAN 2020-RSO9”) senior notes’ benchmark rate, one-month LIBOR, was replaced with the compounded Secured Overnight Financing Rate (“Compounded SOFR”) plus a benchmark adjustment. As each securitizations’ indentures included terms referencing a benchmark rate replacement, no amendments to the indentures were required. The Company will apply the replacement of the benchmark rate prospectively by adjusting the effective interest rate. Additionally, all of the Company’s underwritten loans contain terms that allow for a change to an alternative benchmark rate upon the discontinuation of LIBOR. For the Company’s remaining financial instruments utilizing LIBOR as a benchmark rate, the guidance is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur.

Accounting Standards to be Adopted in Future Periods

In August 2020, the FASB issued guidance that removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation into a debt component and an equity or derivative component. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives and the convertible instrument is not issued with substantial premiums accounted for as paid-in capital. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate. The guidance also revises the derivative scope exception for contracts in an entity’s own equity and improves the consistency of EPS calculations. The guidance is effective for larger public business entities’ annual periods, and interim periods therein, beginning after December 15, 2021 and for smaller reporting entities after December 15, 2023. Early application is permitted for fiscal years beginning after December 15, 2020. The Company is in the process of evaluating the impact of this guidance.

Reclassifications

Certain reclassifications have been made to the 2020 consolidated financial statements, including the consolidated statement of operations and the consolidated statement of cash flows, to conform to the 2021 presentation. These reclassifications had no effect on net income (loss) reported nor the total change in cash flows for each type of cash flow activity on the consolidated statement of cash flows.

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VARIABLE INTEREST ENTITIES

9 Months Ended

Sep. 30, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

VARIABLE INTEREST ENTITIES

NOTE 3 - VARIABLE INTEREST ENTITIES

The Company has evaluated its loans, investments in unconsolidated entities, liabilities to subsidiary trusts issuing preferred securities (consisting of unsecured junior subordinated notes), securitizations, guarantees and other financial contracts in order to determine if they are variable interests in VIEs. The Company regularly monitors these legal interests and contracts and, to the extent it has determined that it has a variable interest, analyzes the related entity for potential consolidation.

Consolidated VIEs (the Company is the primary beneficiary)

Based on management’s analysis, the Company was the primary beneficiary of six VIEs at September 30, 2021 and December 31, 2020 (collectively, the “Consolidated VIEs”).

The Consolidated VIEs are CRE securitizations and CDOs that were formed on behalf of the Company to invest in real estate-related securities, commercial mortgage-backed securities (“CMBS”), syndicated corporate loans, corporate bonds and asset-backed securities and were financed by the issuance of debt securities. By financing these assets with long-term borrowings through the issuance of debt securities, the Company seeks to generate attractive risk-adjusted equity returns and to match the term of its assets and liabilities. The primary beneficiary determination for each of these VIEs was made at each VIE’s inception and is continually assessed.

The Company has exposure to losses on its securitizations to the extent of its investments in the subordinated debt and preferred equity of each securitization. The Company is entitled to receive payments of principal and interest on the debt securities it holds and, to the extent revenues exceed debt service requirements and other expenses of the securitizations, distributions with respect to its preferred equity interests. As a result of consolidation, the debt and equity interests the Company holds in these securitizations have been eliminated, and the Company’s consolidated balance sheets reflect the assets held, debt issued by the securitizations to third parties and any accrued payables to third parties. The Company’s operating results and cash flows include the gross amounts related to the securitizations’ assets and liabilities as opposed to the Company’s net economic interests in the securitizations. Assets and liabilities related to the securitizations are disclosed, in the aggregate, on the Company’s consolidated balance sheets. For a discussion of the debt issued through the securitizations see Note 11.

Creditors of the Company’s Consolidated VIEs have no recourse to the general credit of the Company, nor to each other. During the nine months ended September 30, 2021 and 2020, the Company did not provide any financial support to any of its VIEs nor does it have any requirement to do so, although it may choose to do so in the future to maximize future cash flows from such investments to the Company. There are no explicit arrangements that obligate the Company to provide financial support to any of its Consolidated VIEs.

The following table shows the classification and carrying values of assets and liabilities of the Company’s Consolidated VIEs at September 30, 2021 (in thousands):

	CRE Securitizations		Other		Total
ASSETS
Restricted cash	$	31,925	$	460	$	32,385
Accrued interest receivable		4,089		—		4,089
CRE loans, pledged as collateral (1)		1,169,809		—		1,169,809
Principal paydowns receivable		25,010		—		25,010
Other assets		314		—		314
Total assets (2)	$	1,231,147	$	460	$	1,231,607
LIABILITIES
Accounts payable and other liabilities	$	129	$	—	$	129
Accrued interest payable		679		—		679
Borrowings		960,709		—		960,709
Total liabilities	$	961,517	$	—	$	961,517

(1) Excludes the allowance for credit losses.

(2) Assets of each of the Consolidated VIEs may only be used to settle the obligations of each respective VIE.

Unconsolidated VIEs (the Company is not the primary beneficiary, but has a variable interest)

Based on management’s analysis, the Company is not the primary beneficiary of the VIEs discussed below since it does not have both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Accordingly, the following VIEs are not consolidated in the Company’s financial statements at September 30, 2021. The Company continuously reassesses whether it is deemed to be the primary beneficiary of its unconsolidated VIEs. The Company’s maximum exposure to risk for each of these unconsolidated VIEs is set forth in the “Maximum Exposure to Loss” column in the table below.

Unsecured Junior Subordinated Debentures

The Company has a 100% interest in the common shares of Resource Capital Trust I (“RCT I”) and RCC Trust II (“RCT II”), respectively, with a value of $1.5 million in the aggregate, or 3.0% of each trust, at September 30, 2021. RCT I and RCT II were formed for the purposes of providing debt financing to the Company. The Company completed a qualitative analysis to determine whether or not it is the primary beneficiary of each of the trusts and determined that it was not the primary beneficiary of either trust because it does not have the power to direct the activities most significant to the trusts, which include the collection of principal and interest through servicing rights. Accordingly, neither trust is consolidated into the Company’s consolidated financial statements.

The Company records its investments in RCT I and RCT II’s common shares of $774,000 each as investments in unconsolidated entities using the cost method, recording dividend income when declared by RCT I and RCT II. The trusts each hold subordinated debentures for which the Company is the obligor in the amount of $25.8 million for each of RCT I and RCT II. The debentures were funded by the issuance of trust preferred securities of RCT I and RCT II.

The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs at September 30, 2021 (in thousands):

	Unsecured Junior Subordinated Debentures			Maximum Exposure to Loss
ASSETS
Accrued interest receivable	$	5		$	—
Investments in unconsolidated entities		1,548		$	1,548
Total assets		1,553
LIABILITIES
Accrued interest payable		181		N/A
Borrowings		51,548		N/A
Total liabilities		51,729		N/A
Net (liability) asset	$	(50,176	)	N/A

At September 30, 2021, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to any of its unconsolidated VIEs.

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SUPPLEMENTAL CASH FLOW INFORMATION

9 Months Ended

Sep. 30, 2021

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL CASH FLOW INFORMATION

NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table summarizes the Company’s supplemental disclosure of cash flow information (in thousands):

	For the Nine Months Ended
	September 30,
	2021			2020
Supplemental cash flows:
Interest expense paid in cash	$	33,889		$	38,246
Income taxes paid in cash	$	—		$	—
Non-cash operating activities include the following:
Receipt of right of use assets	$	(479	)	$	—
Execution of operating leases	$	479		$	—
Non-cash investing activities include the following:
Proceeds from the relinquishment of investment securities available-for-sale	$	—		$	369,873
Non-cash financing activities include the following:
Repayment of repurchase agreements from the relinquishment of investment securities available-for-sale	$	—		$	(369,873	)
Distributions on preferred stock accrued but not paid	$	3,260		$	6,900

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LOANS

9 Months Ended

Sep. 30, 2021

Loans Held For Investment [Abstract]

LOANS

NOTE 5 - LOANS

The following is a summary of the Company’s loans (dollars in thousands, except amounts in footnotes):

Description	Quantity		Principal		Unamortized (Discount) Premium, net (1)			Amortized Cost		Allowance for Credit Losses			Carrying Value		Contractual Interest Rates (2)(3)	Maturity Dates (4)(5)
At September 30, 2021:
CRE loans held for investment:
Whole loans (6)(7)		95	$	1,853,168	$	(12,180	)	$	1,840,988	$	(18,578	)	$	1,822,410	1M LIBOR plus 2.70% to 1M LIBOR plus 9.00%	November 2021 to September 2025
Mezzanine loan (6)		1		4,700		—			4,700		(285	)		4,415	10.00%	June 2028
Total CRE loans held for investment			$	1,857,868	$	(12,180	)	$	1,845,688	$	(18,863	)	$	1,826,825
At December 31, 2020:
CRE loans held for investment:
Whole loans (6)(7)		95	$	1,515,722	$	(6,144	)	$	1,509,578	$	(32,283	)	$	1,477,295	1M LIBOR plus 2.70% to 1M LIBOR plus 9.00%	January 2021 to January 2024
Mezzanine loan (6)		1		4,700		—			4,700		(301	)		4,399	10.00%	June 2028
Preferred equity investments (8)		2		27,650		64			27,714		(1,726	)		25,988	11.00% to 11.50%	June 2022 to April 2023
Total CRE loans held for investment			$	1,548,072	$	(6,080	)	$	1,541,992	$	(34,310	)	$	1,507,682

(1) Amounts include unamortized loan origination fees of $11.7 million and $5.7 million and deferred amendment fees of $469,000 and $495,000 at September 30, 2021 and December 31, 2020, respectively. Additionally, the amounts include unamortized loan acquisition costs of $29,000 and $118,000 at September 30, 2021 and December 31, 2020, respectively.

(2) The Company’s whole loan portfolio of $1.9 billion and $1.5 billion had a weighted-average one-month LIBOR floor of 1.03% and 1.88% at September 30, 2021 and December 31, 2020, respectively. At September 30, 2021, all but one of the Company’s floating-rate whole loans had one-month LIBOR floors. At December 31, 2020, all whole loans had one-month LIBOR floors.

(3) Excludes one whole loan that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

(4) Maturity dates exclude contractual extension options, subject to the satisfaction of certain terms that may be available to the borrowers.

(5) Maturity dates exclude four and three whole loans, with amortized costs of $49.1 million and $39.7 million, in maturity default at September 30, 2021 and December 31, 2020, respectively.

(6) Substantially all loans are pledged as collateral under various borrowings at September 30, 2021 and December 31, 2020.

(7) CRE whole loans had $140.6 million and $67.2 million in unfunded loan commitments at September 30, 2021 and December 31, 2020, respectively. These unfunded loan commitments are advanced as the borrowers formally request additional funding and meet certain benchmarks, as permitted under the loan agreement, and any necessary approvals have been obtained.

(8) The interest rate on the Company’s preferred equity investments paid at 8.00%. The remaining interest was deferred until payoff, which occurred in March 2021 and April 2021.

The following is a summary of the contractual maturities of the Company’s CRE loans held for investment, at amortized cost (in thousands, except amounts in the footnotes):

Description	2021		2022		2023 and Thereafter		Total
At September 30, 2021:
Whole loans (1)	$	85,013	$	530,398	$	1,176,479	$	1,791,890
Mezzanine loan		—		—		4,700		4,700
Total CRE loans (2)	$	85,013	$	530,398	$	1,181,179	$	1,796,590
Description	2021		2022		2023 and Thereafter		Total
At December 31, 2020:
Whole loans (1)	$	599,053	$	540,639	$	330,143	$	1,469,835
Mezzanine loan		—		—		4,700		4,700
Preferred equity investments		—		6,452		21,262		27,714
Total CRE loans (2)	$	599,053	$	547,091	$	356,105	$	1,502,249

(1) Excludes four and three whole loans, with amortized costs of $49.1 million and $39.7 million, in default at September 30, 2021 and December 31, 2020, respectively.

(2) At September 30, 2021, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $14.3 million, $87.2 million and $1.7 billion in 2021, 2022 and 2023 and thereafter, respectively. At December 31, 2020, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $112.4 million, $125.1 million and $1.3 billion in 2021, 2022 and 2023 and thereafter, respectively.

At September 30, 2021, approximately, 22.0%, 18.4% and 15.7% of the Company’s CRE loan portfolio was concentrated in the Southeast, Southwest and Mountain regions, respectively, based on carrying value, as defined by the National Council of Real Estate Investment Fiduciaries. At December 31, 2020, approximately 21.4%, 17.9% and 16.1% of the Company’s CRE loan portfolio was concentrated in the Mountain, Southwest and Southeast regions, respectively, based on carrying value. No single loan or investment represented more than 10% of the Company’s total assets and no single investor group generated over 10% of the Company’s revenue.

Principal Paydowns Receivable

Principal paydowns receivable represents loan principal payments that have been received by the Company’s servicers and trustees but have not been remitted to the Company. At September 30, 2021, the Company had $25.0 million of loan principal paydowns receivable, all of which was received in cash by the Company in October 2021. At December 31, 2020, the Company had $4.3 million of loan principal paydowns receivable, all of which was received in cash by the Company in January 2021.

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FINANCING RECEIVABLES

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

FINANCING RECEIVABLES

NOTE 6 - FINANCING RECEIVABLES

The following table shows the activity in the allowance for credit losses for the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands, except amount in the footnote):

	Nine Months Ended September 30, 2021			Year Ended December 31, 2020
	CRE Loans			CRE Loans
Allowance for credit losses:
Allowance for credit losses at beginning of period	$	34,310		$	1,460
Adoption of the new accounting guidance		—			3,032
(Reversal of) provision for credit losses		(15,447	)		30,815
Realized loss on sale of loan (1)		—			(997	)
Allowance for credit losses at end of period	$	18,863		$	34,310

(1) The allowance for credit losses included a realized loss of $997,000 that was charged to the allowance related to one CRE loan sale that occurred during the year ended December 31, 2020. There was no such charge off during the nine months ended September 30, 2021.

During the three months ended September 30, 2021, the Company recorded a provision for expected credit losses of $537,000 in connection with an increase in the size of the CRE loan portfolio, offset by an improvement in macroeconomic conditions. During the nine months ended September 30, 2021, reversals of expected credit losses in the first and second quarters of 2021 outpaced the provision during the third quarter of 2021, resulting in a net reversal of expected credit losses of $15.4 million. Overall, the reversal of expected credit losses was attributable to declines in expected unemployment and continued improvement in macroeconomic conditions, loan paydowns and improved collateral operating performance.

Beginning in the first quarter through the second quarter of 2020, expected credit losses on the Company’s CRE loan portfolio were negatively impacted by higher than expected unemployment and increased volatility in CRE asset pricing and liquidity in connection with the COVID-19 pandemic. While projections of declining unemployment and recoveries in CRE asset pricing began to improve during the three months ended September 30, 2020, resulting in a reversal of expected credit losses of $8.1 million, the impact of COVID-19 in the first two quarters of 2020 resulted in a provision for expected credit losses of $48.5 million during the nine months ended September 30, 2020.

During the three and nine months ended September 30, 2021, the Company individually evaluated an office loan in the East North Central region with a $19.9 million principal balance, two hotel loans in the Northeast region with $23.3 million of total principal balances and a hotel loan in the East North Central region with a $8.4 million principal balance for which sale or foreclosure was determined to be probable. The Company obtained an updated appraisal in October 2021 on the office loan, which indicated an as-is appraised value of $17.6 million. The Company consequently recorded a provision for credit losses of $400,000 during the three months ended September 30, 2021 to increase the current expected credit losses (“CECL”) allowance to $2.3 million on the loan, which was based on the new appraised value of the collateral. Additionally, the Company received a bid to sell the note on one hotel loan in the Northeast region with a $9.3 million principal balance. Using the bid less estimated costs to sell, the Company individually evaluated the loan and recorded a reversal of credit losses of $465,000 during the three months ended September 30, 2021. The loan had a CECL allowance of $1.8 million at September 30, 2021. The hotel loan in the East North Central region and other hotel loan in the Northeast region were determined to have no CECL allowance as the as-is appraised values on the properties were in excess of the principal and interest balances.

Credit quality indicators

Commercial Real Estate Loans

CRE loans are collateralized by a diversified mix of real estate properties and are assessed for credit quality based on the collective evaluation of several factors, including but not limited to: collateral performance relative to underwritten plan, time since origination, current implied and/or reunderwritten loan-to-collateral value ratios, loan structure and exit plan. Depending on the loan’s performance against these various factors, loans are rated on a scale from 1 to 5, with loans rated 1 representing loans with the highest credit quality and loans rated 5 representing loans with the lowest credit quality. Loans are rated a 2 at origination. The factors evaluated provide general criteria to monitor credit migration in the Company’s loan portfolio; as such, a loan’s rating may improve or worsen, depending on new information received.

The criteria set forth below should be used as general guidelines and, therefore, not every loan will have all of the characteristics described in each category below.

Risk Rating	Risk Characteristics
1	• Property performance has surpassed underwritten expectations.
	• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.
2	• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded.
	• Occupancy is stabilized, near stabilized or is on track with underwriting.
3	• Property performance lags behind underwritten expectations.
	• Occupancy is not stabilized and the property has some tenancy rollover.
4	• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers.
	• Occupancy is not stabilized and the property has a large amount of tenancy rollover.
5	• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Expected sale proceeds would not be sufficient to pay off the loan at maturity.
	• The property has a material vacancy rate and significant rollover of remaining tenants.
	• An updated appraisal is required upon designation and updated on an as-needed basis.

All CRE loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Mezzanine loans and preferred equity investments may experience greater credit risks due to their nature as subordinated investments.

For the purpose of calculating the quarterly provision for credit losses under CECL, the Company pools CRE loans based on the underlying collateral property type and utilizes a probability of default and loss given default methodology for approximately one year after which it immediately reverts to a historical mean loss ratio.

Credit risk profiles of CRE loans at amortized cost were as follows (in thousands, except amounts in the footnotes):

	Rating 1		Rating 2		Rating 3		Rating 4		Rating 5		Total (1)
At September 30, 2021:
Whole loans, floating-rate (2)	$	—	$	1,310,042	$	353,430	$	123,647	$	53,869	$	1,840,988
Mezzanine loan		—		—		4,700		—		—		4,700
Total	$	—	$	1,310,042	$	358,130	$	123,647	$	53,869	$	1,845,688
At December 31, 2020:
Whole loans, floating-rate	$	—	$	611,838	$	599,208	$	262,398	$	36,134	$	1,509,578
Mezzanine loan		—		—		4,700		—		—		4,700
Preferred equity investments		—		—		6,452		21,262		—		27,714
Total	$	—	$	611,838	$	610,360	$	283,660	$	36,134	$	1,541,992

(1) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Includes one $20.8 million whole loan, risk rated a 3, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

Credit risk profiles of CRE loans by origination year at amortized cost were as follows (in thousands, except amounts in the footnotes):

	2021		2020		2019		2018		2017		Prior		Total (1)
At September 30, 2021:
Whole loans, floating-rate: (2)
Rating 2	$	944,534	$	197,627	$	114,859	$	53,022	$	—	$	—	$	1,310,042
Rating 3 (3)		10,315		10,084		190,708		108,327		16,496		17,500		353,430
Rating 4		—		—		28,420		86,025		—		9,202		123,647
Rating 5		—		—		22,373		9,300		19,900		2,296		53,869
Total whole loans, floating-rate		954,849		207,711		356,360		256,674		36,396		28,998		1,840,988
Mezzanine loan (rating 3)		—		—		—		4,700		—		—		4,700
Total	$	954,849	$	207,711	$	356,360	$	261,374	$	36,396	$	28,998	$	1,845,688
	2020		2019		2018		2017		2016		Prior		Total (1)
At December 31, 2020:
Whole loans, floating-rate: (2)
Rating 2	$	221,364	$	279,077	$	111,397	$	—	$	—	$	—	$	611,838
Rating 3		43,579		246,073		246,944		45,142		—		17,470		599,208
Rating 4		—		77,495		129,536		46,220		—		9,147		262,398
Rating 5		—		13,938		—		19,900		—		2,296		36,134
Total whole loans, floating-rate		264,943		616,583		487,877		111,262		—		28,913		1,509,578
Mezzanine loan (rating 3)		—		—		4,700		—		—		—		4,700
Preferred equity investments
Rating 3		—		6,452		—		—		—		—		6,452
Rating 4		—		—		21,262		—		—		—		21,262
Total preferred equity investments		—		6,452		21,262		—		—		—		27,714
Total	$	264,943	$	623,035	$	513,839	$	111,262	$	—	$	28,913	$	1,541,992

(1) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Acquired CRE whole loans are grouped within each loan’s year of issuance.

(3) Includes one $20.8 million whole loan, originated in 2018, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

Loan Portfolio Aging Analysis

The following table presents the CRE loan portfolio aging analysis as of the dates indicated for CRE loans at amortized cost (in thousands, except amounts in footnotes):

	30-59 Days		60-89 Days		Greater than 90 Days (1)		Total Past Due		Current (2)		Total Loans Receivable (3)		Total Loans > 90 Days and Accruing
At September 30, 2021:
Whole loans, floating-rate (4)	$	—	$	—	$	39,798	$	39,798	$	1,801,190	$	1,840,988	$	19,898
Mezzanine loan		—		—		—		—		4,700		4,700		—
Total	$	—	$	—	$	39,798	$	39,798	$	1,805,890	$	1,845,688	$	19,898
At December 31, 2020:
Whole loans, floating-rate	$	—	$	—	$	11,443	$	11,443	$	1,498,135	$	1,509,578	$	11,443
Mezzanine loan		—		—		—		—		4,700		4,700		—
Preferred equity investments		—		—		—		—		27,714		27,714		—
Total	$	—	$	—	$	11,443	$	11,443	$	1,530,549	$	1,541,992	$	11,443

(1) During the three and nine months ended September 30, 2021, the Company recognized interest income of $480,000 and $1.7 million, respectively, on the three loans with principal payments past due greater than 90 days at September 30, 2021. During the three and nine months ended September 30, 2020, the Company recognized interest income of $605,000 and $1.8 million, respectively, on these loans.

(2) Includes two whole loans, with amortized costs of $28.3 million, in maturity default at December 31, 2020.

(3) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(4) Includes one $20.8 million whole loan, which is current, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

At September 30, 2021 and December 31, 2020, the Company had four and three CRE loans in maturity default, respectively, with total amortized costs of $49.1 million and $39.7 million, respectively. One of the four loans in maturity default, with a carrying value of $17.6 million at September 30, 2021, completed the receipt of the deed-in-lieu of foreclosure in October 2021 on the collateral, based on an as-is appraised value. Two of the four loans in maturity default at September 30, 2021 are making current interest payments, while one of the loans was on non-accrual status.

The Company received proceeds of $28.8 million relating to the payoffs of its preferred equity investments during the nine months ended September 30, 2021.

Troubled Debt Restructurings (“TDRs”)

There were no TDRs for the nine months ended September 30, 2021 and 2020.

During the nine months ended September 30, 2021, the Company entered into 13 agreements that extended loans by a weighted average period of 11 months and, in certain cases, modified certain other loan terms. Three formerly forborne borrowers and one borrower performing in accordance with a forbearance agreement were in maturity default at September 30, 2021. No loan modifications during the nine months ended September 30, 2021 resulted in TDRs.

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INVESTMENT IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES

9 Months Ended

Sep. 30, 2021

Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Abstract]

Investment In Real Estate And Other Acquired Assets And Assumed Liabilities

NOTE 7 - INVESTMENT IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES

In November 2020, the Company received the deed in lieu of foreclosure on a hotel property that formerly collateralized a $38.0 million CRE whole loan. The Company determined that the acquisition of the hotel property should be accounted for as an asset acquisition. The Company obtained third-party valuations of the acquired assets and assumed liabilities. The fair value of the total net assets acquired was $39.8 million.

The following table summarizes the book value of the Company’s investments in real estate and related intangible assets (in thousands, except amounts in the footnotes):

	September 30, 2021									December 31, 2020
	Cost			Accumulated Depreciation & Amortization			Book Value			Cost			Accumulated Depreciation & Amortization			Book Value
Assets acquired:
Investments in real estate (1)	$	34,104		$	(1,305	)	$	32,799		$	33,929		$	(123	)	$	33,806
Right of use assets (2)(3)		5,603			(74	)		5,529			5,603			(11	)		5,592
Intangible assets (4)		3,337			(296	)		3,041			3,336			(42	)		3,294
Total		43,044			(1,675	)		41,369			42,868			(176	)		42,692
Liabilities assumed:
Lease liabilities (3)		(3,113	)		41			(3,072	)		(3,113	)		6			(3,107	)
Total		(3,113	)		41			(3,072	)		(3,113	)		6			(3,107	)
	$	39,931					$	38,297		$	39,755					$	39,585

(1) Includes approximately $180,000 and $5,000 of furniture and fixtures purchased for the property, subsequent to the date of acquisition, at September 30, 2021 and December 31, 2020, respectively.

(2) Right of use assets include a right of use asset associated with an acquired ground lease of $3.1 million accounted for as an operating lease and a below-market lease intangible asset of $2.5 million at September 30, 2021 and December 31, 2020.

(3) Refer to Note 8 for additional information on the Company’s remaining operating leases.

(4) Intangible assets include a franchise agreement intangible asset of $2.7 million and $2.8 million and a customer list intangible asset of $352,000 and $477,000 at September 30, 2021 and December 31, 2020, respectively.

The right of use assets and lease liabilities comprised an acquired ground lease that was determined to be an operating lease and associated below-market lease intangible asset. The lease payments on the ground lease consist of air rights rent, retail rent and parking rent, the amounts of which are specifically determined in the executed lease agreement and subsequently increased based on the increase of the consumer price index over a specified number of periods. The Company recorded approximately $35,000 of offsetting amortization and accretion on its ground lease right of use assets and lease liabilities during the nine months ended September 30, 2021.

During the three and nine months ended September 30, 2021, the Company recorded amortization expense of approximately $94,000 and $282,000, respectively, on its intangible assets. The Company expects to record amortization expense of $375,000, $375,000, $355,000, $210,000 and $210,000 during the 2021, 2022, 2023, 2024 and 2025 fiscal years, respectively, on its intangible assets.

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LEASES

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

LEASES

NOTE 8 - LEASES

In addition to the ground lease discussed in Note 7, the Company has operating leases for office space and office equipment. The leases have terms that expire between January 2024 and July 2028. The leases on the office space and office equipment contain options for early termination granted to the Company and the lessor. Lease payments are determined as follows:

• Office space: payments are made on a fixed schedule, escalating annually, and also include the Company’s responsibility for a percentage of increases in the building’s property taxes and operating expenses over the base year.

• Office equipment: payments are made on a fixed schedule.

The following table summarizes the Company’s operating leases (in thousands):

	September 30, 2021
Operating Leases:
Right of use assets	$	455
Lease liabilities	$	(488	)
Weighted average remaining lease term:	6.8 years
Weighted average discount rate:		10.65	%

The following table summarizes the Company’s operating lease costs and cash payments during the respective periods (in thousands):

	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Lease Cost:
Operating lease cost	$	24	$	50

The following table summarizes the Company’s operating leases by maturity date based on undiscounted cash flows (in thousands):

	Operating Leases
2021	$	24
2022		97
2023		99
2024		99
2025		102
Thereafter		274
Subtotal		695
Less: impact of discount		(207	)
Total	$	488

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INVESTMENT SECURITIES AVAILABLE-FOR-SALE

9 Months Ended

Sep. 30, 2021

Available For Sale Securities [Abstract]

INVESTMENT SECURITIES AVAILABLE-FOR-SALE

NOTE 9 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The following table summarizes the Company’s investment securities available-for-sale, carried at fair value, including those pledged as collateral (in thousands, except amount in the footnote):

	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
At December 31, 2020:
CMBS, fixed-rate	$	2,080	$	—	$	—	$	2,080

(1) The amortized cost of CMBS excluded accrued interest receivable of $56,000 at December 31, 2020.

Beginning in the first quarter of 2020, the COVID-19 pandemic produced material and previously unforeseeable liquidity shocks to credit markets. This resulted in significant declines in the pricing of the Company’s investment securities available-for-sale, which triggered substantial margin calls by its counterparties and, in certain cases, formal notices of events of default, all of which were withdrawn or rescinded as of April 19, 2020. As a result of these circumstances and the uncertainty caused by the COVID-19 pandemic, substantially all of the Company’s remaining CMBS available-for-sale were sold as of April 2020.

During the nine months ended September 30, 2020, the Company incurred losses of $186.1 million on its CMBS portfolio, including realized losses of $180.3 million primarily attributable to the sale of 67 CMBS as of April 2020.

During the nine months ended September 30, 2020, the Company recorded unrealized losses of $5.8 million, which included $203,000 of unrealized gains during the three months ended September 30, 2020, on two CMBS securities on its consolidated statements of operations as the fair values of the securities were less than the amortized cost bases and the securities were expected to sell prior to recovery of the amortized cost bases. In March 2021, the Company sold these two positions, resulting in cash proceeds of $3.0 million and gains of $878,000 during the nine months ended September 30, 2021.

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INVESTMENTS IN UNCONSOLIDATED ENTITIES

9 Months Ended

Sep. 30, 2021

Equity Method Investments And Joint Ventures [Abstract]

INVESTMENTS IN UNCONSOLIDATED ENTITIES

NOTE 10 - INVESTMENTS IN UNCONSOLIDATED ENTITIES

The Company’s investments in unconsolidated entities at September 30, 2021 and December 31, 2020 comprised a 100% interest in the common shares of RCT I and RCT II with a value of $1.5 million in the aggregate, or 3.0% of each trust. The Company records its investments in RCT I’s and RCT II’s common shares as investments in unconsolidated entities using the cost method, recording dividend income when declared by RCT I and RCT II. During the three and nine months ended September 30, 2021, the Company recorded dividends from its investments in RCT I’s and RCT II’s common shares, reported in other revenue on the consolidated statement of operations, of $16,000 and $49,000, respectively. During the three and nine months ended September 30, 2020, the Company recorded dividends of $19,000 and $62,000, respectively.

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BORROWINGS

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

BORROWINGS

NOTE 11 - BORROWINGS

The Company historically has financed the acquisition of its investments, including investment securities and loans, through the use of secured and unsecured borrowings in the form of securitized notes, secured term warehouse financing facilities, a senior secured financing facility, senior unsecured notes, convertible senior notes and trust preferred securities issuances. Certain information with respect to the Company’s borrowings is summarized in the following table (dollars in thousands, except amounts in the footnotes):

	Principal Outstanding		Unamortized Issuance Costs and Discounts		Outstanding Borrowings		Weighted Average Borrowing Rate			Weighted Average Remaining Maturity	Value of Collateral
At September 30, 2021:
XAN 2020-RSO8 Senior Notes	$	173,600	$	1,142	$	172,458		2.02	%	13.4 years	$	260,488
XAN 2020-RSO9 Senior Notes		119,824		1,191		118,633		3.91	%	15.6 years		169,371
ACR 2021-FL1 Senior Notes (1)		675,223		5,605		669,618		1.57	%	14.7 years		802,643
Senior secured financing facility		41,182		3,586		37,596		5.75	%	5.8 years		217,835
CRE - term warehouse financing facilities (2)(3)		320,515		50		320,465		2.05	%	27 days		421,644
4.50% Convertible Senior Notes		88,014		2,204		85,810		4.50	%	319 days		—
5.75% Senior Unsecured Notes (4)		150,000		3,526		146,474		5.75	%	4.9 years		—
Unsecured junior subordinated debentures		51,548		—		51,548		4.09	%	14.9 years		—
Total	$	1,619,906	$	17,304	$	1,602,602		2.62	%	9.9 years	$	1,871,981
	Principal Outstanding		Unamortized Issuance Costs and Discounts		Outstanding Borrowings		Weighted Average Borrowing Rate			Weighted Average Remaining Maturity	Value of Collateral
At December 31, 2020:
XAN 2019-RSO7 Senior Notes	$	415,621	$	2,861	$	412,760		1.60	%	15.3 years	$	516,979
XAN 2020-RSO8 Senior Notes		388,459		4,164		384,295		1.62	%	14.2 years		475,347
XAN 2020-RSO9 Senior Notes		234,731		3,857		230,874		3.31	%	16.3 years		285,862
Senior secured financing facility		33,360		4,046		29,314		5.75	%	6.6 years		239,385
CRE - term warehouse financing facility (2)		13,516		1,258		12,258		2.66	%	299 days		20,000
4.50% Convertible Senior Notes		143,750		6,498		137,252		4.50	%	1.6 years		—
12.00% Senior Unsecured Notes		50,000		3,574		46,426		12.00	%	6.6 years		—
Unsecured junior subordinated debentures		51,548		—		51,548		4.18	%	15.7 years		—
Total	$	1,330,985	$	26,258	$	1,304,727		2.83	%	13.0 years	$	1,537,573

(1) Value of collateral excludes exit fees of $752,000 and interest received of $87,000 at September 30, 2021.

(2) Principal outstanding includes accrued interest payable of $320,000 and $16,000 at September 30, 2021 and December 31, 2020, respectively.

(3) In October 2021, the Company extended the maturity of its Barclays Bank PLC (“Barclays”) and JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) CRE - term warehouse financing facilities to October 2022 and October 2024, respectively, and allowed the Wells Fargo Bank, N.A. (“Wells Fargo”) CRE - term warehouse financing facility to mature.

(4) Includes deferred debt issuance costs of $320,000 at September 30, 2021 from the redeemed 12.00% senior unsecured notes due 2027 (“12.00% Senior Unsecured Notes”).

Securitizations

The following table sets forth certain information with respect to the Company’s consolidated securitizations at September 30, 2021 (in thousands, except amount in footnotes):

	Closing Date	Maturity Date	Permitted Funded Companion Participation Acquisition Period End (1)	Reinvestment Period End (2)	Total Note Paydowns Received from Closing Date through September 30, 2021
XAN 2020-RSO8	March 2020	March 2035	March 2023	N/A	$	262,143
XAN 2020-RSO9 (3)	September 2020	April 2037	N/A	N/A	$	125,970
ACR 2021-FL1	May 2021	June 2036	N/A	May 2023	$	—

(1) The permitted funded companion participation acquisition period is the period in which principal repayments can be utilized to purchase loans held outside of the respective securitization that represent the funded commitments of existing collateral in the respective securitization that were not funded as of the date the respective securitization was closed.

(2) The reinvestment period is the period in which principal proceeds received before the end of the period may be used to acquire CRE loans for reinvestment into the securitization.

(3) XAN 2020-RSO9 includes a future advances reserve account of $7.7 million at September 30, 2021 to fund unfunded commitments, which is reported in restricted cash on the consolidated balance sheet.

The investments held by the Company’s securitizations collateralize the securitizations’ borrowings and, as a result, are not available to the Company, its creditors, or stockholders. All senior notes and preferred shares of the securitizations held by the Company at September 30, 2021 and December 31, 2020 were eliminated in consolidation.

XAN 2019-RSO7

In April 2019, the Company closed Exantas Capital Corp. 2019-RSO7, Ltd. (“XAN 2019-RSO7”), a $687.2 million CRE debt securitization transaction that provided financing for CRE loans. In May 2021, the Company exercised the optional redemption on XAN 2019-RSO7 in conjunction with the closing of ACRES Commercial Realty 2021-FL1 Issuer, Ltd. (“ACR 2021-FL1”) (see below).

XAN 2020-RSO8

In March 2020, the Company closed XAN 2020-RSO8, a $522.6 million CRE debt securitization transaction that provided financing for CRE loans. In June 2021, the benchmark rate on XAN 2020-RSO8’s senior notes, previously one-month LIBOR, was replaced with Compounded SOFR plus a benchmark adjustment.

XAN 2020-RSO9

In September 2020, the Company closed XAN 2020-RSO9, a $297.0 million CRE debt securitization transaction that provided financing for CRE loans. In June 2021, the benchmark rate on XAN 2020-RSO9’s senior notes, previously one-month LIBOR, was replaced with Compounded SOFR plus a benchmark adjustment.

ACR 2021-FL1

In May 2021, the Company closed ACR 2021-FL1, a $802.6 million CRE debt securitization transaction that provided financing for CRE loans. ACR 2021-FL1 includes a reinvestment period, which ends in May 2023, that allows it to acquire CRE loans for reinvestment into the securitization using uninvested principal proceeds. ACR 2021-FL1 issued a total of $675.2 million of non-recourse, floating-rate notes to third parties at par. Additionally, ACRES RF retained 100% of the Class F and Class G notes and a subsidiary of ACRES RF retained 100% of the outstanding preference shares. The preference shares are subordinated in right of payment to all other securities issued by ACR 2021-FL1.

At closing, the senior notes issued to investors consisted of the following classes: (i) $431.4 million of Class A notes bearing interest at one-month LIBOR plus 1.20%; (ii) $100.3 million of Class A-S notes bearing interest at one-month LIBOR plus 1.60%; (iii) $37.1 million of Class B notes bearing interest at one-month LIBOR plus 1.80%; (iv) $43.1 million of Class C notes bearing interest at one-month LIBOR plus 2.00%; (v) $50.2 million of Class D notes bearing interest at one-month LIBOR plus 2.65%; and (vi) $13.0 million of Class E notes bearing interest at one-month LIBOR plus 3.10%.

All of the notes issued mature in June 2036, although the Company has the right to call the notes anytime after May 2023.

Corporate Debt

4.50% Convertible Senior Notes and 8.00% Convertible Senior Notes

The Company issued $100.0 million aggregate principal of its 8.00% convertible senior notes due 2020 (“8.00% Convertible Senior Notes”) and $143.8 million aggregate principal of its 4.50% convertible senior notes due 2022 (“4.50% Convertible Senior Notes”) in January 2015 and August 2017, respectively. In conjunction with the issuance of the 4.50% Convertible Senior Notes, the Company extinguished $78.8 million of aggregate principal of its 8.00% Convertible Senior Notes. In January 2020, the remaining 8.00% Convertible Senior Notes were paid off upon maturity.

During the three months ended September 30, 2021, the Company repurchased $55.7 million of its 4.50% Convertible Senior Notes, resulting in a charge to earnings of $1.5 million, comprising an extinguishment of debt charge of $1.2 million in connection with the acceleration of the market discount and interest expense of $304,000 in connection with the acceleration of deferred debt issuance costs.

The following table summarizes the 4.50% Convertible Senior Notes at September 30, 2021 (dollars in thousands, except the conversion price and amounts in the footnotes):

	Principal Outstanding		Borrowing Rate			Effective Rate (1)(2)			Conversion Rate (3)(4)	Conversion Price (4)		Maturity Date
4.50% Convertible Senior Notes	$	88,014		4.50	%		7.43	%	27.7222	$	36.06	August 15, 2022

(1) Includes the amortization of the market discounts and deferred debt issuance costs, if any, for the 4.50% Convertible Senior Notes recorded in interest expense on the consolidated statements of operations.

(2) During the three and nine months ended September 30, 2021 and 2020, the effective interest rate for the 4.50% Convertible Senior Notes was 7.43%.

(3) Represents the number of shares of common stock per $1,000 principal amount of the 4.50% Convertible Senior Notes’ principal outstanding, subject to adjustment as provided in the Third Supplemental Indenture (the “4.50% Convertible Senior Notes Indenture”).

(4) The conversion rate and conversion price of the 4.50% Convertible Senior Notes at September 30, 2021 are adjusted to reflect quarterly cash distributions in excess of a $0.30 distribution threshold, as defined in the 4.50% Convertible Senior Notes Indenture.

The 4.50% Convertible Senior Notes are convertible at the option of the holder at any time up until one business day before the respective maturity date and may be settled in cash, the Company’s common stock or a combination of cash and the Company’s common stock, at the Company’s election. The closing price of the Company’s common stock was $16.17 on September 30, 2021, which did not exceed the conversion price of its 4.50% Convertible Senior Notes at September 30, 2021.

Senior Unsecured Notes

5.75% Senior Unsecured Notes Due 2026

On August 16, 2021, the Company issued $150.0 million of its 5.75% senior unsecured notes due 2026 (the “5.75% Senior Unsecured Notes”) pursuant to its Indenture, dated August 16, 2021 (the “Base Indenture”), between it and Wells Fargo, now Computershare Trust Company, N.A. (“CTC”), as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated August 16, 2021, between it and Wells Fargo, now CTC, (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). Prior to May 15, 2026, the Company may at its option redeem the 5.75% Senior Unsecured Notes, in whole or in part, at a redemption price equal to the sum of (i) 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date, and (ii) a make-whole premium. On or after May 15, 2026, the Company may at its option redeem the 5.75% Senior Unsecured Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the 5.75% Senior Unsecured Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.

The Indenture contains restrictive covenants that, among other things, require the Company to maintain certain financial ratios. The foregoing limitations are subject to exceptions as set forth in the Supplemental Indenture. At September 30, 2021, the Company was in compliance with these covenants. The Indenture provides for customary events of default that include, among other things (subject in certain cases to customary grace and cure periods): (i) non-payment of principal or interest, (ii) breach of certain covenants contained in the Indenture or the 5.75% Senior Unsecured Notes, (iii) an event of default or acceleration of certain other indebtedness of the Company or a subsidiary in which the Company has invested at least $75 million in capital within the applicable grace period and (iv) certain events of bankruptcy or insolvency. Generally, if an event of default occurs (subject to certain exceptions), CTC or the holders of at least 25% in aggregate principal amount of the then outstanding 5.75% Senior Unsecured Notes may declare all of the notes to be due and payable.

12.00% Senior Unsecured Notes Due 2027

On July 31, 2020, the Company entered into a Note and Warrant Purchase Agreement (the “Note and Warrant Purchase Agreement”) with Oaktree Capital Management, L.P. (“Oaktree”) and Massachusetts Mutual Life Insurance Company (“MassMutual”) pursuant to which the Company may issue to Oaktree and MassMutual from time to time up to $125.0 million aggregate principal amount of 12.00% Senior Unsecured Notes. The 12.00% Senior Unsecured Notes had an annual interest rate of 12.00%, payable up to 3.25% (at the election of the Company) as pay-in-kind interest and the remainder as cash interest. On July 31, 2020, the Company issued to Oaktree and MassMutual $42.0 million and $8.0 million aggregate principal amount, respectively, of the 12.00% Senior Unsecured Notes.

On August 18, 2021, the Company entered into an agreement with Oaktree and MassMutual that provided for the redemption in full of the outstanding balance of the 12.00% Senior Unsecured Notes, including a waiver of certain sections of the Note and Warrant Purchase Agreement. On August 20, 2021, the redemption was consummated and a payment to Oaktree and MassMutual was made for an aggregate $55.3 million, which consisted of (i) principal in the amount of $50.0 million, (ii) interest in the amount of approximately $329,000 and (iii) a make-whole amount of approximately $5.0 million. In connection with the redemption, the Company recorded a charge to earnings of $8.0 million, comprising an extinguishment of debt charge of $7.8 million in connection with (i) the $5.0 million net make-whole amount and (ii) the $2.8 million acceleration of the remaining market discount; and interest expense of $218,000 in connection with the acceleration of deferred debt issuance costs.

Senior Secured Financing Facility and Term Warehouse Financing Facilities

Borrowings under the Company’s senior secured financing facility and term warehouse facilities are guaranteed by the Company or one or more of its subsidiaries. The following table sets forth certain information with respect to the Company’s senior secured financing and term warehouse financing facilities (dollars in thousands, except amounts in footnotes):

	September 30, 2021									December 31, 2020
	Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate			Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate
Senior Secured Financing Facility
Massachusetts Mutual Life Insurance Company (1)	$	37,596	$	217,835		12		5.75	%	$	29,314	$	239,385		15		5.75	%
CRE - Term Warehouse Financing Facilities
Barclays Bank PLC		109,471		138,422		6		1.95	%		—		—		—		—	%
JPMorgan Chase Bank, N.A. (2)(3)		210,994		283,222		14		2.10	%		12,258		20,000		1		2.66	%
Total	$	358,061	$	639,479						$	41,572	$	259,385

(1) Includes $3.6 million and $4.0 million of deferred debt issuance costs at September 30, 2021 and December 31, 2020, respectively.

(2) Outstanding borrowings include accrued interest payable.

(3) Includes $50,000 and $1.3 million of deferred debt issuance costs at September 30, 2021 and December 31, 2020, respectively, which includes $678,000 of deferred debt issuance costs at December 31, 2020 from other term warehouse financing facilities with no balance.

The following table shows information about the amount at risk under the warehouse financing facilities (dollars in thousands):

	Amount at Risk (1)		Weighted Average Remaining Maturity	Weighted Average Interest Rate
At September 30, 2021:
CRE - Term Warehouse Financing Facilities
Barclays Bank PLC (2)	$	29,312	29 days		1.95	%
JPMorgan Chase Bank, N.A. (2)	$	73,020	26 days		2.10	%

(1) Equal to the total of the estimated fair value of loans sold and accrued interest receivable, minus the total of the warehouse financing agreement liabilities and accrued interest payable.

(2) In October 2021, the Company extended the maturity of its Barclays and JPMorgan Chase CRE - term warehouse financing facilities to October 2022 and October 2024, respectively.

The Company was in compliance with all financial covenants in each of the respective agreements at September 30, 2021 and December 31, 2020.

CRE - Term Warehouse Financing Facilities

In February 2012, an indirect wholly-owned subsidiary entered into a master repurchase and securities agreement, which was subsequently replaced with an amended and restated master repurchase agreement in July 2018, (the “Wells Fargo Facility”) with Wells Fargo to finance the origination of CRE loans. In October 2021, the Wells Fargo Facility matured.

In April 2018, an indirect wholly-owned subsidiary of the Company entered into a master repurchase agreement (the “Barclays Facility”) with Barclays to finance the origination of CRE loans. In connection with the Barclays Facility, the Company fully guaranteed all payments and performance under the Barclays Facility pursuant to a guaranty agreement (the “Barclays Guaranty”). In October 2021, the Barclays Facility and the Barclays Guaranty were amended to extend the revolving period of the facility to October 2022 and to modify the guaranty to limit financial covenants to be applicable when there are outstanding transactions.

In October 2018, an indirect wholly-owned subsidiary of the Company entered into a master repurchase agreement (the “JPMorgan Chase Facility”) with JPMorgan Chase to finance the origination of CRE loans. In September and October 2021, the JPMorgan Chase Facility was amended twice, resulting in (i) the extension of the JPMorgan Chase Facility’s maturity date to October 2024, (ii) an update to the Company’s tangible net worth requirement and minimum liquidity covenant as set forth in the guarantee agreement and (iii) a modification of market terms regarding the replacement of LIBOR upon determination of a benchmark transition event.

In November 2021, an indirect, wholly-owned subsidiary of the Company (the “Subsidiary”) entered into a $250.0 million Master Repurchase and Securities Contract Agreement with Morgan Stanley Mortgage Capital Holdings LLC (“Morgan Stanley”), to be used to finance the Company’s core commercial real estate lending business (the “Morgan Stanley Facility”). Each repurchase transaction will specify its own terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate. The financing provided by the Morgan Stanley Facility matures in November 2022, with two one-year automatic extensions unless the Subsidiary provides notice of its intent not to extend the facility. The Subsidiary also has the right to request an extension for an additional one-year period after the second automatic extension to the extent it is utilized. The Company paid a structuring fee to Morgan Stanley as well as other reasonable closing costs.

The Morgan Stanley Facility contains margin call provisions that provide Morgan Stanley with certain rights if the value of purchased assets declines (“Margin Deficit”). Under these circumstances, Morgan Stanley may require the Subsidiary to transfer cash in an amount necessary to eliminate such Margin Deficit or repurchase the asset(s) that resulted in such Margin Deficit.

The Company guaranteed the Subsidiary’s payment and performance under the Morgan Stanley Facility pursuant to a guaranty agreement (the “Morgan Stanley Guaranty”), subject to a limit of 25% of the then currently unpaid aggregate repurchase price of all purchased assets. The Morgan Stanley Guaranty includes certain financial covenants required of the Company, including required liquidity, required capital, ratios of total intendedness to equity and EBITDA requirements. Also, the Subsidiary’s direct parent, ACRES Realty Funding, Inc. (“Pledgor”), executed a Pledge Agreement with Morgan Stanley pursuant to which Pledgor pledged and granted to Morgan Stanley a continuing security interest in any and all of Pledgor’s right, title and interest in and to the Subsidiary, including all distributions, proceeds, payments, income and profits from Pledgor’s interests in the Subsidiary.

The Morgan Stanley Facility specifies events of default, subject to certain materiality thresholds and grace periods, customary for this type of financing arrangement. The remedies for such events of default are also customary for this type of financing arrangement and include acceleration of the principal amount outstanding under the Morgan Stanley Facility and liquidation by Morgan Stanley of purchased assets then subject to the Morgan Stanley Facility.

Contractual maturity dates of the Company’s borrowings’ principal outstanding by category and year are presented in the table below (in thousands):

	Total		2021		2022		2023		2024		2025 and Thereafter
At September 30, 2021:
CRE securitizations	$	968,647	$	—	$	—	$	—	$	—	$	968,647
Senior secured financing facility		41,182		—		—		—		—		41,182
Term warehouse financing facilities (1)(2)		320,515		320,515		—		—		—		—
4.50% Convertible Senior Notes		88,014		—		88,014		—		—		—
5.75% Senior Unsecured Notes		150,000		—		—		—		—		150,000
Unsecured junior subordinated debentures		51,548		—		—		—		—		51,548
Total	$	1,619,906	$	320,515	$	88,014	$	—	$	—	$	1,211,377

(1) Includes accrued interest payable in the balances of principal outstanding.

(2) In October 2021, the Company extended the maturity of its Barclays and JPMorgan Chase CRE - term warehouse financing facilities to October 2022 and October 2024, respectively, and allowed the Wells Fargo CRE - term warehouse financing facility to mature.

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SHARE ISSUANCE AND REPURCHASE

9 Months Ended

Sep. 30, 2021

Stockholders Equity Note [Abstract]

SHARE ISSUANCE AND REPURCHASE

NOTE 12 - SHARE ISSUANCE AND REPURCHASE

In May 2021, and subsequently in June 2021, the Company issued a total of 4.6 million shares of 7.875% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) at a public offering price of $25.00 per share. The Company received net proceeds of $110.5 million after $4.5 million of underwriting discounts and other offering expenses. Dividends are payable quarterly in arrears at the end of January, April, July and October. The Series D Preferred Stock has no maturity date and the Company is not required to redeem the Series D Preferred Stock at any time. On or after May 21, 2026, the Company may, at its option, redeem the Series D Preferred Stock, in whole or part, at any time and from time to time, for cash at $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date.

On or after July 30, 2024, the Company may, at its option, redeem its 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”), in whole or in part, at any time and from time to time, for cash at $25.00 per share, plus accrued and unpaid distributions, if any, to the redemption date. Effective July 30, 2024 and thereafter, the Company will pay cumulative distributions on the Series C Preferred Stock at a floating rate equal to three-month LIBOR plus 5.927% per annum based on the $25.00 liquidation preference, provided that such floating rate shall not be less than the initial rate of 8.625% at any date of determination.

At September 30, 2021, the Company had 4.8 million shares of Series C Preferred Stock and 4.6 million shares of Series D Preferred Stock outstanding, with weighted average issuance prices, excluding offering costs, of $25.00.

In March 2016, the Board of Directors (“Board”) approved a share repurchase program and in November 2020, the Board reauthorized and approved the continued use of the Company’s existing share repurchase program in order to repurchase up to $20.0 million of the currently outstanding shares of the Company’s common stock through March 31, 2021. In March 2021, the Board authorized the extension of the previous $20.0 million authorization through the second quarter of 2021 or until the $20.0 million is fully deployed. Additionally, the Board authorized the Company to enter into written trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934 (the “Exchange Act”) in connection with the authorized repurchases. During the nine months ended September 30, 2021, the Company repurchased $14.7 million of its common stock, or approximately 1.1 million shares. In total, the Company repurchased 1,607,382 shares for $20.0 million, excluding broker fees and commissions, during its deployment of the program. During the nine months ended September 30, 2020, the Company did not repurchase any shares of its common or preferred stock through this program.

In connection with the Note and Warrant Purchase Agreement, the 12.00% Senior Unsecured Notes give Oaktree and MassMutual warrants to purchase an aggregate of up to 1,166,653 shares of common stock at an exercise price of $0.03 per share, subject to certain potential adjustments. On July 31, 2020, concurrently with the issuance of the 12.00% Senior Unsecured Notes, the Company issued to Oaktree warrants to purchase 391,995 shares of common stock for an aggregate purchase price of $42.0 million and issued to MassMutual warrants to purchase 74,666 shares of common stock for an aggregate purchase price of $8.0 million. The warrants are recorded in additional paid-in capital on the consolidated balance sheet at their fair value of $3.1 million at issuance. At any time and from time to time prior to January 31, 2022, the Company may elect to issue to Oaktree and MassMutual warrants to purchase an additional 699,992 shares of common stock for a purchase price equal to the principal amount of the additional 12.00% Senior Unsecured Notes being issued. The warrants are immediately exercisable on issuance and expire seven years from the issuance date. The warrants can be exercised with cash or as a net exercise.

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SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

SHARE-BASED COMPENSATION

NOTE 13 - SHARE-BASED COMPENSATION

In June 2021, the Company’s shareholders approved the ACRES Commercial Realty Corp. Third Amended and Restated Omnibus Equity Compensation Plan (the “Omnibus Plan”) and the ACRES Commercial Realty Corp. Manager Incentive Plan (the “Manager Plan” and together with the Omnibus Plan, the “Plans”). The Omnibus Plan was amended (i) increase the number of shares authorized for issuance by an additional 1,100,000 shares of common stock less any shares of common stock issued or subject to awards granted under the Manager Plan; and (ii) extend the expiration date of the Omnibus Plan from June 2029 to June 2031. The maximum number of shares that may be subject to awards granted under the Omnibus Plan and the Manager Plan, determined on a combined basis, will be 1,700,817 shares of common stock.  

The Company recognized stock-based compensation expense of $771,000 and $961,000 during the three and nine months ended September 30, 2021, respectively, and $1.9 million and $3.1 million during the three and nine months ended September 30, 2020, respectively, related to restricted stock.

The following table summarizes the Company’s restricted common stock transactions:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Unvested shares at January 1, 2021		11,610		$	6.46
Issued		333,329			17.39
Vested		(11,610	)		6.46
Forfeited		—			—
Unvested shares at September 30, 2021		333,329		$	17.39

The unvested restricted common stock shares are expected to vest during the following years:

Year	Shares
2021		—
2022		83,331
2023		83,331
2024		83,331
2025		83,336
Total		333,329

The shares issued during the nine months ended September 30, 2021 will vest in installments over a four-year period, pursuant to the terms of the respective award agreements. At September 30, 2021, total unrecognized compensation costs relating to unvested restricted stock was $4.9 million based on the grant date fair value of shares granted. The cost is expected to be recognized over a weighted average period of 3.7 years.

The following table summarizes the status of the Company’s vested stock options at September 30, 2021:

Vested Options	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Vested at January 1, 2021		3,333		$	76.80
Vested		—			—
Exercised		—			—
Forfeited		—			—
Expired		(3,333	)		76.80
Vested at September 30, 2021		—		$	—		—	$	—

There were no options granted during the nine months ended September 30, 2021 or 2020. The outstanding stock options had contractual terms of ten years and expired in May 2021.

Under the Company’s Fourth Amended and Restated Management Agreement, as amended (“Management Agreement”), incentive compensation is paid quarterly. Up to 75% of the incentive compensation is paid in cash and at least 25% is paid in the form of an award of common stock, recorded in management fees on the consolidated statements of operations. No incentive compensation was paid to the Manager for the three and nine months ended September 30, 2021 or 2020. No incentive compensation was paid to the Prior Manager for the nine months ended September 30, 2020.

The Omnibus Plan and the Manager Plan are administered by the compensation committee of our Board (the “Compensation Committee”). In 2020, the Compensation Committee and the Board created parameters for equity awards, whereby they are no longer discretionary but are now based upon the Company’s achievement of performance parameters using book value of the common stock as the appropriate benchmark. See Note 17 for a description of awards made under the Manager Plan.

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 14 - EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings (losses) per common share for the periods presented (dollars in thousands, except per share amounts):

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net (loss) income	$	(4,928	)	$	8,159		$	21,767		$	(221,762	)
Net income allocated to preferred shares		(4,877	)		(2,588	)		(11,033	)		(7,763	)
Net (loss) income allocable to common shares	$	(9,805	)	$	5,571		$	10,734		$	(229,525	)
Weighted average number of common shares outstanding:
Weighted average number of common shares outstanding - basic		9,086,751			10,650,112			9,351,477			10,587,147
Weighted average number of warrants outstanding (1)		466,661			314,492			466,661			105,596
Total weighted average number of common shares outstanding - basic		9,553,412			10,964,604			9,818,138			10,692,743
Effect of dilutive securities - unvested restricted stock		—			1,682			18,465			—
Weighted average number of common shares outstanding - diluted		9,553,412			10,966,286			9,836,603			10,692,743
Net (loss) income per common share - basic	$	(1.03	)	$	0.51		$	1.09		$	(21.47	)
Net (loss) income per common share - diluted	$	(1.03	)	$	0.51		$	1.09		$	(21.47	)

(1) See Note 12 for further details regarding the warrants.

For the 4.50% Convertible Senior Notes, the Company has the intent and ability to settle the principal amount in cash and intends to settle the conversion feature for the amount above the conversion price, or the conversion spread, if any, in common stock. The Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted EPS, if applicable. The conversion spread will have a dilutive impact on diluted EPS when the average market price of the Company’s common stock for a given period exceeds the conversion price of the 4.50% Convertible Senior Notes. For the nine months ended September 30, 2021, the average market price of the Company’s common stock did not exceed the conversion price of the 4.50% Convertible Senior Notes and for the nine months ended September 30, 2020 the average market price of the Company’s common stock did not exceed the conversion price of the 4.50% Convertible Senior Notes and 8.00% Convertible Senior Notes and as such the convertible senior notes have been excluded from the computation of diluted EPS. The conversion rate and conversion price for the 4.50% Convertible Senior Notes are described further in Note 11.

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DISTRIBUTIONS

9 Months Ended

Sep. 30, 2021

Distributions [Abstract]

DISTRIBUTIONS

NOTE 15 - DISTRIBUTIONS

In order to qualify as a REIT, the Company must currently distribute at least 90% of its taxable income. In addition, the Company must distribute 100% of its taxable income not to be subject to corporate federal income taxes on retained income. The Company anticipates it will distribute substantially all of its taxable income, if any, to its stockholders. Because taxable income differs from cash flow from operations due to non-cash revenues or expenses (such as provisions for credit losses and depreciation), in certain circumstances the Company may generate operating cash flow in excess of its distributions or, alternatively, may be required to borrow funds or sell assets to make sufficient distribution payments. In October 2021, the Company finalized its 2020 tax return, which determined that it received net operating loss and net capital loss carryforwards that may reduce its taxable income in the 2021 tax year and in future tax years, subject to carryforward restrictions.

The Company’s 2021 distributions are, and will be, determined by the Board, which will also consider the composition of any distributions declared, including the option of paying a portion in cash and the balance in additional shares of common stock.

For the three months ended September 30, 2021, the Company declared and subsequently paid its Series C Preferred Stock and Series D Preferred Stock distributions, or $0.54 per share and $0.49 per share, respectively. It did not pay any common share distributions for the three months ended September 30, 2021. For the three months ended September 30, 2020, the Company declared and subsequently paid its Series C Preferred Stock distributions, including all distributions in arrears, of $1.62 per share. The Company did not pay distributions on its common shares during three months ended September 30, 2020.

The following tables present distributions declared (on a per share basis) for the nine months ended September 30, 2021 and the year ended December 31, 2020:

	Series C Preferred Stock					Series D Preferred Stock
	Date Paid	Total Distributions Paid		Distributions Per Share		Date Paid	Total Distributions Paid		Distributions Per Share
	(in thousands)					(in thousands)
2021
September 30	November 1	$	2,588	$	0.5390625	November 1	$	2,264	$	0.4921875
June 30	July 30	$	2,588	$	0.5390625	July 30	$	1,736	$	0.377344
March 31	April 30	$	2,588	$	0.5390625	N/A	N/A		N/A
2020
December 31	February 1, 2021	$	2,587	$	0.5390625	N/A	N/A		N/A
March 31, June 30 and September 30	October 30	$	7,763	$	1.6171875	N/A	N/A		N/A

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ACCUMULATED OTHER COMPREHENSIVE LOSS

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE LOSS

NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in net unrealized loss on derivatives, the sole component of accumulated other comprehensive loss, for the nine months ended September 30, 2021 (in thousands):

	Accumulated Other Comprehensive Loss - Net Unrealized Loss on Derivatives
Balance at January 1, 2021	$	(9,978	)
Amounts reclassified from accumulated other comprehensive loss (1)		1,384
Balance at September 30, 2021	$	(8,594	)

(1) Amounts reclassified from accumulated other comprehensive loss are reclassified to interest expense on the Company’s consolidated statements of operations.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2021

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 17 - RELATED PARTY TRANSACTIONS

Relationship with ACRES Capital Corp. and certain of its Subsidiaries

Relationship with ACRES Capital Corp. and certain of its Subsidiaries. The Manager is a subsidiary of ACRES Capital Corp., of which Andrew Fentress, the Company’s Chairman, serves as Managing Partner and Mark Fogel, the Company’s President, Chief Executive Officer and Director, serves as Chief Executive Officer and President. Mr. Fentress and Mr. Fogel are also shareholders and board members of ACRES Capital Corp.

Effective on July 31, 2020, the Company has a Management Agreement with the Manager pursuant to which the Manager provides the day-to-day management of the Company’s operations and receives management fees. For the three and nine months ended September 30, 2021, the Manager earned base management fees of approximately $1.7 million and $4.4 million, respectively. No incentive compensation was earned for the three and nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, the Manager earned base management fees of approximately $898,000. No incentive compensation was earned for the three and nine months ended September 30, 2020. At September 30, 2021 and December 31, 2020, $1.1 million and $442,000, respectively, of base management fees were payable by the Company to the Manager. There was no incentive compensation payable at September 30, 2021 and December 31, 2020. The Manager and its affiliates provide the Company with a Chief Financial Officer and a sufficient number of additional accounting, finance, tax and investor relations professionals. The Company reimburses the Manager’s expenses for (a) the wages, salaries and benefits of the Chief Financial Officer, and (b) a portion of the wages, salaries and benefits of accounting, finance, tax and investor relations professionals, in proportion to such personnel’s percentage of time allocated to the Company’s operations. The Company reimburses out-of-pocket expenses and certain other costs incurred by the Manager that related directly to the Company’s operations. For the three and nine months ended September 30, 2021, the Company reimbursed the Manager $899,000 and $3.5 million, respectively, for all such compensation and costs. For the three and nine months ended September 30, 2020, the Company reimbursed the Manager $432,000 for all such compensation and costs. At September 30, 2021 and December 31, 2020, the Company had payables to the Manager pursuant to the Management Agreement totaling approximately $819,000 and $380,000, respectively, related to such compensation and costs. The Company’s base management fee payable and expense reimbursements payable were recorded in management fee payable - related party and accounts payable and other liabilities on the consolidated balance sheet, respectively.

On July 31, 2020, ACRES RF, then known as RCC Real Estate, Inc. (“RCC RE”), a direct, wholly owned subsidiary of the Company, provided a $12.0 million loan (the “ACRES Loan”) to ACRES Capital Corp. evidenced by the promissory note from ACRES Capital Corp.

The ACRES Loan accrues interest at 3.00% per annum payable monthly. The monthly amortization payment is $25,000. The ACRES Loan matures in July 2026, subject to two one-year extensions (at ACRES Capital Corp.’s option) subject to the payment of a 0.5% extension fee to ACRES RF on the outstanding principal amount of the ACRES Loan.

During the three and nine months ended September 30, 2021, the Company recorded interest income of $90,000 and $268,000, respectively, on the ACRES Loan in other income (expense) on the consolidated statements of operations. During the three and nine months ended September 30, 2020, the Company recorded interest income of $62,000 on the ACRES Loan. At September 30, 2021, the ACRES Loan had a principal balance and accrued interest receivable of $11.7 million and $29,000, respectively, recorded in loan receivable - related party and accrued interest receivable, respectively, on the consolidated balance sheet. At December 31, 2020, the ACRES Loan had a principal balance of $11.9 million, recorded in loan receivable - related party on the consolidated balance sheet, and no accrued interest receivable.

At September 30, 2021, the Company retained equity in two securitization entities that were structured for the Company by the Manager. Under the Management Agreement, the Manager was not separately compensated by the Company for executing this transaction and was not separately compensated for managing the securitization entities and their assets.

Relationship with ACRES Capital Servicing LLC. Under the Loan and Servicing Agreement (the “MassMutual Loan Agreement”) with MassMutual and the other lenders party thereto, ACRES Capital Servicing LLC (“ACRES Capital Servicing”), an affiliate of ACRES Capital Corp. and the Manager, serves as the portfolio servicer. Additionally, ACRES Capital Servicing served as the special servicer of XAN 2019-RSO7 and serves as special servicer of XAN 2020-RSO8, XAN 2020-RSO9 and ACR 2021-FL1. During the three and nine months ended September 30, 2021, ACRES Capital Servicing received no portfolio servicing fees. During the nine months ended September 30, 2021, ACRES Capital Servicing received $14,000 in special servicing fees recorded as a reduction to interest income in the consolidated statements of operations. There were no special servicing fees received during the three months ended September 30, 2021. During the three and nine months ended September 30, 2020, ACRES Capital Servicing received no portfolio servicing fees or special servicing fees.

Relationship with ACRES Collateral Manager, LLC. ACRES Collateral Manager, LLC, an affiliate of ACRES Capital Corp. and the Manager, serves as the collateral manager of ACR 2021-FL1, a role for which it waived its fee.

Relationship with ACRES Realty Funding, Inc. ACRES RF, an affiliate of ACRES Capital Corp. and the Manager, serves as the advancing agent of ACR 2021-FL1, a role for which it waived its fee.

Relationship with ACRES Share Holdings, LLC. In June 2021, the Company’s Manager Incentive Plan was approved by its shareholders, which authorized up to 1,100,000 shares of common stock for issuance to the Manager (less shares of common stock issued or subject to awards under the Omnibus Plan). ACRES Share Holdings, LLC, an affiliate of ACRES Capital Corp. and the Manager, was granted 299,999 shares during the nine months ended September 30, 2021, which will vest 25% for four years, on each anniversary of the issuance date. There were no shares issued under this plan during the three months ended September 30, 2021. See Note 13 for additional details.

Relationship with C-III and certain of its Subsidiaries

Relationship with C-III and Certain of its Subsidiaries. The Prior Manager was a wholly-owned subsidiary of Resource America, Inc. (“Resource America”), which is a wholly-owned subsidiary of C-III. C-III is indirectly controlled and partially owned by Island Capital Group LLC (“Island Capital”). Effective July 31, 2020, in connection with the ACRES acquisition, Andrew L. Farkas, the managing member of Island Capital and the chairman and chief executive officer of C-III, resigned his position as the Company’s Chairman. In addition, Robert C. Lieber and Matthew J. Stern, each executive managing directors of both C-III and Island Capital, resigned their positions as the Company’s Chief Executive Officer and President, respectively. Lastly, Jeffrey P. Cohen, president of C-III and Island Capital, resigned his position as a member of the Board. Those officers and the Company’s other executive officers were also officers of the Company’s Prior Manager, Resource America, C-III and/or affiliates of those companies. Prior to September 8, 2020, a non-employee director of the Company held the position of Executive Vice President at Resource America.

Prior to July 31, 2020, the Company had a management agreement with the Prior Manager pursuant to which the Prior Manager provided the day-to-day management of the Company’s operations and received substantial fees. For the three and nine months ended September 30, 2020, the Prior Manager earned base management fees of approximately $385,000 and $3.8 million, respectively. No incentive compensation was earned for the three and nine months ended September 30, 2020. The Prior Manager and its affiliates provided the Company with a Chief Financial Officer and a sufficient number of additional accounting, finance, tax and investor relations professionals. The Company reimbursed the Prior Manager’s and its affiliates’ expenses for (a) the wages, salaries and benefits of the Chief Financial Officer, (b) a portion of the wages, salaries and benefits of accounting, finance, tax and investor relations professionals, in proportion to such personnel’s percentage of time allocated to the Company’s operations, and (c) personnel principally devoted to the Company’s ancillary operating subsidiaries. The Company reimbursed out-of-pocket expenses and certain other costs incurred by the Prior Manager and its affiliates that related directly to the Company’s operations. For the three and nine months ended September 30, 2020, the Company reimbursed the Prior Manager $727,000 and $4.0 million, respectively, for all such compensation and costs.

At September 30, 2021, the Company retained equity in four securitization entities that were structured for the Company by the Prior Manager, although three of the securitization entities had been substantially liquidated as of September 30, 2021. Under the management agreement, the Prior Manager was not separately compensated by the Company for executing these transactions and was not separately compensated for managing the securitization entities and their assets.

Relationship with Resource Real Estate, LLC. Resource Real Estate, LLC (“Resource Real Estate”), an indirect wholly-owned subsidiary of Resource America and C-III, originated, financed and managed the Company’s CRE loan portfolio until the ACRES acquisition on July 31, 2020. The Company reimbursed Resource Real Estate for loan origination costs associated with all loans originated.

Resource Real Estate served as special servicer for the following liquidated real estate securitization transactions, which provided financing for CRE loans: (i) Resource Capital Corp. 2014-CRE2, Ltd., a $353.9 million securitization that closed in July 2014 and liquidated in August 2017; (ii) Resource Capital Corp. 2015-CRE3, Ltd., a $346.2 million securitization that closed in February 2015 and liquidated in August 2018; (iii) Resource Capital Corp. 2015-CRE4, Ltd., a $312.9 million securitization that closed in August 2015 and liquidated in July 2018; and (iv) Resource Capital Corp. 2017-CRE5, Ltd., a $376.7 million securitization that closed in July 2017 and liquidated in July 2019. Resource Real Estate also served as special servicer for XAN 2020-RSO8, a $522.6 million securitization that closed in March 2020. In January 2021, ACRES Capital Servicing replaced Resource Real Estate as special servicer of XAN 2020-RSO8. Resource Real Estate did not earn any special servicing fees during the three and nine months ended September 30, 2020.

Relationship with C-III Commercial Mortgage. In May 2019, ACRES RF, then known as RCC RE, entered into a Mortgage Loan Sale and Purchase Agreement (the “May 2019 Loan Acquisition Agreement”) with C-III Commercial Mortgage LLC (“C-III Commercial Mortgage”), a wholly-owned subsidiary of C-III, that provided for the acquisition by ACRES RF of certain CRE loans on a servicing-released basis at par, plus accrued and unpaid interest on each loan for an aggregate purchase price of $197.6 million. In accordance with the terms of the May 2019 Loan Acquisition Agreement, C-III Commercial Mortgage retains its title to all exit fees in excess of 0.50% of the outstanding principal balance and certain deferred fees conditioned upon the terms of the loans’ particular agreements. During the three and nine months ended September 30, 2021, C-III Commercial Mortgage earned fees of $227,000 and $361,000, respectively. During the nine months ended September 30, 2020, C-III Commercial Mortgage earned fees of $32,000. The Company had no outstanding payables to C-III Commercial Mortgage at September 30, 2021 and outstanding payables of $48,000 at December 31, 2020.

Relationship with Resource Real Estate Opportunity REIT

In July 2020, ACRES and the Company entered into agreements with Resource America pursuant to which Resource America provided office space and other office-related services as well as performed an internal audit program. In September 2020, the sublease was assigned from Resource America to Resource Real Estate Opportunity REIT and the internal audit engagement letter was assigned from Resource America to Resource NewCo LLC, a subsidiary of Resource Real Estate Opportunity REIT. A former non-employee director of the Company is an executive at, and a director of, Resource Real Estate Opportunity REIT. During the nine months ended September 30, 2021, the Company incurred $67,000 of expenses in connection with these agreements. During the three and nine months ended September 30, 2020, the Company incurred $21,000 of expenses in connection with these agreements. The Company had no payables to Resource Real Estate Opportunity REIT at September 30, 2021. These agreements were terminated as of March 31, 2021.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the Company’s financial instruments carried at fair value on a recurring basis based upon the fair value hierarchy (in thousands):

	Level 1		Level 2		Level 3		Total
At December 31, 2020:
Assets:
Investment securities available-for-sale	$	—	$	—	$	2,080	$	2,080

In accordance with guidance on fair value measurements and disclosures, the Company is not required to disclose quantitative information with respect to unobservable inputs contained in fair value measurements that are not developed by the Company. As a consequence, the Company has not disclosed such information associated with fair values obtained for investment securities available-for-sale from third-party pricing sources.

The following table presents additional information about the Company’s assets that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs (in thousands):

	CMBS
Balance, January 1, 2021	$	2,080
Included in earnings		878
Sales		(2,958	)
Balance, September 30, 2021	$	—

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of the Company’s short-term financial instruments such as cash and cash equivalents, restricted cash, accrued interest receivable, principal paydowns receivable, accrued interest payable and distributions payable approximate their carrying values on the consolidated balance sheets. The fair values of the Company’s investment securities available-for-sale are reported in Note 9.

The fair values of the Company’s loans held for investment are measured by discounting the expected future cash flows using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Par values of loans with variable interest rates are expected to approximate fair value unless evidence of credit deterioration exists, in which case the fair value approximates the par value less the loan’s allowance estimated through individual evaluation. Fair values of loans with fixed rates are calculated using the net present values of future cash flows, discounted at market rates. The Company’s floating-rate CRE loans had interest rates from 3.00% to 9.75% and 4.10% to 9.75% at September 30, 2021 and December 31, 2020, respectively.

The fair value of the Company’s mezzanine loan is measured by discounting the remaining contractual cash flows using the current interest rates at which similar instruments would be originated for the same remaining maturity. The Company’s mezzanine loan is discounted at a rate of 10.00%.

The fair value of the Company’s preferred equity investments were measured by discounting the instrument’s remaining contractual cash flows using current interest rates at which similar instruments would be originated for the same remaining maturities. The Company’s preferred equity investments were discounted at rates of 12.08% and 11.54% at December 31, 2020. The Company’s two preferred equity investments paid off in March 2021 and April 2021, respectively.

The Company’s fixed-rate CRE loans were valued using third-party pricing sources. In March 2021, the fixed-rate CRE loans were sold at par for cash proceeds of $4.8 million.

The Company’s loan receivable - related party is estimated using a discounted cash flow model.

Senior notes in CRE securitizations are estimated using a discounted cash flow model with implied yields based on trades for similar securities.

The fair value of the senior secured financing facility is measured by discounting the facility’s remaining contractual cash flows using the current interest rate at which a similar debt instrument would be issued for the same remaining maturity. The fair value of the senior secured financing facility is estimated using a discounted cash flow model that discounts the expected future cash flows at a rate of 5.75%.

Warehouse financing facilities are variable-rate debt instruments indexed to LIBOR that reset periodically and, as a result, their carrying value approximates their fair value, excluding deferred debt issuance costs.

The fair value of the 4.50% Convertible Senior Notes is determined using a discounted cash flow model that discounts the issuance’s contractual future cash flows using the current interest rate on similar debt issuances with similar terms and similar remaining maturities that do not have a conversion option.

The Company’s 5.75% Senior Unsecured Notes are estimated and 12.00% Senior Unsecured Notes were estimated by using a discounted cash flow model.

The fair values of the junior subordinated notes RCT I and RCT II are estimated by using a discounted cash flow model.

The fair values of the Company’s remaining financial and non-financial assets that are not reported at fair value on the consolidated balance sheets are reported in the following table (in thousands):

			Fair Value Measurements
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At September 30, 2021:
Assets:
CRE whole loans	$	1,822,410	$	1,849,066	$	—	$	—	$	1,849,066
CRE mezzanine loan	$	4,415	$	4,700	$	—	$	—	$	4,700
Loan receivable - related party	$	11,675	$	10,473	$	—	$	—	$	10,473
Liabilities:
Senior notes in CRE securitizations	$	960,709	$	970,552	$	—	$	—	$	970,552
Senior secured financing facility	$	37,596	$	41,182	$	—	$	—	$	41,182
Warehouse financing facilities	$	320,465	$	320,516	$	—	$	—	$	320,516
4.50% Convertible Senior Notes	$	85,810	$	87,935	$	—	$	—	$	87,935
5.75% Senior Unsecured Notes (1)	$	146,474	$	149,670	$	—	$	—	$	149,670
Junior subordinated notes	$	51,548	$	43,519	$	—	$	—	$	43,519
At December 31, 2020:
Assets:
CRE whole loans	$	1,477,295	$	1,513,822	$	—	$	—	$	1,513,822
CRE mezzanine loan	$	4,399	$	4,700	$	—	$	—	$	4,700
CRE preferred equity investments	$	25,988	$	27,650	$	—	$	—	$	27,650
CRE whole loans, fixed-rate (2)	$	4,809	$	4,809	$	—	$	—	$	4,809
Loan receivable - related party	$	11,875	$	10,184	$	—	$	—	$	10,184
Liabilities:
Senior notes in CRE securitizations	$	1,027,929	$	1,030,854	$	—	$	—	$	1,030,854
Senior secured financing facility	$	29,314	$	33,360	$	—	$	—	$	33,360
Warehouse financing facility	$	12,258	$	13,516	$	—	$	—	$	13,516
4.50% Convertible Senior Notes	$	137,252	$	132,437	$	—	$	—	$	132,437
12.00% Senior Unsecured Notes	$	46,426	$	58,910	$	—	$	—	$	58,910
Junior subordinated notes	$	51,548	$	31,955	$	—	$	—	$	31,955

(1) Carrying value includes deferred debt issuance costs of $320,000 from the redeemed 12.00% Senior Unsecured Notes.

(2) Classified as other assets on the consolidated balance sheet.

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MARKET RISK AND DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2021

Derivative Instruments And Hedging Activities Disclosure [Abstract]

MARKET RISK AND DERIVATIVE INSTRUMENTS

NOTE 19 - MARKET RISK AND DERIVATIVE INSTRUMENTS

The Company is affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as “market risks.” When deemed appropriate, the Company used derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments were interest rate risk and market price risk.

The Company also managed its interest rate risk with interest rate swaps. Interest rate swaps are contracts between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices.

The Company seeks to manage the extent to which net income changes as a function of changes in interest rates by matching adjustable-rate assets with variable-rate borrowings.

The Company classified its interest rate swap contracts as cash flow hedges, which are hedges that eliminate the risk of changes in the cash flows of a financial asset or liability.

The Company terminated all of its interest rate swap positions associated with its prior financed CMBS portfolio in April 2020. At termination, the Company realized a loss of $11.8 million. At September 30, 2021 and December 31, 2020, the Company had a loss of $9.0 million and $10.4 million, respectively, recorded in accumulated other comprehensive (loss) income, which will be amortized into earnings over the remaining life of the debt. During the three and nine months ended September 30, 2021, the Company recorded amortization expense, reported in interest expense on the consolidated statements of operations, of $489,000 and $1.5 million, respectively. During the three and nine months ended September 30, 2020, the Company recorded amortization expense of $489,000 and $857,000, respectively.

At September 30, 2021 and December 31, 2020, the Company had an unrealized gain of $370,000 and $438,000, respectively, attributable to two terminated interest rate swaps, in accumulated other comprehensive (loss) income on the consolidated balance sheets, to be accreted into earnings over the remaining life of the debt. During the three and nine months ended September 30, 2021, the Company recorded accretion income, reported in interest expense on the consolidated statements of operations, of $23,000 and $68,000, respectively, to accrete the accumulated other comprehensive income on the terminated swap agreements. During the three and nine months ended September 30, 2020, the Company recorded accretion income of $23,000 and $69,000, respectively.

The Company’s prior origination of fixed-rate CRE whole loans exposed it to market pricing risk in connection with the fluctuations of market interest rates. In order to mitigate this market price risk, the Company entered into interest rate swap contracts in which it paid a fixed rate of interest in exchange for a variable rate of interest, usually three-month LIBOR. Unrealized gains and losses on the value of these swap contracts were recorded in other income (expense) on the consolidated statements of operations. In December 2020, these interest rate swap contracts were terminated.

The following tables present the effect of the derivative instruments on the consolidated statements of operations for the nine months ended September 30, 2021 and 2020 (in thousands):

	Derivatives
Nine Months Ended September 30, 2021	Consolidated Statements of Operations Location	Realized and Unrealized Gain (Loss) (1)
Interest rate swap contracts, hedging	Interest expense	$	(1,384	)

	Derivatives
Nine Months Ended September 30, 2020	Consolidated Statements of Operations Location	Realized and Unrealized Gain (Loss) (1)
Interest rate swap contracts	Other income (expense)	$	(67	)
Interest rate swap contracts, hedging	Interest expense	$	(1,095	)

(1) Negative values indicate a decrease to the associated consolidated statement of operations line items.

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OFFSETTING OF FINANCIAL LIABILITIES

9 Months Ended

Sep. 30, 2021

Offsetting [Abstract]

OFFSETTING OF FINANCIAL LIABILITIES

NOTE 20 - OFFSETTING OF FINANCIAL LIABILITIES

The following table presents a summary of the Company’s offsetting of financial liabilities (in thousands, except amounts in footnotes):

							(iv) Gross Amounts Not Offset on the Consolidated Balance Sheets
	(i) Gross Amounts of Recognized Liabilities		(ii) Gross Amounts Offset on the Consolidated Balance Sheets		(iii) = (i) - (ii) Net Amounts of Liabilities Included on the Consolidated Balance Sheets		Financial Instruments (1)		Cash Collateral Pledged		(v) = (iii) - (iv) Net Amount
At September 30, 2021:
Warehouse financing facilities (2)	$	320,465	$	—	$	320,465	$	320,465	$	—	$	—
At December 31, 2020:
Warehouse financing facilities (2)	$	12,258	$	—	$	12,258	$	12,258	$	—	$	—

(1) Amounts represent financial instruments pledged that are available to be offset against liability balances associated with term warehouse financing facilities.

(2) The combined fair values of loans pledged against the Company’s various term warehouse financing facilities was $421.6 million and $20.0 million at September 30, 2021 and December 31, 2020, respectively.

All balances associated with warehouse financing facilities are presented on a gross basis on the Company’s consolidated balance sheets.

Certain of the Company’s warehouse financing facilities are governed by underlying agreements that generally provide for a right of offset in the event of default or in the event of a bankruptcy of either party to the transaction.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 21 - COMMITMENTS AND CONTINGENCIES

The Company may become involved in litigation on various matters due to the nature of the Company’s business activities. The resolution of these matters may result in adverse judgments, fines, penalties, injunctions and other relief against the Company as well as monetary payments or other agreements and obligations. In addition, the Company may enter into settlements on certain matters in order to avoid the additional costs of engaging in litigation. Except as discussed below, the Company is unaware of any contingencies arising from such litigation that would require accrual or disclosure in the consolidated financial statements at September 30, 2021.

The Company’s subsidiary, Primary Capital Mortgage, LLC (“PCM”), is subject to potential litigation related to claims for repurchases or indemnifications on loans that PCM has sold to third parties. At September 30, 2021 and December 31, 2020, no such litigation demand was outstanding. Reserves for such litigation demands are included in the reserve for mortgage repurchases and indemnifications that totaled $1.4 million and $1.5 million at September 30, 2021 and December 31, 2020, respectively. The reserves for mortgage repurchases and indemnifications are included in liabilities held for sale on the consolidated balance sheets.

The Company did not have any pending litigation matters or general litigation reserve at September 30, 2021 or December 31, 2020.

Impact of COVID-19

As discussed in Note 2, the impact of the COVID-19 pandemic in the U.S. and globally has adversely impacted, and may continue to adversely impact, the Company, its borrowers and their tenants, the properties securing its investments and the economy as a whole. The magnitude and duration of the COVID-19 pandemic could be significant and will depend on future developments, which are uncertain and cannot be predicted, including new virus variants that may exacerbate the severity of the pandemic, the extension of quarantines and restrictions on travel, the discovery of successful treatments and the ensuing reactions by consumers, companies, governmental entities and global markets. The Company had no contingent liabilities at September 30, 2021 recorded in connection with the COVID-19 pandemic, however the prolonged duration and impact of the COVID-19 pandemic has had, and may continue to have, a long-term and material impact on its results of operations, financial condition and cash flows.

Other Contingencies

As part of the May 2017 sale of its equity interest in Pearlmark Mezzanine Realty Partners IV, L.P., the Company entered into an indemnification agreement pursuant to which the Company agreed to indemnify the purchaser against realized losses of up to $4.3 million on one mezzanine loan until its final maturity date in 2020. As a result of the indemnified party’s partial sale of the mezzanine loan, the maximum exposure was reduced to $536,000 in 2019. In October 2020, the mezzanine loan paid off its balance to the indemnified party, resulting in the extinguishment of the Company’s liability.

PCM is subject to additional claims for repurchases or indemnifications on loans that PCM has sold to investors. At both September 30, 2021 and December 31, 2020, outstanding demands for indemnification, repurchase or make whole payments totaled $3.3 million. The Company’s estimated exposure for such outstanding claims, as well as unasserted claims, is included in its reserve for mortgage repurchases and indemnifications.

Unfunded Commitments

Unfunded commitments on the Company’s originated CRE loans generally fall into two categories: (1) pre-approved capital improvement projects and (2) new or additional construction costs subject, in each case, to the borrower meeting specified criteria. Upon completion of the improvements or construction, the Company would receive additional interest income on the advanced amount. Whole loans had $140.6 million and $67.2 million in unfunded loan commitments at September 30, 2021 and December 31, 2020, respectively. Preferred equity investments had $2.5 million in unfunded investment commitments at December 31, 2020. The preferred equity investments paid off during the nine months ended September 30, 2021.

At closing, XAN 2020-RSO9 included a future advances reserve account, with $7.7 million outstanding at September 30, 2021, included in restricted cash on the consolidated balance sheet, to fund unfunded commitments.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 22 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this report and determined that there have not been any events, other than those in Note 11 or as discussed below, that have occurred that would require adjustments to or disclosures in the consolidated financial statements.

On October 4, 2021, the Company and the Manager entered into an Equity Distribution Agreement with JonesTrading Institutional Services LLC, as placement agent (“JonesTrading”), pursuant to which the Company may issue and sell from time to time up to 2.2 million shares of the Series D Preferred Stock. Sales of the Series D Preferred Stock may be made in transactions that are deemed to be “at the market” offerings, as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation, sales made directly on the New York Stock Exchange, on any other existing trading market for the shares or to or through a market maker. Subject to the terms of the Company’s notice, JonesTrading may also sell the shares by any other method permitted by law, including but not limited to in privately negotiated transactions. The Company will pay JonesTrading a commission up to 3.0% of the gross proceeds from the sales of the Series D Preferred Stock pursuant to the agreement. The terms and conditions of the agreement include various representations and warranties, conditions to closing, indemnification rights and obligations of the parties and termination provisions.

On November 5, 2021, the Board authorized and approved the continued use of its existing share repurchase program, originally authorized by the Board in March 2016, in order to repurchase up to $20.0 million of the Company’s currently outstanding shares of common stock. Under the share repurchase program, the Company intends to repurchase shares through open market purchases, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 and 10b5-1 of the Exchange Act.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the accounting policies set forth in Note 2 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The consolidated financial statements include the accounts of the Company, majority-owned or controlled subsidiaries and VIEs for which the Company is considered the primary beneficiary. All inter-company transactions and balances have been eliminated in consolidation.

Basis of Presentation

Basis of Presentation

All adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows have been made.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management 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 within the period of financial results. Actual results could differ from those estimates. Estimates affecting the accompanying consolidated financial statements include but are not limited to the net realizable and fair values of the Company’s investments and derivatives, the estimated useful lives used to calculate depreciation, the expected lives over which to amortize premiums and accrete discounts, reversals of or provisions for expected credit losses and the disclosure of contingent liabilities.

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified. The resulting global proliferation of the virus led the World Health Organization to designate COVID-19 as a pandemic and numerous countries, including the U.S., to declare national emergencies. Many countries responded to the outbreak by instituting quarantines and restrictions on travel, which resulted in the closure or remote operation of non-essential businesses. Such actions produced material and previously unforeseeable shocks to global markets, disruptions to global supply chains and adversity to many industries and economies as whole. While the U.S. and certain countries around the world have eased restrictions and financial markets have stabilized to some degree in connection with the discovery and distribution of vaccines, the pandemic, exacerbated by virus variants, continues to cause uncertainty on the U.S. and global economies generally, and the CRE business in particular, that make estimates and assumptions as of September 30, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19. The Company believes the estimates and assumptions underlying the consolidated financial statements are reasonable and supportable based on the information available at September 30, 2021. Actual results may ultimately differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid investments with original maturities of three months or less at the time of purchase. At September 30, 2021 and December 31, 2020, approximately $108.4 million and $27.3 million, respectively, of the reported cash balances exceeded the Federal Deposit Insurance Corporation and Securities Investor Protection Corporation deposit insurance limits of $250,000 per respective depository or brokerage institution. However, all of the Company’s cash deposits are held at multiple, established financial institutions, in multiple accounts associated with its parent and respective consolidated subsidiaries, to minimize credit risk exposure.

Restricted cash includes required account balance minimums primarily for the Company’s CRE debt securitizations, term warehouse financing facilities and repurchase agreements as well as cash held in the syndicated corporate loan collateralized debt obligations (“CDOs”).

The following table provides a reconciliation of cash, cash equivalents and restricted cash on the consolidated balance sheets to the total amount shown on the consolidated statements of cash flows (in thousands):

	September 30,
	2021		2020
Cash and cash equivalents	$	109,949	$	122,105
Restricted cash		32,406		33,776
Total cash, cash equivalents and restricted cash shown on the Company’s consolidated statements of cash flows	$	142,355	$	155,881

Hotel Operating Revenue

Hotel Operating Revenue

Hotel operating revenue, which is presented in real estate income on the consolidated statements of operations, consists of amounts derived from hotel operations, including room sales and other hotel revenues. The Company recognizes hotel operating revenue when guest rooms are occupied, services have been provided or fees have been earned. Revenues are recorded net of any sales, occupancy or other taxes collected from customers on behalf of third parties. The following provides additional detail on room revenue and other operating revenue:

• Room revenue is recognized when the Company’s hotel satisfies its performance obligation of providing a hotel room. The hotel reservation defines the terms of the agreement including an agreed-upon rate and length of stay. Payment is typically due and paid in full at the end of the stay with some customers prepaying for their rooms prior to the stay. Payments received from a customer prior to arrival are recorded as an advance deposit and are recognized as revenue at the time of occupancy.

• Other operating revenue is recognized at the time when the goods or services are provided to the customer or when the performance obligation is satisfied. Payment is due at the time that goods or services are rendered or billed.

Investment In Real Estate

Investment in Real Estate

The Company amortizes the value allocated to lease right of use assets and related in-place lease liabilities, when determined to be operating leases, using the straight-line method over the remaining lease term. The value allocated to any associated above or below market lease intangible asset or liability is amortized to lease expense over the remaining lease term. The estimated useful lives of the right of use assets and lease liabilities are each 66.3 years.

Leases

Leases

The value of the operating leases are determined through the discounted cash flow method and are recognized on the consolidated balance sheet as offsetting right of use assets and lease liabilities. The operating lease for the Company’s office space is amortized over the lease term, or 7.3 years, using the effective-interest method. The Company’s operating lease for office equipment is amortized over the lease term, or three years, using the straight-line method.

Income Taxes

Income Taxes

The Company recorded a full valuation allowance against its net deferred tax assets of $63.0 million (tax effected expense of $21.2 million) at September 30, 2021, as the Company believes it is more likely than not that the deferred tax assets will not be realized. This assessment was based on the Company’s cumulative historical losses and uncertainties as to the amount of taxable income that would be generated in future years by the Company’s taxable REIT subsidiaries.

Earnings per Share

Earnings per Share

The Company presents both basic and diluted earnings per share (“EPS”). Basic EPS excludes dilution and is computed by dividing net income (loss) allocable to common shareholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.

Recent Accounting Standards

Recent Accounting Standards

Accounting Standards Adopted in 2021

In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance that provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives and other contracts, related to the expected market transition from the London Interbank Offered Rate (“LIBOR”), and certain other floating-rate benchmark indices to alternative reference rates. The guidance generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination.

In June 2021, Exantas Capital Corp. 2020-RSO8, Ltd.’s (“XAN 2020-RSO8”) and Exantas Capital Corp. 2020-RSO9, Ltd.’s (“XAN 2020-RSO9”) senior notes’ benchmark rate, one-month LIBOR, was replaced with the compounded Secured Overnight Financing Rate (“Compounded SOFR”) plus a benchmark adjustment. As each securitizations’ indentures included terms referencing a benchmark rate replacement, no amendments to the indentures were required. The Company will apply the replacement of the benchmark rate prospectively by adjusting the effective interest rate. Additionally, all of the Company’s underwritten loans contain terms that allow for a change to an alternative benchmark rate upon the discontinuation of LIBOR. For the Company’s remaining financial instruments utilizing LIBOR as a benchmark rate, the guidance is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur.

Accounting Standards to be Adopted in Future Periods

In August 2020, the FASB issued guidance that removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation into a debt component and an equity or derivative component. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives and the convertible instrument is not issued with substantial premiums accounted for as paid-in capital. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate. The guidance also revises the derivative scope exception for contracts in an entity’s own equity and improves the consistency of EPS calculations. The guidance is effective for larger public business entities’ annual periods, and interim periods therein, beginning after December 15, 2021 and for smaller reporting entities after December 15, 2023. Early application is permitted for fiscal years beginning after December 15, 2020. The Company is in the process of evaluating the impact of this guidance.

Reclassifications

Reclassifications

Certain reclassifications have been made to the 2020 consolidated financial statements, including the consolidated statement of operations and the consolidated statement of cash flows, to conform to the 2021 presentation. These reclassifications had no effect on net income (loss) reported nor the total change in cash flows for each type of cash flow activity on the consolidated statement of cash flows.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Reconciliation of cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash on the consolidated balance sheets to the total amount shown on the consolidated statements of cash flows (in thousands):

	September 30,
	2021		2020
Cash and cash equivalents	$	109,949	$	122,105
Restricted cash		32,406		33,776
Total cash, cash equivalents and restricted cash shown on the Company’s consolidated statements of cash flows	$	142,355	$	155,881

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VARIABLE INTEREST ENTITIES (Tables)

9 Months Ended

Sep. 30, 2021

VIE, Primary Beneficiary

Schedule of variable interest entities

The following table shows the classification and carrying values of assets and liabilities of the Company’s Consolidated VIEs at September 30, 2021 (in thousands):

	CRE Securitizations		Other		Total
ASSETS
Restricted cash	$	31,925	$	460	$	32,385
Accrued interest receivable		4,089		—		4,089
CRE loans, pledged as collateral (1)		1,169,809		—		1,169,809
Principal paydowns receivable		25,010		—		25,010
Other assets		314		—		314
Total assets (2)	$	1,231,147	$	460	$	1,231,607
LIABILITIES
Accounts payable and other liabilities	$	129	$	—	$	129
Accrued interest payable		679		—		679
Borrowings		960,709		—		960,709
Total liabilities	$	961,517	$	—	$	961,517

(1) Excludes the allowance for credit losses.

(2) Assets of each of the Consolidated VIEs may only be used to settle the obligations of each respective VIE.

VIE, Not Primary Beneficiary

Schedule of variable interest entities

The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs at September 30, 2021 (in thousands):

	Unsecured Junior Subordinated Debentures			Maximum Exposure to Loss
ASSETS
Accrued interest receivable	$	5		$	—
Investments in unconsolidated entities		1,548		$	1,548
Total assets		1,553
LIABILITIES
Accrued interest payable		181		N/A
Borrowings		51,548		N/A
Total liabilities		51,729		N/A
Net (liability) asset	$	(50,176	)	N/A

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SUPPLEMENTAL CASH FLOW INFORMATION (Tables)

9 Months Ended

Sep. 30, 2021

Supplemental Cash Flow Elements [Abstract]

Schedule of other significant noncash transactions

The following table summarizes the Company’s supplemental disclosure of cash flow information (in thousands):

	For the Nine Months Ended
	September 30,
	2021			2020
Supplemental cash flows:
Interest expense paid in cash	$	33,889		$	38,246
Income taxes paid in cash	$	—		$	—
Non-cash operating activities include the following:
Receipt of right of use assets	$	(479	)	$	—
Execution of operating leases	$	479		$	—
Non-cash investing activities include the following:
Proceeds from the relinquishment of investment securities available-for-sale	$	—		$	369,873
Non-cash financing activities include the following:
Repayment of repurchase agreements from the relinquishment of investment securities available-for-sale	$	—		$	(369,873	)
Distributions on preferred stock accrued but not paid	$	3,260		$	6,900

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LOANS (Tables)

9 Months Ended

Sep. 30, 2021

Loans Held For Investment [Abstract]

Summary of loans held for Investments

The following is a summary of the Company’s loans (dollars in thousands, except amounts in footnotes):

Description	Quantity		Principal		Unamortized (Discount) Premium, net (1)			Amortized Cost		Allowance for Credit Losses			Carrying Value		Contractual Interest Rates (2)(3)	Maturity Dates (4)(5)
At September 30, 2021:
CRE loans held for investment:
Whole loans (6)(7)		95	$	1,853,168	$	(12,180	)	$	1,840,988	$	(18,578	)	$	1,822,410	1M LIBOR plus 2.70% to 1M LIBOR plus 9.00%	November 2021 to September 2025
Mezzanine loan (6)		1		4,700		—			4,700		(285	)		4,415	10.00%	June 2028
Total CRE loans held for investment			$	1,857,868	$	(12,180	)	$	1,845,688	$	(18,863	)	$	1,826,825
At December 31, 2020:
CRE loans held for investment:
Whole loans (6)(7)		95	$	1,515,722	$	(6,144	)	$	1,509,578	$	(32,283	)	$	1,477,295	1M LIBOR plus 2.70% to 1M LIBOR plus 9.00%	January 2021 to January 2024
Mezzanine loan (6)		1		4,700		—			4,700		(301	)		4,399	10.00%	June 2028
Preferred equity investments (8)		2		27,650		64			27,714		(1,726	)		25,988	11.00% to 11.50%	June 2022 to April 2023
Total CRE loans held for investment			$	1,548,072	$	(6,080	)	$	1,541,992	$	(34,310	)	$	1,507,682

(1) Amounts include unamortized loan origination fees of $11.7 million and $5.7 million and deferred amendment fees of $469,000 and $495,000 at September 30, 2021 and December 31, 2020, respectively. Additionally, the amounts include unamortized loan acquisition costs of $29,000 and $118,000 at September 30, 2021 and December 31, 2020, respectively.

(2) The Company’s whole loan portfolio of $1.9 billion and $1.5 billion had a weighted-average one-month LIBOR floor of 1.03% and 1.88% at September 30, 2021 and December 31, 2020, respectively. At September 30, 2021, all but one of the Company’s floating-rate whole loans had one-month LIBOR floors. At December 31, 2020, all whole loans had one-month LIBOR floors.

(3) Excludes one whole loan that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

(4) Maturity dates exclude contractual extension options, subject to the satisfaction of certain terms that may be available to the borrowers.

(5) Maturity dates exclude four and three whole loans, with amortized costs of $49.1 million and $39.7 million, in maturity default at September 30, 2021 and December 31, 2020, respectively.

(6) Substantially all loans are pledged as collateral under various borrowings at September 30, 2021 and December 31, 2020.

(7) CRE whole loans had $140.6 million and $67.2 million in unfunded loan commitments at September 30, 2021 and December 31, 2020, respectively. These unfunded loan commitments are advanced as the borrowers formally request additional funding and meet certain benchmarks, as permitted under the loan agreement, and any necessary approvals have been obtained.

(8) The interest rate on the Company’s preferred equity investments paid at 8.00%. The remaining interest was deferred until payoff, which occurred in March 2021 and April 2021.

Summary of Contractual Maturities of Commercial Real Estate Loans at Amortized Cost

The following is a summary of the contractual maturities of the Company’s CRE loans held for investment, at amortized cost (in thousands, except amounts in the footnotes):

Description	2021		2022		2023 and Thereafter		Total
At September 30, 2021:
Whole loans (1)	$	85,013	$	530,398	$	1,176,479	$	1,791,890
Mezzanine loan		—		—		4,700		4,700
Total CRE loans (2)	$	85,013	$	530,398	$	1,181,179	$	1,796,590
Description	2021		2022		2023 and Thereafter		Total
At December 31, 2020:
Whole loans (1)	$	599,053	$	540,639	$	330,143	$	1,469,835
Mezzanine loan		—		—		4,700		4,700
Preferred equity investments		—		6,452		21,262		27,714
Total CRE loans (2)	$	599,053	$	547,091	$	356,105	$	1,502,249

(1) Excludes four and three whole loans, with amortized costs of $49.1 million and $39.7 million, in default at September 30, 2021 and December 31, 2020, respectively.

(2) At September 30, 2021, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $14.3 million, $87.2 million and $1.7 billion in 2021, 2022 and 2023 and thereafter, respectively. At December 31, 2020, the amortized costs of the floating-rate CRE whole loans, summarized by contractual maturity assuming full exercise of the extension options, were $112.4 million, $125.1 million and $1.3 billion in 2021, 2022 and 2023 and thereafter, respectively.

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FINANCING RECEIVABLES (Tables)

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

Activity in Allowance for Credit Losses

The following table shows the activity in the allowance for credit losses for the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands, except amount in the footnote):

	Nine Months Ended September 30, 2021			Year Ended December 31, 2020
	CRE Loans			CRE Loans
Allowance for credit losses:
Allowance for credit losses at beginning of period	$	34,310		$	1,460
Adoption of the new accounting guidance		—			3,032
(Reversal of) provision for credit losses		(15,447	)		30,815
Realized loss on sale of loan (1)		—			(997	)
Allowance for credit losses at end of period	$	18,863		$	34,310

(1) The allowance for credit losses included a realized loss of $997,000 that was charged to the allowance related to one CRE loan sale that occurred during the year ended December 31, 2020. There was no such charge off during the nine months ended September 30, 2021.

Credit quality indicators for bank loans and commercial real estate loans

The criteria set forth below should be used as general guidelines and, therefore, not every loan will have all of the characteristics described in each category below.

Risk Rating	Risk Characteristics
1	• Property performance has surpassed underwritten expectations.
	• Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.
2	• Property performance is consistent with underwritten expectations and covenants and performance criteria are being met or exceeded.
	• Occupancy is stabilized, near stabilized or is on track with underwriting.
3	• Property performance lags behind underwritten expectations.
	• Occupancy is not stabilized and the property has some tenancy rollover.
4	• Property performance significantly lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers.
	• Occupancy is not stabilized and the property has a large amount of tenancy rollover.
5	• Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Expected sale proceeds would not be sufficient to pay off the loan at maturity.
	• The property has a material vacancy rate and significant rollover of remaining tenants.
	• An updated appraisal is required upon designation and updated on an as-needed basis.

All CRE loans are evaluated for any credit deterioration by debt asset management and certain finance personnel on at least a quarterly basis. Mezzanine loans and preferred equity investments may experience greater credit risks due to their nature as subordinated investments.

For the purpose of calculating the quarterly provision for credit losses under CECL, the Company pools CRE loans based on the underlying collateral property type and utilizes a probability of default and loss given default methodology for approximately one year after which it immediately reverts to a historical mean loss ratio.

Credit risk profiles of CRE loans at amortized cost were as follows (in thousands, except amounts in the footnotes):

	Rating 1		Rating 2		Rating 3		Rating 4		Rating 5		Total (1)
At September 30, 2021:
Whole loans, floating-rate (2)	$	—	$	1,310,042	$	353,430	$	123,647	$	53,869	$	1,840,988
Mezzanine loan		—		—		4,700		—		—		4,700
Total	$	—	$	1,310,042	$	358,130	$	123,647	$	53,869	$	1,845,688
At December 31, 2020:
Whole loans, floating-rate	$	—	$	611,838	$	599,208	$	262,398	$	36,134	$	1,509,578
Mezzanine loan		—		—		4,700		—		—		4,700
Preferred equity investments		—		—		6,452		21,262		—		27,714
Total	$	—	$	611,838	$	610,360	$	283,660	$	36,134	$	1,541,992

(1) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Includes one $20.8 million whole loan, risk rated a 3, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

Credit risk profiles of CRE loans by origination year at amortized cost were as follows (in thousands, except amounts in the footnotes):

	2021		2020		2019		2018		2017		Prior		Total (1)
At September 30, 2021:
Whole loans, floating-rate: (2)
Rating 2	$	944,534	$	197,627	$	114,859	$	53,022	$	—	$	—	$	1,310,042
Rating 3 (3)		10,315		10,084		190,708		108,327		16,496		17,500		353,430
Rating 4		—		—		28,420		86,025		—		9,202		123,647
Rating 5		—		—		22,373		9,300		19,900		2,296		53,869
Total whole loans, floating-rate		954,849		207,711		356,360		256,674		36,396		28,998		1,840,988
Mezzanine loan (rating 3)		—		—		—		4,700		—		—		4,700
Total	$	954,849	$	207,711	$	356,360	$	261,374	$	36,396	$	28,998	$	1,845,688
	2020		2019		2018		2017		2016		Prior		Total (1)
At December 31, 2020:
Whole loans, floating-rate: (2)
Rating 2	$	221,364	$	279,077	$	111,397	$	—	$	—	$	—	$	611,838
Rating 3		43,579		246,073		246,944		45,142		—		17,470		599,208
Rating 4		—		77,495		129,536		46,220		—		9,147		262,398
Rating 5		—		13,938		—		19,900		—		2,296		36,134
Total whole loans, floating-rate		264,943		616,583		487,877		111,262		—		28,913		1,509,578
Mezzanine loan (rating 3)		—		—		4,700		—		—		—		4,700
Preferred equity investments
Rating 3		—		6,452		—		—		—		—		6,452
Rating 4		—		—		21,262		—		—		—		21,262
Total preferred equity investments		—		6,452		21,262		—		—		—		27,714
Total	$	264,943	$	623,035	$	513,839	$	111,262	$	—	$	28,913	$	1,541,992

(1) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(2) Acquired CRE whole loans are grouped within each loan’s year of issuance.

(3) Includes one $20.8 million whole loan, originated in 2018, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

Loan portfolios aging analysis

The following table presents the CRE loan portfolio aging analysis as of the dates indicated for CRE loans at amortized cost (in thousands, except amounts in footnotes):

	30-59 Days		60-89 Days		Greater than 90 Days (1)		Total Past Due		Current (2)		Total Loans Receivable (3)		Total Loans > 90 Days and Accruing
At September 30, 2021:
Whole loans, floating-rate (4)	$	—	$	—	$	39,798	$	39,798	$	1,801,190	$	1,840,988	$	19,898
Mezzanine loan		—		—		—		—		4,700		4,700		—
Total	$	—	$	—	$	39,798	$	39,798	$	1,805,890	$	1,845,688	$	19,898
At December 31, 2020:
Whole loans, floating-rate	$	—	$	—	$	11,443	$	11,443	$	1,498,135	$	1,509,578	$	11,443
Mezzanine loan		—		—		—		—		4,700		4,700		—
Preferred equity investments		—		—		—		—		27,714		27,714		—
Total	$	—	$	—	$	11,443	$	11,443	$	1,530,549	$	1,541,992	$	11,443

(1) During the three and nine months ended September 30, 2021, the Company recognized interest income of $480,000 and $1.7 million, respectively, on the three loans with principal payments past due greater than 90 days at September 30, 2021. During the three and nine months ended September 30, 2020, the Company recognized interest income of $605,000 and $1.8 million, respectively, on these loans.

(2) Includes two whole loans, with amortized costs of $28.3 million, in maturity default at December 31, 2020.

(3) The total amortized cost of CRE loans excluded accrued interest receivable of $6.6 million and $7.3 million at September 30, 2021 and December 31, 2020, respectively.

(4) Includes one $20.8 million whole loan, which is current, that has a fixed interest rate of 5.75% from June 2021 through December 2021 in connection with a modification.

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INVESTMENT IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2021

Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Abstract]

Schedule of Investments in Real Estate and Related Intangible Assets

The following table summarizes the book value of the Company’s investments in real estate and related intangible assets (in thousands, except amounts in the footnotes):

	September 30, 2021									December 31, 2020
	Cost			Accumulated Depreciation & Amortization			Book Value			Cost			Accumulated Depreciation & Amortization			Book Value
Assets acquired:
Investments in real estate (1)	$	34,104		$	(1,305	)	$	32,799		$	33,929		$	(123	)	$	33,806
Right of use assets (2)(3)		5,603			(74	)		5,529			5,603			(11	)		5,592
Intangible assets (4)		3,337			(296	)		3,041			3,336			(42	)		3,294
Total		43,044			(1,675	)		41,369			42,868			(176	)		42,692
Liabilities assumed:
Lease liabilities (3)		(3,113	)		41			(3,072	)		(3,113	)		6			(3,107	)
Total		(3,113	)		41			(3,072	)		(3,113	)		6			(3,107	)
	$	39,931					$	38,297		$	39,755					$	39,585

(1) Includes approximately $180,000 and $5,000 of furniture and fixtures purchased for the property, subsequent to the date of acquisition, at September 30, 2021 and December 31, 2020, respectively.

(2) Right of use assets include a right of use asset associated with an acquired ground lease of $3.1 million accounted for as an operating lease and a below-market lease intangible asset of $2.5 million at September 30, 2021 and December 31, 2020.

(3) Refer to Note 8 for additional information on the Company’s remaining operating leases.

(4) Intangible assets include a franchise agreement intangible asset of $2.7 million and $2.8 million and a customer list intangible asset of $352,000 and $477,000 at September 30, 2021 and December 31, 2020, respectively.

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LEASES (Tables)

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Summary of Operating Leases

The following table summarizes the Company’s operating leases (in thousands):

	September 30, 2021
Operating Leases:
Right of use assets	$	455
Lease liabilities	$	(488	)
Weighted average remaining lease term:	6.8 years
Weighted average discount rate:		10.65	%

Summary of Operating Lease Costs and Cash Payments

The following table summarizes the Company’s operating lease costs and cash payments during the respective periods (in thousands):

	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Lease Cost:
Operating lease cost	$	24	$	50

Summary of Operating Leases by Maturity Date Based on Undiscounted Cash Flows

The following table summarizes the Company’s operating leases by maturity date based on undiscounted cash flows (in thousands):

	Operating Leases
2021	$	24
2022		97
2023		99
2024		99
2025		102
Thereafter		274
Subtotal		695
Less: impact of discount		(207	)
Total	$	488

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INVESTMENT SECURITIES AVAILABLE-FOR-SALE (Tables)

9 Months Ended

Sep. 30, 2021

Available For Sale Securities [Abstract]

Available-for-sale securities

The following table summarizes the Company’s investment securities available-for-sale, carried at fair value, including those pledged as collateral (in thousands, except amount in the footnote):

	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
At December 31, 2020:
CMBS, fixed-rate	$	2,080	$	—	$	—	$	2,080

(1) The amortized cost of CMBS excluded accrued interest receivable of $56,000 at December 31, 2020.

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BORROWINGS (Tables)

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Information with respect to borrowings

Certain information with respect to the Company’s borrowings is summarized in the following table (dollars in thousands, except amounts in the footnotes):

	Principal Outstanding		Unamortized Issuance Costs and Discounts		Outstanding Borrowings		Weighted Average Borrowing Rate			Weighted Average Remaining Maturity	Value of Collateral
At September 30, 2021:
XAN 2020-RSO8 Senior Notes	$	173,600	$	1,142	$	172,458		2.02	%	13.4 years	$	260,488
XAN 2020-RSO9 Senior Notes		119,824		1,191		118,633		3.91	%	15.6 years		169,371
ACR 2021-FL1 Senior Notes (1)		675,223		5,605		669,618		1.57	%	14.7 years		802,643
Senior secured financing facility		41,182		3,586		37,596		5.75	%	5.8 years		217,835
CRE - term warehouse financing facilities (2)(3)		320,515		50		320,465		2.05	%	27 days		421,644
4.50% Convertible Senior Notes		88,014		2,204		85,810		4.50	%	319 days		—
5.75% Senior Unsecured Notes (4)		150,000		3,526		146,474		5.75	%	4.9 years		—
Unsecured junior subordinated debentures		51,548		—		51,548		4.09	%	14.9 years		—
Total	$	1,619,906	$	17,304	$	1,602,602		2.62	%	9.9 years	$	1,871,981
	Principal Outstanding		Unamortized Issuance Costs and Discounts		Outstanding Borrowings		Weighted Average Borrowing Rate			Weighted Average Remaining Maturity	Value of Collateral
At December 31, 2020:
XAN 2019-RSO7 Senior Notes	$	415,621	$	2,861	$	412,760		1.60	%	15.3 years	$	516,979
XAN 2020-RSO8 Senior Notes		388,459		4,164		384,295		1.62	%	14.2 years		475,347
XAN 2020-RSO9 Senior Notes		234,731		3,857		230,874		3.31	%	16.3 years		285,862
Senior secured financing facility		33,360		4,046		29,314		5.75	%	6.6 years		239,385
CRE - term warehouse financing facility (2)		13,516		1,258		12,258		2.66	%	299 days		20,000
4.50% Convertible Senior Notes		143,750		6,498		137,252		4.50	%	1.6 years		—
12.00% Senior Unsecured Notes		50,000		3,574		46,426		12.00	%	6.6 years		—
Unsecured junior subordinated debentures		51,548		—		51,548		4.18	%	15.7 years		—
Total	$	1,330,985	$	26,258	$	1,304,727		2.83	%	13.0 years	$	1,537,573

(1) Value of collateral excludes exit fees of $752,000 and interest received of $87,000 at September 30, 2021.

(2) Principal outstanding includes accrued interest payable of $320,000 and $16,000 at September 30, 2021 and December 31, 2020, respectively.

(3) In October 2021, the Company extended the maturity of its Barclays Bank PLC (“Barclays”) and JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) CRE - term warehouse financing facilities to October 2022 and October 2024, respectively, and allowed the Wells Fargo Bank, N.A. (“Wells Fargo”) CRE - term warehouse financing facility to mature.

(4) Includes deferred debt issuance costs of $320,000 at September 30, 2021 from the redeemed 12.00% senior unsecured notes due 2027 (“12.00% Senior Unsecured Notes”).

Schedule of securitizations

The following table sets forth certain information with respect to the Company’s consolidated securitizations at September 30, 2021 (in thousands, except amount in footnotes):

	Closing Date	Maturity Date	Permitted Funded Companion Participation Acquisition Period End (1)	Reinvestment Period End (2)	Total Note Paydowns Received from Closing Date through September 30, 2021
XAN 2020-RSO8	March 2020	March 2035	March 2023	N/A	$	262,143
XAN 2020-RSO9 (3)	September 2020	April 2037	N/A	N/A	$	125,970
ACR 2021-FL1	May 2021	June 2036	N/A	May 2023	$	—

(1) The permitted funded companion participation acquisition period is the period in which principal repayments can be utilized to purchase loans held outside of the respective securitization that represent the funded commitments of existing collateral in the respective securitization that were not funded as of the date the respective securitization was closed.

(2) The reinvestment period is the period in which principal proceeds received before the end of the period may be used to acquire CRE loans for reinvestment into the securitization.

(3) XAN 2020-RSO9 includes a future advances reserve account of $7.7 million at September 30, 2021 to fund unfunded commitments, which is reported in restricted cash on the consolidated balance sheet.

Schedule of convertible senior notes

The following table summarizes the 4.50% Convertible Senior Notes at September 30, 2021 (dollars in thousands, except the conversion price and amounts in the footnotes):

	Principal Outstanding		Borrowing Rate			Effective Rate (1)(2)			Conversion Rate (3)(4)	Conversion Price (4)		Maturity Date
4.50% Convertible Senior Notes	$	88,014		4.50	%		7.43	%	27.7222	$	36.06	August 15, 2022

(1) Includes the amortization of the market discounts and deferred debt issuance costs, if any, for the 4.50% Convertible Senior Notes recorded in interest expense on the consolidated statements of operations.

(2) During the three and nine months ended September 30, 2021 and 2020, the effective interest rate for the 4.50% Convertible Senior Notes was 7.43%.

(3) Represents the number of shares of common stock per $1,000 principal amount of the 4.50% Convertible Senior Notes’ principal outstanding, subject to adjustment as provided in the Third Supplemental Indenture (the “4.50% Convertible Senior Notes Indenture”).

(4) The conversion rate and conversion price of the 4.50% Convertible Senior Notes at September 30, 2021 are adjusted to reflect quarterly cash distributions in excess of a $0.30 distribution threshold, as defined in the 4.50% Convertible Senior Notes Indenture.

Senior secured warehouse financing facilities and repurchase agreements

The following table sets forth certain information with respect to the Company’s senior secured financing and term warehouse financing facilities (dollars in thousands, except amounts in footnotes):

	September 30, 2021									December 31, 2020
	Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate			Outstanding Borrowings		Value of Collateral		Number of Positions as Collateral		Weighted Average Interest Rate
Senior Secured Financing Facility
Massachusetts Mutual Life Insurance Company (1)	$	37,596	$	217,835		12		5.75	%	$	29,314	$	239,385		15		5.75	%
CRE - Term Warehouse Financing Facilities
Barclays Bank PLC		109,471		138,422		6		1.95	%		—		—		—		—	%
JPMorgan Chase Bank, N.A. (2)(3)		210,994		283,222		14		2.10	%		12,258		20,000		1		2.66	%
Total	$	358,061	$	639,479						$	41,572	$	259,385

(1) Includes $3.6 million and $4.0 million of deferred debt issuance costs at September 30, 2021 and December 31, 2020, respectively.

(2) Outstanding borrowings include accrued interest payable.

(3) Includes $50,000 and $1.3 million of deferred debt issuance costs at September 30, 2021 and December 31, 2020, respectively, which includes $678,000 of deferred debt issuance costs at December 31, 2020 from other term warehouse financing facilities with no balance.

Schedule of amount at risk under credit facility

The following table shows information about the amount at risk under the warehouse financing facilities (dollars in thousands):

	Amount at Risk (1)		Weighted Average Remaining Maturity	Weighted Average Interest Rate
At September 30, 2021:
CRE - Term Warehouse Financing Facilities
Barclays Bank PLC (2)	$	29,312	29 days		1.95	%
JPMorgan Chase Bank, N.A. (2)	$	73,020	26 days		2.10	%

(1) Equal to the total of the estimated fair value of loans sold and accrued interest receivable, minus the total of the warehouse financing agreement liabilities and accrued interest payable.

(2) In October 2021, the Company extended the maturity of its Barclays and JPMorgan Chase CRE - term warehouse financing facilities to October 2022 and October 2024, respectively.

Schedule of contractual obligations and commitments

Contractual maturity dates of the Company’s borrowings’ principal outstanding by category and year are presented in the table below (in thousands):

	Total		2021		2022		2023		2024		2025 and Thereafter
At September 30, 2021:
CRE securitizations	$	968,647	$	—	$	—	$	—	$	—	$	968,647
Senior secured financing facility		41,182		—		—		—		—		41,182
Term warehouse financing facilities (1)(2)		320,515		320,515		—		—		—		—
4.50% Convertible Senior Notes		88,014		—		88,014		—		—		—
5.75% Senior Unsecured Notes		150,000		—		—		—		—		150,000
Unsecured junior subordinated debentures		51,548		—		—		—		—		51,548
Total	$	1,619,906	$	320,515	$	88,014	$	—	$	—	$	1,211,377

(1) Includes accrued interest payable in the balances of principal outstanding.

(2) In October 2021, the Company extended the maturity of its Barclays and JPMorgan Chase CRE - term warehouse financing facilities to October 2022 and October 2024, respectively, and allowed the Wells Fargo CRE - term warehouse financing facility to mature.

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SHARE-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of restricted common stock transactions

The following table summarizes the Company’s restricted common stock transactions:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Unvested shares at January 1, 2021		11,610		$	6.46
Issued		333,329			17.39
Vested		(11,610	)		6.46
Forfeited		—			—
Unvested shares at September 30, 2021		333,329		$	17.39

Summary of unvested restricted common stock expected to vest

The unvested restricted common stock shares are expected to vest during the following years:

Year	Shares
2021		—
2022		83,331
2023		83,331
2024		83,331
2025		83,336
Total		333,329

Summary of stock option transactions

The following table summarizes the status of the Company’s vested stock options at September 30, 2021:

Vested Options	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Vested at January 1, 2021		3,333		$	76.80
Vested		—			—
Exercised		—			—
Forfeited		—			—
Expired		(3,333	)		76.80
Vested at September 30, 2021		—		$	—		—	$	—

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Reconciliation of basic and diluted earnings (losses) per common share

The following table presents a reconciliation of basic and diluted earnings (losses) per common share for the periods presented (dollars in thousands, except per share amounts):

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net (loss) income	$	(4,928	)	$	8,159		$	21,767		$	(221,762	)
Net income allocated to preferred shares		(4,877	)		(2,588	)		(11,033	)		(7,763	)
Net (loss) income allocable to common shares	$	(9,805	)	$	5,571		$	10,734		$	(229,525	)
Weighted average number of common shares outstanding:
Weighted average number of common shares outstanding - basic		9,086,751			10,650,112			9,351,477			10,587,147
Weighted average number of warrants outstanding (1)		466,661			314,492			466,661			105,596
Total weighted average number of common shares outstanding - basic		9,553,412			10,964,604			9,818,138			10,692,743
Effect of dilutive securities - unvested restricted stock		—			1,682			18,465			—
Weighted average number of common shares outstanding - diluted		9,553,412			10,966,286			9,836,603			10,692,743
Net (loss) income per common share - basic	$	(1.03	)	$	0.51		$	1.09		$	(21.47	)
Net (loss) income per common share - diluted	$	(1.03	)	$	0.51		$	1.09		$	(21.47	)

(1) See Note 12 for further details regarding the warrants.

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DISTRIBUTIONS (Tables)

9 Months Ended

Sep. 30, 2021

Distributions [Abstract]

Distributions Declared

The following tables present distributions declared (on a per share basis) for the nine months ended September 30, 2021 and the year ended December 31, 2020:

	Series C Preferred Stock					Series D Preferred Stock
	Date Paid	Total Distributions Paid		Distributions Per Share		Date Paid	Total Distributions Paid		Distributions Per Share
	(in thousands)					(in thousands)
2021
September 30	November 1	$	2,588	$	0.5390625	November 1	$	2,264	$	0.4921875
June 30	July 30	$	2,588	$	0.5390625	July 30	$	1,736	$	0.377344
March 31	April 30	$	2,588	$	0.5390625	N/A	N/A		N/A
2020
December 31	February 1, 2021	$	2,587	$	0.5390625	N/A	N/A		N/A
March 31, June 30 and September 30	October 30	$	7,763	$	1.6171875	N/A	N/A		N/A

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Schedule of accumulated other comprehensive loss

The following table presents the changes in net unrealized loss on derivatives, the sole component of accumulated other comprehensive loss, for the nine months ended September 30, 2021 (in thousands):

	Accumulated Other Comprehensive Loss - Net Unrealized Loss on Derivatives
Balance at January 1, 2021	$	(9,978	)
Amounts reclassified from accumulated other comprehensive loss (1)		1,384
Balance at September 30, 2021	$	(8,594	)

(1) Amounts reclassified from accumulated other comprehensive loss are reclassified to interest expense on the Company’s consolidated statements of operations.

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair value of financial instruments measured on recurring basis

The following table presents the Company’s financial instruments carried at fair value on a recurring basis based upon the fair value hierarchy (in thousands):

	Level 1		Level 2		Level 3		Total
At December 31, 2020:
Assets:
Investment securities available-for-sale	$	—	$	—	$	2,080	$	2,080

Fair value assets unobservable input reconciliation

The following table presents additional information about the Company’s assets that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs (in thousands):

	CMBS
Balance, January 1, 2021	$	2,080
Included in earnings		878
Sales		(2,958	)
Balance, September 30, 2021	$	—

Fair value financial and non-financial assets not reported at fair value

The fair values of the Company’s remaining financial and non-financial assets that are not reported at fair value on the consolidated balance sheets are reported in the following table (in thousands):

			Fair Value Measurements
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At September 30, 2021:
Assets:
CRE whole loans	$	1,822,410	$	1,849,066	$	—	$	—	$	1,849,066
CRE mezzanine loan	$	4,415	$	4,700	$	—	$	—	$	4,700
Loan receivable - related party	$	11,675	$	10,473	$	—	$	—	$	10,473
Liabilities:
Senior notes in CRE securitizations	$	960,709	$	970,552	$	—	$	—	$	970,552
Senior secured financing facility	$	37,596	$	41,182	$	—	$	—	$	41,182
Warehouse financing facilities	$	320,465	$	320,516	$	—	$	—	$	320,516
4.50% Convertible Senior Notes	$	85,810	$	87,935	$	—	$	—	$	87,935
5.75% Senior Unsecured Notes (1)	$	146,474	$	149,670	$	—	$	—	$	149,670
Junior subordinated notes	$	51,548	$	43,519	$	—	$	—	$	43,519
At December 31, 2020:
Assets:
CRE whole loans	$	1,477,295	$	1,513,822	$	—	$	—	$	1,513,822
CRE mezzanine loan	$	4,399	$	4,700	$	—	$	—	$	4,700
CRE preferred equity investments	$	25,988	$	27,650	$	—	$	—	$	27,650
CRE whole loans, fixed-rate (2)	$	4,809	$	4,809	$	—	$	—	$	4,809
Loan receivable - related party	$	11,875	$	10,184	$	—	$	—	$	10,184
Liabilities:
Senior notes in CRE securitizations	$	1,027,929	$	1,030,854	$	—	$	—	$	1,030,854
Senior secured financing facility	$	29,314	$	33,360	$	—	$	—	$	33,360
Warehouse financing facility	$	12,258	$	13,516	$	—	$	—	$	13,516
4.50% Convertible Senior Notes	$	137,252	$	132,437	$	—	$	—	$	132,437
12.00% Senior Unsecured Notes	$	46,426	$	58,910	$	—	$	—	$	58,910
Junior subordinated notes	$	51,548	$	31,955	$	—	$	—	$	31,955

(1) Carrying value includes deferred debt issuance costs of $320,000 from the redeemed 12.00% Senior Unsecured Notes.

(2) Classified as other assets on the consolidated balance sheet.

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MARKET RISK AND DERIVATIVE INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2021

Derivative Instruments And Hedging Activities Disclosure [Abstract]

The effect of derivative instruments on the statement of income

The following tables present the effect of the derivative instruments on the consolidated statements of operations for the nine months ended September 30, 2021 and 2020 (in thousands):

	Derivatives
Nine Months Ended September 30, 2021	Consolidated Statements of Operations Location	Realized and Unrealized Gain (Loss) (1)
Interest rate swap contracts, hedging	Interest expense	$	(1,384	)

	Derivatives
Nine Months Ended September 30, 2020	Consolidated Statements of Operations Location	Realized and Unrealized Gain (Loss) (1)
Interest rate swap contracts	Other income (expense)	$	(67	)
Interest rate swap contracts, hedging	Interest expense	$	(1,095	)

(1) Negative values indicate a decrease to the associated consolidated statement of operations line items.

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OFFSETTING OF FINANCIAL LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2021

Offsetting [Abstract]

Offsetting financial liabilities

The following table presents a summary of the Company’s offsetting of financial liabilities (in thousands, except amounts in footnotes):

							(iv) Gross Amounts Not Offset on the Consolidated Balance Sheets
	(i) Gross Amounts of Recognized Liabilities		(ii) Gross Amounts Offset on the Consolidated Balance Sheets		(iii) = (i) - (ii) Net Amounts of Liabilities Included on the Consolidated Balance Sheets		Financial Instruments (1)		Cash Collateral Pledged		(v) = (iii) - (iv) Net Amount
At September 30, 2021:
Warehouse financing facilities (2)	$	320,465	$	—	$	320,465	$	320,465	$	—	$	—
At December 31, 2020:
Warehouse financing facilities (2)	$	12,258	$	—	$	12,258	$	12,258	$	—	$	—

(1) Amounts represent financial instruments pledged that are available to be offset against liability balances associated with term warehouse financing facilities.

(2) The combined fair values of loans pledged against the Company’s various term warehouse financing facilities was $421.6 million and $20.0 million at September 30, 2021 and December 31, 2020, respectively.

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ORGANIZATION (Details)	Feb. 16, 2021 $ / shares shares	Sep. 30, 2021 $ / shares shares	May 31, 2021 shares	Apr. 30, 2021 shares	Dec. 31, 2020 $ / shares shares
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Reverse stock split of common stock	0.333
Number of fractional shares issued	0
Common stock, par value (in dollars per share) | $ / shares	$ 0.001	$ 0.001			$ 0.001
Capital stock, shares authorized			141,666,666	225,000,000
Common stock, shares authorized		41,666,666	41,666,666	125,000,000	125,000,000
Preferred stock, shares authorized			100,000,000	100,000,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Summary Of Significant Accounting Policies [Line Items]
Cash balance in excess of federal deposit Insurance limit, amount	$ 108.4	$ 27.3
Right of use assets estimated useful lives	66 years 3 months 18 days
Lease liabilities estimated useful lives	66 years 3 months 18 days
Operating loss carryforwards, valuation allowance	$ 63.0
Operating loss carryforwards, valuation allowance, tax expense impact	$ 21.2
Office Space
Summary Of Significant Accounting Policies [Line Items]
Operating lease term	7 years 3 months 18 days
Office Equipment
Summary Of Significant Accounting Policies [Line Items]
Operating lease term	3 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Cash and cash equivalents	$ 109,949	$ 29,355	$ 122,105
Restricted cash	32,406	38,386	33,776
Total cash, cash equivalents and restricted cash shown on the Company’s consolidated statements of cash flows	$ 142,355	$ 67,741	$ 155,881	$ 94,434

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VARIABLE INTEREST ENTITIES (Consolidated VIEs) (the Company is the primary beneficiary) (Details) - VIE, Primary Beneficiary	9 Months Ended
	Sep. 30, 2021 USD ($) entity	Sep. 30, 2020 USD ($)	Dec. 31, 2020 entity
Variable Interest Entity [Line Items]
Number of consolidated VIEs | entity	6		6
Financial support, amount | $	$ 0	$ 0

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VARIABLE INTEREST ENTITIES (Schedule of Carrying Value of Assets and Liabilities of Consolidated VIEs) (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020	Sep. 30, 2020
ASSETS:
Restricted cash	$ 32,406	$ 38,386	$ 33,776
Accrued interest receivable	6,678	7,372
Principal paydowns receivable	25,000	4,300
Other assets	5,835	8,783
Total assets	2,061,750	1,654,084
LIABILITIES
Accounts payable and other liabilities	3,987	2,068
Accrued interest payable	2,521	6,036
Borrowings	1,602,602	1,304,727
Total liabilities	1,618,481	1,319,702
VIE, Primary Beneficiary
ASSETS:
Restricted cash	32,385	38,353
Accrued interest receivable	4,089	5,398
CRE loans, pledged as collateral	1,169,809	1,231,184
Principal paydowns receivable	25,010
Other assets	314	114
Total assets	1,231,607	1,279,299
LIABILITIES
Accounts payable and other liabilities	129	136
Accrued interest payable	679	806
Borrowings	960,709	1,027,929
Total liabilities	961,517	$ 1,028,871
CRE Securitizations | VIE, Primary Beneficiary
ASSETS:
Restricted cash	31,925
Accrued interest receivable	4,089
CRE loans, pledged as collateral	1,169,809
Principal paydowns receivable	25,010
Other assets	314
Total assets	1,231,147
LIABILITIES
Accounts payable and other liabilities	129
Accrued interest payable	679
Borrowings	960,709
Total liabilities	961,517
Other | VIE, Primary Beneficiary
ASSETS:
Restricted cash	460
Accrued interest receivable	0
CRE loans, pledged as collateral	0
Other assets	0
Total assets	460
LIABILITIES
Accounts payable and other liabilities	0
Accrued interest payable	0
Borrowings	0
Total liabilities	$ 0

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VARIABLE INTEREST ENTITIES (Unconsolidated VIEs) (the Company is not the primary beneficiary, but has a variable interest) (Details) - USD ($)	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Variable Interest Entity [Line Items]
Investments in unconsolidated entities	$ 1,548,000	$ 1,548,000
Borrowings	$ 1,602,602,000	$ 1,304,727,000
VIE, Not Primary Beneficiary | Investment in RCT I and II
Variable Interest Entity [Line Items]
Ownership percentage in VIE	100.00%
Investments in unconsolidated entities	$ 1,500,000
VIE, Not Primary Beneficiary | Interest in RCT I
Variable Interest Entity [Line Items]
Investments in unconsolidated entities	$ 774,000
Percentage of value of trusts owned	3.00%
Borrowings	$ 25,800,000
VIE, Not Primary Beneficiary | Interest in RCT II
Variable Interest Entity [Line Items]
Investments in unconsolidated entities	$ 774,000
Percentage of value of trusts owned	3.00%
Borrowings	$ 25,800,000

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VARIABLE INTEREST ENTITIES (Schedule of Classification, Carrying Value, and Maximum Exposure to Loss of Unconsolidated VIEs) (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
ASSETS:
Total assets	$ 2,061,750	$ 1,654,084
LIABILITIES
Total liabilities	1,618,481	$ 1,319,702
VIE, Not Primary Beneficiary | Interest Receivable
LIABILITIES
Maximum Exposure to Loss	0
VIE, Not Primary Beneficiary | Investments in Unconsolidated Entities
LIABILITIES
Maximum Exposure to Loss	1,548
Unsecured Junior Subordinated Debentures | VIE, Not Primary Beneficiary
ASSETS:
Accrued interest receivable	5
Investments in unconsolidated entities	1,548
Total assets	1,553
LIABILITIES
Accrued interest payable	181
Borrowings	51,548
Total liabilities	51,729
Net (liability) asset	$ (50,176)

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SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Supplemental cash flows:
Interest expense paid in cash	$ 33,889	$ 38,246
Non-cash operating activities include the following:
Receipt of right of use assets	(479)
Execution of operating leases	479
Non-cash investing activities include the following:
Proceeds from the relinquishment of investment securities available-for-sale		369,873
Non-cash financing activities include the following:
Repayment of repurchase agreements from the relinquishment of investment securities available-for-sale		(369,873)
Preferred Stock
Non-cash financing activities include the following:
Distributions accrued but not paid	$ 3,260	$ 6,900

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LOANS (Summary of Loans) (Details)	9 Months Ended
	Sep. 30, 2021 USD ($) Loan	Dec. 31, 2020 USD ($) Loan	Dec. 31, 2019 USD ($)
Receivables With Imputed Interest [Line Items]
Amortized Cost, Loans held for investment	$ 1,845,688,000	$ 1,541,992,000
Allowance for Credit Losses	(18,863,000)	(34,310,000)
Commercial Real Estate Loans
Receivables With Imputed Interest [Line Items]
Principal, Loans held for investment	1,857,868,000	1,548,072,000
Unamortized (Discount) Premium, net	(12,180,000)	(6,080,000)
Amortized Cost, Loans held for investment	1,845,688,000	1,541,992,000
Allowance for Credit Losses	(18,863,000)	(34,310,000)	$ (1,460,000)
Carrying Value, Loans held for investment	1,826,825,000	1,507,682,000
Loan origination fees	11,700,000	5,700,000
Deferred amendment fees	469,000	495,000
Unamortized loan acquisition costs	$ 29,000	118,000
Loans receivable, contracted interest rate	5.75%
Commercial Real Estate Loans | Whole Loans
Receivables With Imputed Interest [Line Items]
Principal, Loans held for investment	$ 1,853,168,000	1,515,722,000
Unamortized (Discount) Premium, net	(12,180,000)	(6,144,000)
Amortized Cost, Loans held for investment	1,840,988,000	1,509,578,000
Allowance for Credit Losses	(18,578,000)	(32,283,000)
Carrying Value, Loans held for investment	$ 1,822,410,000	$ 1,477,295,000
Quantity | Loan	95	95
Loans held for investment, unfunded loan commitments	$ 140,600,000	$ 67,200,000
Commercial Real Estate Loans | Whole Loans | London Interbank Offered Rate (LIBOR)
Receivables With Imputed Interest [Line Items]
Loan receivable, floor interest rate	1.03%	1.88%
Commercial Real Estate Loans | Whole Loans | London Interbank Offered Rate (LIBOR) | Minimum
Receivables With Imputed Interest [Line Items]
Contractual Interest Rates	2.70%	2.70%
Commercial Real Estate Loans | Whole Loans | London Interbank Offered Rate (LIBOR) | Maximum
Receivables With Imputed Interest [Line Items]
Contractual Interest Rates	9.00%	9.00%
Commercial Real Estate Loans | Mezzanine loan
Receivables With Imputed Interest [Line Items]
Principal, Loans held for investment	$ 4,700,000	$ 4,700,000
Amortized Cost, Loans held for investment	4,700,000	4,700,000
Allowance for Credit Losses	(285,000)	(301,000)
Carrying Value, Loans held for investment	$ 4,415,000	$ 4,399,000
Quantity | Loan	1	1
Contractual Interest Rates	10.00%	10.00%
Commercial Real Estate Loans | Preferred equity investments
Receivables With Imputed Interest [Line Items]
Principal, Loans held for investment		$ 27,650,000
Unamortized (Discount) Premium, net		64,000
Amortized Cost, Loans held for investment		27,714,000
Allowance for Credit Losses		(1,726,000)
Carrying Value, Loans held for investment		$ 25,988,000
Quantity | Loan		2
Loans receivable, contracted interest rate		8.00%
Loans held for investment, unfunded loan commitments		$ 2,500,000
Commercial Real Estate Loans | Preferred equity investments | Minimum
Receivables With Imputed Interest [Line Items]
Contractual Interest Rates		11.00%
Commercial Real Estate Loans | Preferred equity investments | Maximum
Receivables With Imputed Interest [Line Items]
Contractual Interest Rates		11.50%
Commercial Real Estate Loans | Whole Loans Fixed Interest Rate
Receivables With Imputed Interest [Line Items]
Quantity | Loan	1
Loans receivable, contracted interest rate	5.75%
Fixed interest rate period	June 2021 through December 2021
Commercial Real Estate Loans | Whole Loans in Default
Receivables With Imputed Interest [Line Items]
Amortized Cost, Loans held for investment	$ 49,100,000	$ 39,700,000
Quantity | Loan	4	3

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LOANS (Commercial Real Estate Loans, at Amortized Cost) (Details) $ in Thousands	Sep. 30, 2021 USD ($) Loan	Dec. 31, 2020 USD ($) Loan
Receivables With Imputed Interest [Line Items]
Amortized Cost, Loans held for investment	$ 1,845,688	$ 1,541,992
Commercial Real Estate Loans
Receivables With Imputed Interest [Line Items]
Amortized Cost, Loans held for investment	1,845,688	1,541,992
Commercial Real Estate Loans | Whole Loans in Default
Receivables With Imputed Interest [Line Items]
Amortized Cost, Loans held for investment	$ 49,100	$ 39,700
Number of loans | Loan	4	3
Commercial Real Estate Debt Investments
Receivables With Imputed Interest [Line Items]
2021	$ 85,013	$ 599,053
2022	530,398	547,091
2023 and Thereafter	1,181,179	356,105
Amortized Cost, Loans held for investment	1,796,590	1,502,249
Commercial Real Estate Debt Investments | Whole Loans
Receivables With Imputed Interest [Line Items]
2021	85,013	599,053
2022	530,398	540,639
2023 and Thereafter	1,176,479	330,143
Amortized Cost, Loans held for investment	1,791,890	1,469,835
Commercial Real Estate Debt Investments | Mezzanine loan
Receivables With Imputed Interest [Line Items]
2023 and Thereafter	4,700	4,700
Amortized Cost, Loans held for investment	4,700	4,700
Commercial Real Estate Debt Investments | Preferred equity investments
Receivables With Imputed Interest [Line Items]
2022		6,452
2023 and Thereafter		21,262
Amortized Cost, Loans held for investment		27,714
Commercial Real Estate Debt Investments | Floating-rate CRE whole loans | Whole Loan in Extension Option
Receivables With Imputed Interest [Line Items]
2021	14,300	112,400
2022	87,200	125,100
2023 and Thereafter	$ 1,700,000	$ 1,300,000

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LOANS (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Variable Interest Entity [Line Items]
Principal paydowns receivable	$ 25.0	$ 4.3
Commercial Real Estate Loans | Southwest Region
Variable Interest Entity [Line Items]
Concentration of loan portfolio risk	18.40%	17.90%
Commercial Real Estate Loans | Mountain Region
Variable Interest Entity [Line Items]
Concentration of loan portfolio risk	15.70%	21.40%
Commercial Real Estate Loans | Southeast Region
Variable Interest Entity [Line Items]
Concentration of loan portfolio risk	22.00%	16.10%

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FINANCING RECEIVABLES (Activity in Allowance for Credit Losses) (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Allowance for credit losses:
Allowance for credit losses at beginning of period			$ 34,310,000
(Reversal of) provision for credit losses			(15,447,000)	$ 49,449,000
Allowance for credit losses at end of period	$ 18,863,000		18,863,000		$ 34,310,000
Commercial Real Estate Loans
Allowance for credit losses:
Allowance for credit losses at beginning of period			34,310,000	1,460,000	1,460,000
(Reversal of) provision for credit losses	537,000	$ (8,100,000)	(15,447,000)	$ 48,500,000	30,815,000
Realized loss on sale of loan			0		(997,000)
Allowance for credit losses at end of period	$ 18,863,000		$ 18,863,000		34,310,000
Commercial Real Estate Loans | ASU 2016-13 (CECL Guidance)
Allowance for credit losses:
Adoption of the new accounting guidance					$ 3,032,000

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FINANCING RECEIVABLES (Activity in Allowance for Credit Losses) (Parenthetical) (Details) - Commercial Real Estate Loans - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Accounts Notes And Loans Receivable [Line Items]
Realized loss related to allowance for credit loss		$ 997,000
Charge off of realized loss on sale of loan	$ 0	$ 997,000

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FINANCING RECEIVABLES (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021 USD ($) Loan	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) Loan Contract Borrower	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($) Loan
Accounts Notes And Loans Receivable [Line Items]
Provision (Reversal) for credit losses			$ (15,447,000)	$ 49,449,000
Troubled-debt restructurings	$ 0	$ 0	$ 0	0
Extension Agreements
Accounts Notes And Loans Receivable [Line Items]
No of extension agreements | Contract			13
Weighted average extension period of contracts			11 months
Principal Forgiveness
Accounts Notes And Loans Receivable [Line Items]
Number of borrowers | Borrower			3
Number of borrowers, default | Borrower			1
Office Loan
Accounts Notes And Loans Receivable [Line Items]
Provision (Reversal) for credit losses	400,000
Loan appraised value			$ 17,600,000
Current expected credit losses (CECL) allowance	2,300,000		2,300,000
Hotel Loan
Accounts Notes And Loans Receivable [Line Items]
Current expected credit losses (CECL) allowance	0		0
Northeast Region
Accounts Notes And Loans Receivable [Line Items]
Current expected credit losses (CECL) allowance	1,800,000		1,800,000
Northeast Region | Office Loan
Accounts Notes And Loans Receivable [Line Items]
Principal balance individually evaluated	19,900,000		19,900,000
Northeast Region | Hotel Loan
Accounts Notes And Loans Receivable [Line Items]
Provision (Reversal) for credit losses			(465,000)
Principal balance individually evaluated	23,300,000		23,300,000
Principal balance, bid for sale			9,300,000
East North Central Region | Hotel Loan
Accounts Notes And Loans Receivable [Line Items]
Principal balance individually evaluated	8,400,000		8,400,000
Commercial Real Estate Loans
Accounts Notes And Loans Receivable [Line Items]
Provision (Reversal) for credit losses	$ 537,000	$ (8,100,000)	$ (15,447,000)	$ 48,500,000	$ 30,815,000
Number of defaulted loans | Loan	4		4		3
Number of defaulted loans completed receipt of deed-in-lieu of foreclosure | Loan	1		1
Number of defaulted loans making current interest payments | Loan	2		2
Number of defaulted loans in non-accrual status | Loan	1		1
Recorded investment	$ 49,100,000		$ 49,100,000		$ 39,700,000
Loan appraised value	$ 17,600,000		17,600,000
Commercial Real Estate Loans | Preferred Equity Investment
Accounts Notes And Loans Receivable [Line Items]
Proceeds from the payoffs of loans receivable			$ 28,800,000

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FINANCING RECEIVABLES (Credit Risk Profiles and Allowance For Loan Losses) (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	$ 1,845,688	$ 1,541,992
Commercial Real Estate Loans
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	1,845,688	1,541,992
Commercial Real Estate Loans | Whole loans floating-rate
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	1,840,988	1,509,578
Commercial Real Estate Loans | Mezzanine loan
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	4,700	4,700
Commercial Real Estate Loans | Preferred equity investments
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost		27,714
Rating 1 | Commercial Real Estate Loans
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	0	0
Rating 1 | Commercial Real Estate Loans | Whole loans floating-rate
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	0	0
Rating 1 | Commercial Real Estate Loans | Mezzanine loan
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	0	0
Rating 1 | Commercial Real Estate Loans | Preferred equity investments
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost		0
Rating 2 | Commercial Real Estate Loans
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	1,310,042	611,838
Rating 2 | Commercial Real Estate Loans | Whole loans floating-rate
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	1,310,042	611,838
Rating 2 | Commercial Real Estate Loans | Mezzanine loan
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	0	0
Rating 2 | Commercial Real Estate Loans | Preferred equity investments
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost		0
Rating 3 | Commercial Real Estate Loans
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	358,130	610,360
Rating 3 | Commercial Real Estate Loans | Whole loans floating-rate
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	353,430	599,208
Rating 3 | Commercial Real Estate Loans | Mezzanine loan
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	4,700	4,700
Rating 3 | Commercial Real Estate Loans | Preferred equity investments
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost		6,452
Rating 4 | Commercial Real Estate Loans
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	123,647	283,660
Rating 4 | Commercial Real Estate Loans | Whole loans floating-rate
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	123,647	262,398
Rating 4 | Commercial Real Estate Loans | Mezzanine loan
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	0	0
Rating 4 | Commercial Real Estate Loans | Preferred equity investments
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost		21,262
Rating 5 | Commercial Real Estate Loans
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	53,869	36,134
Rating 5 | Commercial Real Estate Loans | Whole loans floating-rate
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	53,869	36,134
Rating 5 | Commercial Real Estate Loans | Mezzanine loan
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost	$ 0	0
Rating 5 | Commercial Real Estate Loans | Preferred equity investments
Schedule Of Financing Receivables [Line Items]
Loans at amortized cost		$ 0

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FINANCING RECEIVABLES (Credit Risk Profiles and Allowance For Loan Losses) (Parenthetical) (Details) - Commercial Real Estate Loans - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Accounts Notes And Loans Receivable [Line Items]
Recorded investment excluded accrued interest receivable	$ 6.6	$ 7.3
Loan amount	$ 20.8
Loan amount fixed interest rate	5.75%

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FINANCING RECEIVABLES (Credit Risk Profiles of CRE Loans by Origination Year at Amortized Costs) (Details) - Commercial Real Estate Loans - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021	$ 954,849	$ 264,943
Loans and receivables by origination year, 2020	207,711	623,035
Loans and receivables by origination year, 2019	356,360	513,839
Loans and receivables by origination year, 2018	261,374	111,262
Loans and receivables by origination year, 2017	36,396	0
Loans and receivables by origination year, Prior	28,998	28,913
Loans and receivables by origination year, Total	1,845,688	1,541,992
Whole loans floating-rate
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021	954,849	264,943
Loans and receivables by origination year, 2020	207,711	616,583
Loans and receivables by origination year, 2019	356,360	487,877
Loans and receivables by origination year, 2018	256,674	111,262
Loans and receivables by origination year, 2017	36,396	0
Loans and receivables by origination year, Prior	28,998	28,913
Loans and receivables by origination year, Total	1,840,988	1,509,578
Whole loans floating-rate | Rating 2
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021	944,534	221,364
Loans and receivables by origination year, 2020	197,627	279,077
Loans and receivables by origination year, 2019	114,859	111,397
Loans and receivables by origination year, 2018	53,022	0
Loans and receivables by origination year, 2017	0	0
Loans and receivables by origination year, Prior	0	0
Loans and receivables by origination year, Total	1,310,042	611,838
Whole loans floating-rate | Rating 3
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021	10,315	43,579
Loans and receivables by origination year, 2020	10,084	246,073
Loans and receivables by origination year, 2019	190,708	246,944
Loans and receivables by origination year, 2018	108,327	45,142
Loans and receivables by origination year, 2017	16,496	0
Loans and receivables by origination year, Prior	17,500	17,470
Loans and receivables by origination year, Total	353,430	599,208
Whole loans floating-rate | Rating 4
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021	0	0
Loans and receivables by origination year, 2020	0	77,495
Loans and receivables by origination year, 2019	28,420	129,536
Loans and receivables by origination year, 2018	86,025	46,220
Loans and receivables by origination year, 2017	0	0
Loans and receivables by origination year, Prior	9,202	9,147
Loans and receivables by origination year, Total	123,647	262,398
Whole loans floating-rate | Rating 5
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021	0	0
Loans and receivables by origination year, 2020	0	13,938
Loans and receivables by origination year, 2019	22,373	0
Loans and receivables by origination year, 2018	9,300	19,900
Loans and receivables by origination year, 2017	19,900	0
Loans and receivables by origination year, Prior	2,296	2,296
Loans and receivables by origination year, Total	53,869	36,134
Mezzanine loan | Rating 3
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021	0	0
Loans and receivables by origination year, 2020	0	0
Loans and receivables by origination year, 2019	0	4,700
Loans and receivables by origination year, 2018	4,700	0
Loans and receivables by origination year, 2017	0	0
Loans and receivables by origination year, Prior	0	0
Loans and receivables by origination year, Total	$ 4,700	4,700
Preferred equity investments
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021		0
Loans and receivables by origination year, 2020		6,452
Loans and receivables by origination year, 2019		21,262
Loans and receivables by origination year, 2018		0
Loans and receivables by origination year, 2017		0
Loans and receivables by origination year, Prior		0
Loans and receivables by origination year, Total		27,714
Preferred equity investments | Rating 3
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021		0
Loans and receivables by origination year, 2020		6,452
Loans and receivables by origination year, 2019		0
Loans and receivables by origination year, 2018		0
Loans and receivables by origination year, 2017		0
Loans and receivables by origination year, Prior		0
Loans and receivables by origination year, Total		6,452
Preferred equity investments | Rating 4
Financing Receivable Recorded Investment [Line Items]
Loans and receivables by origination year, 2021		0
Loans and receivables by origination year, 2020		0
Loans and receivables by origination year, 2019		21,262
Loans and receivables by origination year, 2018		0
Loans and receivables by origination year, 2017		0
Loans and receivables by origination year, Prior		0
Loans and receivables by origination year, Total		$ 21,262

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FINANCING RECEIVABLES (Credit Risk Profiles of CRE Loans by Origination Year at Amortized Costs) (Parenthetical) (Details) - Commercial Real Estate Loans - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Financing Receivable Recorded Investment Past Due [Line Items]
Recorded investment excluded accrued interest receivable	$ 6.6	$ 7.3
Loan amount	$ 20.8
Loan amount fixed interest rate	5.75%

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FINANCING RECEIVABLES (Loan Portfolio Aging Analysis) (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	$ 1,845,688	$ 1,541,992
Total Loans > Than 90 days and Accruing	19,898	11,443
30-59 Days
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	0	0
60-89 Days
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	0	0
Greater than 90 Days
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	39,798	11,443
Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	39,798	11,443
Current
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	1,805,890	1,530,549
Commercial Real Estate Loans
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	1,845,688	1,541,992
Commercial Real Estate Loans | Whole loans floating-rate
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	1,840,988	1,509,578
Total Loans > Than 90 days and Accruing	19,898	11,443
Commercial Real Estate Loans | Mezzanine loan
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	4,700	4,700
Total Loans > Than 90 days and Accruing	0	0
Commercial Real Estate Loans | Preferred equity investments
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans		27,714
Total Loans > Than 90 days and Accruing		0
Commercial Real Estate Loans | 30-59 Days | Whole loans floating-rate
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	0	0
Commercial Real Estate Loans | 30-59 Days | Mezzanine loan
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	0	0
Commercial Real Estate Loans | 30-59 Days | Preferred equity investments
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans		0
Commercial Real Estate Loans | 60-89 Days | Whole loans floating-rate
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	0	0
Commercial Real Estate Loans | 60-89 Days | Mezzanine loan
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	0	0
Commercial Real Estate Loans | 60-89 Days | Preferred equity investments
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans		0
Commercial Real Estate Loans | Greater than 90 Days | Whole loans floating-rate
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	39,798	11,443
Commercial Real Estate Loans | Greater than 90 Days | Mezzanine loan
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	0	0
Commercial Real Estate Loans | Greater than 90 Days | Preferred equity investments
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans		0
Commercial Real Estate Loans | Total Past Due | Whole loans floating-rate
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	39,798	11,443
Commercial Real Estate Loans | Total Past Due | Mezzanine loan
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	0	0
Commercial Real Estate Loans | Total Past Due | Preferred equity investments
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans		0
Commercial Real Estate Loans | Current | Whole loans floating-rate
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	1,801,190	1,498,135
Commercial Real Estate Loans | Current | Mezzanine loan
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans	$ 4,700	4,700
Commercial Real Estate Loans | Current | Preferred equity investments
Financing Receivable Recorded Investment Past Due [Line Items]
CRE loans		$ 27,714

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FINANCING RECEIVABLES (Loan Portfolio Aging Analysis) (Parenthetical) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($) Loan	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) Loan	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($) Loan
Financing Receivable Recorded Investment Past Due [Line Items]
Interest income	$ 23,986,000	$ 24,638,000	$ 74,528,000	$ 85,171,000
Whole Loans In Maturity Default
Financing Receivable Recorded Investment Past Due [Line Items]
Number of defaulted loans | Loan					2
Recorded investment					$ 28,300,000
Commercial Real Estate Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Number of defaulted loans | Loan	4		4		3
Recorded investment	$ 49,100,000		$ 49,100,000		$ 39,700,000
Recorded investment excluded accrued interest receivable	6,600,000		6,600,000		$ 7,300,000
Loan amount	$ 20,800,000		$ 20,800,000
Loan amount fixed interest rate	5.75%		5.75%
Commercial Real Estate Loans | Greater than 90 Days
Financing Receivable Recorded Investment Past Due [Line Items]
Number of defaulted loans | Loan	3		3
Commercial Real Estate Loans | Whole Loans In Maturity Default
Financing Receivable Recorded Investment Past Due [Line Items]
Interest income	$ 480,000	$ 605,000	$ 1,700,000	$ 1,800,000

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INVESTMENT IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES (Details) - USD ($)	1 Months Ended	3 Months Ended	9 Months Ended
	Nov. 30, 2020	Sep. 30, 2021	Sep. 30, 2021
Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Line Items]
Amortization expense on intangible assets		$ 94,000	$ 282,000
Amortization expense on intangible assets during 2021		375,000	375,000
Amortization expense on intangible assets during 2022		375,000	375,000
Amortization expense on intangible assets during 2023		355,000	355,000
Amortization expense on intangible assets during 2024		210,000	210,000
Amortization expense on intangible assets during 2025		$ 210,000	210,000
Ground Lease
Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Line Items]
Offsetting amortization and accretion on right of use assets and lease liabilities			$ 35,000
CRE Whole Loan
Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Line Items]
Collateralized of hotel property	$ 38,000,000.0
Fair value of assets acquired	$ 39,800,000

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INVESTMENT IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES (Schedule of Investments in Real Estate and Related Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Abstract]
Investment in Real Estate, Cost	$ 34,104	$ 33,929
Investment in Real Estate Accumulated Depreciation & Amortization	(1,305)	(123)
Investment in Real Estate, Book Value	32,799	33,806
Right of use Assets, Cost	5,603	5,603
Right of use Assets Accumulated Depreciation & Amortization	(74)	(11)
Right of use Assets, Book Value	5,529	5,592
Intangible Assets, Cost	3,337	3,336
Intangible Assets, Accumulated Depreciation & Amortization	(296)	(42)
Intangible Assets, Book Value	3,041	3,294
Assets Acquired, Cost	43,044	42,868
Assets Acquired, Accumulated Depreciation & Amortization	(1,675)	(176)
Assets Acquired, Book Value	41,369	42,692
Lease Liabilities, Cost	(3,113)	(3,113)
Lease Liabilities, Accumulated Depreciation & Amortization	41	6
Lease Liabilities, Book Value	(3,072)	(3,107)
Liabilities Assumed, Cost	(3,113)	(3,113)
Liabilities Assumed, Accumulated Depreciation & Amortization	41	6
Liabilities Assumed, Book Value	(3,072)	(3,107)
Assets Acquired and Liabilities Assumed, Cost	39,931	39,755
Asset Acquired and Liabilities Assumed, Book Value	$ 38,297	$ 39,585

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INVESTMENT IN REAL ESTATE AND OTHER ACQUIRED ASSETS AND ASSUMED LIABILITIES (Schedule of Investments in Real Estate and Related Intangible Assets) (Parenthetical) (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Line Items]
Furniture and fixtures purchased for the property	$ 180,000	$ 5,000
Ground leases	3,100,000	3,100,000
Below market lease intangible asset	2,500,000	2,500,000
Intangible assets	3,041,000	3,294,000
Franchise Agreement
Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Line Items]
Intangible assets	2,700,000	2,800,000
Customer Lists
Investment In Real Estate And Other Acquired Assets And Assumed Liabilities [Line Items]
Intangible assets	$ 352,000	$ 477,000

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LEASES (Details) - Office Space and Office Equipment	9 Months Ended
	Sep. 30, 2021
Minimum
Lessee Lease Description [Line Items]
Operating lease expiration date	2024-01
Maximum
Lessee Lease Description [Line Items]
Operating lease expiration date	2028-07

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LEASES (Summary of Operating Leases) (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Leases [Abstract]
Right of use assets	$ 455
Lease liabilities	$ (488)
Weighted average remaining lease term:	6 years 9 months 18 days
Weighted average discount rate:	10.65%

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LEASES (Summary of Operating Lease Costs and Cash Payments) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2021
Lease Cost:
Operating lease cost	$ 24	$ 50

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LEASES (Summary of Operating Leases by Maturity Date Based on Undiscounted Cash Flows) (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Leases [Abstract]
2021	$ 24
2022	97
2023	99
2024	99
2025	102
Thereafter	274
Subtotal	695
Less: impact of discount	(207)
Total	$ 488

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INVESTMENT SECURITIES AVAILABLE-FOR-SALE (Schedule of Available-for-Sale Securities, Fair Value) (Details) - CMBS, Fixed Rate $ in Thousands	Dec. 31, 2020 USD ($)
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 2,080
Fair Value	$ 2,080

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INVESTMENT SECURITIES AVAILABLE-FOR-SALE (Schedule of Available-for-Sale Securities, Fair Value) (Parenthetical) (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
Debt Securities, Available-for-sale [Line Items]
Accrued interest receivable	$ 6,678,000	$ 7,372,000
CMBS
Debt Securities, Available-for-sale [Line Items]
Accrued interest receivable		$ 56,000

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INVESTMENT SECURITIES AVAILABLE-FOR-SALE (Details)	1 Months Ended		3 Months Ended	9 Months Ended
	Mar. 31, 2021 position	Apr. 30, 2020 position	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)
Schedule Of Trading Securities And Other Trading Assets [Line Items]
Total losses					$ 186,100,000
Proceeds from sale of investment securities available-for-sale				$ 2,958,000	37,764,000
67 CMBS
Schedule Of Trading Securities And Other Trading Assets [Line Items]
Realized losses					180,300,000
Positions Sold/Redeemed | position		67
CMBS
Schedule Of Trading Securities And Other Trading Assets [Line Items]
Positions Sold/Redeemed | position	2
Unrealized losses			$ 203,000		$ 5,800,000
Proceeds from sale of investment securities available-for-sale				3,000,000.0
Realized gain				$ 878,000

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INVESTMENTS IN UNCONSOLIDATED ENTITIES (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Schedule Of Equity Method Investments [Line Items]
Investments in unconsolidated entities	$ 1,548,000		$ 1,548,000		$ 1,548,000
VIE, Not Primary Beneficiary | Investment in RCT I and II
Schedule Of Equity Method Investments [Line Items]
Ownership percentage in VIE			100.00%		100.00%
Investments in unconsolidated entities	1,500,000		$ 1,500,000		$ 1,500,000
Dividends from investments in unconsolidated entities	$ 16,000	$ 19,000	$ 49,000	$ 62,000
VIE, Not Primary Beneficiary | Interest in RCT I
Schedule Of Equity Method Investments [Line Items]
Percentage of value of trusts owned	3.00%		3.00%		3.00%
VIE, Not Primary Beneficiary | Interest in RCT II
Schedule Of Equity Method Investments [Line Items]
Percentage of value of trusts owned	3.00%		3.00%		3.00%

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BORROWINGS (Schedule of Debt) (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Principal Outstanding	$ 1,619,906,000	$ 1,330,985,000
Unamortized Issuance Costs and Discounts	17,304,000	26,258,000
Outstanding Borrowings	$ 1,602,602,000	$ 1,304,727,000
Weighted Average Borrowing Rate	2.62%	2.83%
Weighted Average Remaining Maturity	9 years 10 months 24 days	13 years
Value of Collateral	$ 1,871,981,000	$ 1,537,573,000
XAN 2020-RSO8 Senior Notes
Debt Instrument [Line Items]
Principal Outstanding	173,600,000	388,459,000
Unamortized Issuance Costs and Discounts	1,142,000	4,164,000
Outstanding Borrowings	$ 172,458,000	$ 384,295,000
Weighted Average Borrowing Rate	2.02%	1.62%
Weighted Average Remaining Maturity	13 years 4 months 24 days	14 years 2 months 12 days
Value of Collateral	$ 260,488,000	$ 475,347,000
XAN 2020-RSO9 Senior Notes
Debt Instrument [Line Items]
Principal Outstanding	119,824,000	234,731,000
Unamortized Issuance Costs and Discounts	1,191,000	3,857,000
Outstanding Borrowings	$ 118,633,000	$ 230,874,000
Weighted Average Borrowing Rate	3.91%	3.31%
Weighted Average Remaining Maturity	15 years 7 months 6 days	16 years 3 months 18 days
Value of Collateral	$ 169,371,000	$ 285,862,000
4.50% Convertible Senior Notes
Debt Instrument [Line Items]
Principal Outstanding	88,014,000	143,750,000
Unamortized Issuance Costs and Discounts	2,204,000	6,498,000
Outstanding Borrowings	$ 85,810,000	$ 137,252,000
Weighted Average Borrowing Rate	4.50%	4.50%
Weighted Average Remaining Maturity	319 days	1 year 7 months 6 days
Value of Collateral	$ 0	$ 0
Unsecured Junior Subordinated Debentures
Debt Instrument [Line Items]
Principal Outstanding	51,548,000	51,548,000
Unamortized Issuance Costs and Discounts	0	0
Outstanding Borrowings	$ 51,548,000	$ 51,548,000
Weighted Average Borrowing Rate	4.09%	4.18%
Weighted Average Remaining Maturity	14 years 10 months 24 days	15 years 8 months 12 days
Value of Collateral	$ 0	$ 0
ACR 2021-FL1 Senior Notes
Debt Instrument [Line Items]
Principal Outstanding	675,223,000
Unamortized Issuance Costs and Discounts	5,605,000
Outstanding Borrowings	$ 669,618,000
Weighted Average Borrowing Rate	1.57%
Weighted Average Remaining Maturity	14 years 8 months 12 days
Value of Collateral	$ 802,643,000
Senior Secured Financing Facility
Debt Instrument [Line Items]
Principal Outstanding	41,182,000	33,360,000
Unamortized Issuance Costs and Discounts	3,586,000	4,046,000
Outstanding Borrowings	$ 37,596,000	$ 29,314,000
Weighted Average Borrowing Rate	5.75%	5.75%
Weighted Average Remaining Maturity	5 years 9 months 18 days	6 years 7 months 6 days
Value of Collateral	$ 217,835,000	$ 239,385,000
5.75% Senior Unsecured Notes
Debt Instrument [Line Items]
Principal Outstanding	150,000,000
Unamortized Issuance Costs and Discounts	3,526,000
Outstanding Borrowings	$ 146,474,000
Weighted Average Borrowing Rate	5.75%
Weighted Average Remaining Maturity	4 years 10 months 24 days
CRE - Term Warehouse Financing Facilities
Debt Instrument [Line Items]
Principal Outstanding	$ 320,515,000	13,516,000
Unamortized Issuance Costs and Discounts	50,000	1,258,000
Outstanding Borrowings	$ 320,465,000	$ 12,258,000
Weighted Average Borrowing Rate	2.05%	2.66%
Weighted Average Remaining Maturity	27 days	299 days
Value of Collateral	$ 421,644,000	$ 20,000,000
XAN 2019-RSO7 Senior Notes
Debt Instrument [Line Items]
Principal Outstanding		415,621,000
Unamortized Issuance Costs and Discounts		2,861,000
Outstanding Borrowings		$ 412,760,000
Weighted Average Borrowing Rate		1.60%
Weighted Average Remaining Maturity		15 years 3 months 18 days
Value of Collateral		$ 516,979,000
12.00% Senior Unsecured Notes
Debt Instrument [Line Items]
Principal Outstanding		50,000,000
Unamortized Issuance Costs and Discounts	$ 320,000	3,574,000
Outstanding Borrowings		$ 46,426,000
Weighted Average Borrowing Rate		12.00%
Weighted Average Remaining Maturity		6 years 7 months 6 days

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BORROWINGS (Schedule of Debt) (Parenthetical) (Details) - USD ($)	1 Months Ended	9 Months Ended
	Oct. 31, 2021	Sep. 30, 2021	Aug. 16, 2021	Dec. 31, 2020	Sep. 30, 2020	Aug. 31, 2017
Debt Instrument [Line Items]
Accrued interest costs		$ 2,521,000		$ 6,036,000
Unamortized issuance costs and discounts		$ 17,304,000		$ 26,258,000
4.50% Convertible Senior Notes
Debt Instrument [Line Items]
Interest rate, stated percentage		4.50%		4.50%	4.50%	4.50%
Unamortized issuance costs and discounts		$ 2,204,000		$ 6,498,000
5.75% Senior Unsecured Notes
Debt Instrument [Line Items]
Interest rate, stated percentage		5.75%	5.75%
Unamortized issuance costs and discounts		$ 3,526,000
12.00% Senior Unsecured Notes
Debt Instrument [Line Items]
Interest rate, stated percentage				12.00%
Unamortized issuance costs and discounts		320,000		$ 3,574,000
ACR 2021-FL1 Senior Notes
Debt Instrument [Line Items]
Exit fees		752,000
Interest received		87,000
Unamortized issuance costs and discounts		5,605,000
CRE - Term Warehouse Financing Facilities
Debt Instrument [Line Items]
Accrued interest costs		320,000		16,000
Unamortized issuance costs and discounts		$ 50,000		$ 1,258,000
CRE - Term Warehouse Financing Facilities | Barclays Bank PLC | Subsequent Event
Debt Instrument [Line Items]
Debt instrument extended maturity year and month	2022-10
CRE - Term Warehouse Financing Facilities | JP Morgan Chase Bank, N.A. | Subsequent Event
Debt Instrument [Line Items]
Debt instrument extended maturity year and month	2024-10

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BORROWINGS (Securitization) (Details) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended
	May 31, 2021	Sep. 30, 2021
XAN 2020-RSO8 Senior Notes
Debt Instrument [Line Items]
Closing Date		2020-03
Maturity Date		2035-03
Permitted Funded Companion Participation Acquisition Period End		2023-03
Total Note Paydowns Received from Closing Date through September 30, 2021		$ 262,143
XAN 2020-RSO9 Senior Notes
Debt Instrument [Line Items]
Closing Date		2020-09
Maturity Date		2037-04
Total Note Paydowns Received from Closing Date through September 30, 2021		$ 125,970
ACR 2021-FL1 Senior Notes
Debt Instrument [Line Items]
Closing Date		2021-05
Maturity Date	2036-06	2036-06
End of Designated Principal Reinvestment Period		2023-05
Total Note Paydowns Received from Closing Date through September 30, 2021		$ 0

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BORROWINGS (Securitization) (Parenthetical) (Details) $ in Millions	Sep. 30, 2021 USD ($)
XAN 2020-RSO9 Senior Notes
Debt Instrument [Line Items]
Future advance reserve account to unfunded commitments	$ 7.7

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BORROWINGS (XAN 2019-RSO7) (Details) $ in Millions	Apr. 30, 2019 USD ($)
XAN 2019-RSO7 Senior Notes | Senior Notes
Debt Instrument [Line Items]
Closing transaction amount	$ 687.2

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BORROWINGS (XAN 2020-RSO8) (Details) $ in Millions	Mar. 31, 2020 USD ($)
XAN 2020-RSO8 Senior Notes
Debt Instrument [Line Items]
Closing transaction amount	$ 522.6

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BORROWINGS (XAN 2020-RSO9) (Details) $ in Millions	Sep. 30, 2020 USD ($)
XAN 2020-RSO9 Senior Notes
Debt Instrument [Line Items]
Closing transaction amount	$ 297.0

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BORROWINGS (ACR 2021-FL1) (Details) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended
	May 31, 2021	Sep. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Face amount of debt issued		$ 358,061	$ 41,572
ACR 2021-FL1 Senior Notes
Debt Instrument [Line Items]
Closing transaction amount	$ 802,600
Face amount of debt issued	$ 675,200
Maturity Date	2036-06	2036-06
ACR 2021-FL1 Senior Notes | Debt Instrument, Class A
Debt Instrument [Line Items]
Face amount of debt issued	$ 431,400
ACR 2021-FL1 Senior Notes | Debt Instrument, Class A | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate	1.20%
ACR 2021-FL1 Senior Notes | Debt Instrument, Class A-S
Debt Instrument [Line Items]
Face amount of debt issued	$ 100,300
ACR 2021-FL1 Senior Notes | Debt Instrument, Class A-S | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate	1.60%
ACR 2021-FL1 Senior Notes | Debt Instrument, Class B
Debt Instrument [Line Items]
Face amount of debt issued	$ 37,100
ACR 2021-FL1 Senior Notes | Debt Instrument, Class B | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate	1.80%
ACR 2021-FL1 Senior Notes | Debt Instrument, Class C
Debt Instrument [Line Items]
Face amount of debt issued	$ 43,100
ACR 2021-FL1 Senior Notes | Debt Instrument, Class C | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate	2.00%
ACR 2021-FL1 Senior Notes | Debt Instrument, Class D
Debt Instrument [Line Items]
Face amount of debt issued	$ 50,200
ACR 2021-FL1 Senior Notes | Debt Instrument, Class D | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate	2.65%
ACR 2021-FL1 Senior Notes | Debt Instrument, Class E
Debt Instrument [Line Items]
Face amount of debt issued	$ 13,000
ACR 2021-FL1 Senior Notes | Debt Instrument, Class E | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate	3.10%
ACR 2021-FL1 Senior Notes | Preferred Stock | Subsidiary of ACRES Realty Funding, Inc
Debt Instrument [Line Items]
Interest ownership percentage on outstanding debt	100.00%
ACR 2021-FL1 Senior Notes | Debt Instrument, Class F | Subsidiary of ACRES Realty Funding, Inc
Debt Instrument [Line Items]
Interest ownership percentage on outstanding debt	100.00%
ACR 2021-FL1 Senior Notes | Debt Instrument, Class G | Subsidiary of ACRES Realty Funding, Inc
Debt Instrument [Line Items]
Interest ownership percentage on outstanding debt	100.00%

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BORROWINGS (4.50% Convertible Senior Notes and 8.00% Convertible Senior Notes) (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
	Aug. 31, 2017	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Jan. 31, 2015
Debt Instrument [Line Items]
Face amount of debt issued		$ 358,061,000		$ 358,061,000		$ 41,572,000
Loss on extinguishment of debt		(9,006,000)	$ 0	(9,006,000)	$ 0
Interest expense		$ 14,534,000	$ 13,033,000	$ 46,960,000	$ 43,974,000
8.00% Convertible Senior Notes
Debt Instrument [Line Items]
Face amount of debt issued							$ 100,000,000.0
Debt instrument, interest rate, stated percentage		8.00%	8.00%	8.00%	8.00%		8.00%
Extinguishment of debt, amount	$ 78,800,000
4.50% Convertible Senior Notes
Debt Instrument [Line Items]
Face amount of debt issued	$ 143,800,000
Debt instrument, interest rate, stated percentage	4.50%	4.50%	4.50%	4.50%	4.50%	4.50%
Repurchase of convertible senior notes		$ 55,700,000		$ 55,700,000
Charge to earnings		1,500,000
Loss on extinguishment of debt		1,200,000
Interest expense		$ 304,000
Closing price of common stock		$ 16.17		$ 16.17

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BORROWINGS (Schedule of Convertible Senior Notes) (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($) $ / shares	Dec. 31, 2020 USD ($)	Sep. 30, 2020	Aug. 31, 2017
Debt Instrument [Line Items]
Principal Outstanding	$ 1,619,906	$ 1,330,985
4.50% Convertible Senior Notes
Debt Instrument [Line Items]
Principal Outstanding	$ 88,014	$ 143,750
Borrowing Rate	4.50%	4.50%	4.50%	4.50%
Effective Rate	7.43%		7.43%
Conversion Rate	27.7222
Conversion Price | $ / shares	$ 36.06
Maturity Date	Aug. 15, 2022

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BORROWINGS (Schedule of Convertible Senior Notes) (Parenthetical) (Details) - 4.50% Convertible Senior Notes - USD ($)	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Aug. 31, 2017
Debt Instrument [Line Items]
Effective interest rate	7.43%		7.43%
Conversion principal amount				$ 1,000
Debt instrument convertible distribution threshold (in dollars per share)	$ 0.30
Borrowing Rate	4.50%	4.50%	4.50%	4.50%

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BORROWINGS (5.75% Senior Unsecured Notes Due 2026) (Details) - USD ($)		9 Months Ended
	Aug. 16, 2021	Sep. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Face amount of debt issued		$ 358,061,000	$ 41,572,000
5.75% Senior Unsecured Notes
Debt Instrument [Line Items]
Face amount of debt issued	$ 150,000,000.0
Debt instrument, interest rate, stated percentage	5.75%	5.75%
Percentage of principal amount to be redeemed	100.00%
Debt instrument redemption term		Prior to May 15, 2026, the Company may at its option redeem the 5.75% Senior Unsecured Notes, in whole or in part, at a redemption price equal to the sum of (i) 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date, and (ii) a make-whole premium. On or after May 15, 2026, the Company may at its option redeem the 5.75% Senior Unsecured Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the 5.75% Senior Unsecured Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date
Minimum invested amount in capital	$ 75,000,000
Minimum percentage of aggregate principal amount	25.00%

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BORROWINGS (12.00% Senior Unsecured Notes Due 2027) (Details) - USD ($)			3 Months Ended		9 Months Ended
	Aug. 18, 2021	Jul. 31, 2020	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Debt Instrument [Line Items]
Face amount of debt issued			$ 358,061,000		$ 358,061,000		$ 41,572,000
Loss on extinguishment of debt			(9,006,000)	$ 0	(9,006,000)	$ 0
Interest expense			$ 14,534,000	$ 13,033,000	$ 46,960,000	$ 43,974,000
12.00% Senior Unsecured Notes
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage							12.00%
12.00% Senior Unsecured Notes | Note and Warrant Purchase Agreement | Oaktree and MassMutual
Debt Instrument [Line Items]
Debt instrument, maximum borrowing capacity		$ 125,000,000.0
Debt instrument, interest rate, stated percentage		12.00%
Debt instrument, pay-in-kind interest rate maximum percentage		3.25%
Face amount of debt issued	$ 50,000,000.0
Debt instrument, redemption amount	55,300,000
Debt instrument redemption interest amount	329,000
Debt instrument make-whole amount	5,000,000.0
Debt instrument, charge to earnings in connection with redemption	8,000,000.0
Loss on extinguishment of debt	7,800,000
Debt instrument net make-whole amount	5,000,000.0
Debt instrument, acceleration of remaining market discount	2,800,000
Interest expense	$ 218,000
12.00% Senior Unsecured Notes | Note and Warrant Purchase Agreement | Oaktree
Debt Instrument [Line Items]
Face amount of debt issued		$ 42,000,000.0
12.00% Senior Unsecured Notes | Note and Warrant Purchase Agreement | MassMutual
Debt Instrument [Line Items]
Face amount of debt issued		$ 8,000,000.0

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BORROWINGS (Senior Secured Financing and Term Warehouse Financing Facilities and Repurchase Agreements) (Details) $ in Thousands	Sep. 30, 2021 USD ($) Loan	Dec. 31, 2020 USD ($) Loan
Debt Instrument [Line Items]
Outstanding Borrowings	$ 358,061	$ 41,572
Value of Collateral	$ 639,479	$ 259,385
Weighted Average Interest Rate	2.62%	2.83%
Senior Secured Financing Facility | Massachusetts Mutual Life Insurance Company
Debt Instrument [Line Items]
Outstanding Borrowings	$ 37,596	$ 29,314
Value of Collateral	$ 217,835	$ 239,385
Number of Positions as Collateral | Loan	12	15
Weighted Average Interest Rate	5.75%	5.75%
CRE - Term Warehouse Financing Facilities | Barclays Bank PLC
Debt Instrument [Line Items]
Outstanding Borrowings	$ 109,471
Value of Collateral	$ 138,422
Number of Positions as Collateral | Loan	6
Weighted Average Interest Rate	1.95%
CRE - Term Warehouse Financing Facilities | JP Morgan Chase Bank, N.A.
Debt Instrument [Line Items]
Outstanding Borrowings	$ 210,994	$ 12,258
Value of Collateral	$ 283,222	$ 20,000
Number of Positions as Collateral | Loan	14	1
Weighted Average Interest Rate	2.10%	2.66%

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BORROWINGS (Senior Secured Financing and Term Warehouse Financing Facilities and Repurchase Agreements) (Parenthetical) (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Unamortized issuance costs and discounts	$ 17,304,000	$ 26,258,000
Senior Secured Financing Facility | Massachusetts Mutual Life Insurance Company
Debt Instrument [Line Items]
Unamortized issuance costs and discounts	3,600,000	4,000,000.0
CRE - Term Warehouse Financing Facilities | JP Morgan Chase Bank, N.A.
Debt Instrument [Line Items]
Unamortized issuance costs and discounts	$ 50,000	1,300,000
Interest Receivable | JP Morgan Chase Bank, N.A.
Debt Instrument [Line Items]
Unamortized issuance costs and discounts		$ 678,000

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BORROWINGS (Amount at Risk Under Warehouse Financing Facilities) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Weighted Average Remaining Maturity	9 years 10 months 24 days	13 years
Weighted Average Interest Rate	2.62%	2.83%
CRE - Term Warehouse Financing Facilities
Debt Instrument [Line Items]
Weighted Average Remaining Maturity	27 days	299 days
Weighted Average Interest Rate	2.05%	2.66%
CRE - Term Warehouse Financing Facilities | Barclays Bank PLC
Debt Instrument [Line Items]
Amount at Risk	$ 29,312
Weighted Average Remaining Maturity	29 days
Weighted Average Interest Rate	1.95%
CRE - Term Warehouse Financing Facilities | JP Morgan Chase Bank, N.A.
Debt Instrument [Line Items]
Amount at Risk	$ 73,020
Weighted Average Remaining Maturity	26 days
Weighted Average Interest Rate	2.10%

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BORROWINGS (Amount at Risk Under Warehouse Financing Facilities) (Parenthetical) (Details) - Subsequent Event - CRE - Term Warehouse Financing Facilities	1 Months Ended
	Oct. 31, 2021
Barclays Bank PLC
Debt Instrument [Line Items]
Debt instrument extended maturity year and month	2022-10
JP Morgan Chase Bank, N.A.
Debt Instrument [Line Items]
Debt instrument extended maturity year and month	2024-10

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BORROWINGS (CRE - Term Warehouse Financing Facilities) (Details) - Line of Credit - CRE - Term Warehouse Financing Facilities - Morgan Stanley Mortgage Capital Holdings LLC - Subsequent Event	Nov. 08, 2021 USD ($) extension
Debt Instrument [Line Items]
Facility amount | $	$ 250,000,000.0
Maturity Date	2022-11
Number of options to extend | extension	2
Option to extend, term	1 year
Guaranty Agreement, maximum percentage of then current unpaid aggregate repurchase price of all purchased assets	25.00%

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BORROWINGS (Contractual Commitments) (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Debt Instrument [Line Items]
Total	$ 1,619,906
2021	320,515
2022	88,014
2023	0
2024	0
2025 and Thereafter	1,211,377
CRE securitizations
Debt Instrument [Line Items]
Total	968,647
2021	0
2022	0
2023	0
2024	0
2025 and Thereafter	968,647
Unsecured Junior Subordinated Debentures
Debt Instrument [Line Items]
Total	51,548
2021	0
2022	0
2023	0
2024	0
2025 and Thereafter	51,548
Convertible Debt | 4.50% Convertible Senior Notes
Debt Instrument [Line Items]
Total	88,014
2021	0
2022	88,014
2023	0
2024	0
2025 and Thereafter	0
Senior Secured Financing Facility
Debt Instrument [Line Items]
Total	41,182
2021	0
2022	0
2023	0
2024	0
2025 and Thereafter	41,182
5.75% Senior Unsecured Notes
Debt Instrument [Line Items]
Total	150,000
2021	0
2022	0
2023	0
2024	0
2025 and Thereafter	150,000
Term Warehouse Financing Facilities
Debt Instrument [Line Items]
Total	320,515
2021	320,515
2022	0
2023	0
2024	0
2025 and Thereafter	$ 0

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BORROWINGS (Contractual Commitments) (Parenthetical) (Details) - Subsequent Event - CRE - Term Warehouse Financing Facilities	1 Months Ended
	Oct. 31, 2021
Barclays Bank PLC
Debt Instrument [Line Items]
Debt instrument extended maturity year and month	2022-10
JP Morgan Chase Bank, N.A.
Debt Instrument [Line Items]
Debt instrument extended maturity year and month	2024-10

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SHARE ISSUANCE AND REPURCHASE (Details) - USD ($)		2 Months Ended	9 Months Ended		11 Months Ended	12 Months Ended
	Jul. 31, 2020	Jun. 30, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Dec. 31, 2020	Nov. 30, 2020
Class Of Stock [Line Items]
Proceeds from issuance of preferred stock, net			$ 110,533,000
Shares repurchased during period, value			$ 14,700,000	$ 0	$ 20,000,000.0
Shares repurchased during period, shares			1,100,000		1,607,382
Note and Warrant Purchase Agreement | Oaktree and MassMutual
Class Of Stock [Line Items]
Warrant Exercise price	$ 0.03
Warrants recorded in additional paid-in capital, fair value	$ 3,100,000
Date from which remaining unissued warrants can be issued	Jan. 31, 2022
Warrants to purchase additional shares of common stock	699,992
Warrants expiration term	7 years
Note and Warrant Purchase Agreement | Oaktree and MassMutual | Maximum
Class Of Stock [Line Items]
Aggregate purchase of common stock warrants	1,166,653
Note and Warrant Purchase Agreement | Oaktree
Class Of Stock [Line Items]
Warrants issued to purchase common stock	391,995
Purchase price of common stock for warrants issued	$ 42,000,000.0
Note and Warrant Purchase Agreement | MassMutual
Class Of Stock [Line Items]
Warrants issued to purchase common stock	74,666
Purchase price of common stock for warrants issued	$ 8,000,000.0
Equity and Debt Securities Repurchase Program
Class Of Stock [Line Items]
Stock repurchase program, authorized amount (up to)			$ 20,000,000.0		$ 20,000,000.0		$ 20,000,000.0
8.625% Series C Preferred Stock
Class Of Stock [Line Items]
Preferred stock, coupon authorized			8.625%			8.625%
Preferred stock, liquidation preference (in dollars per share)			$ 25.00		$ 25.00	$ 25.00
Preferred stock, shares issued (in shares)			4,800,000		4,800,000	4,800,000
Preferred stock, shares outstanding (in shares)			4,800,000		4,800,000	4,800,000
Preferred stock, weighted average issuance price (in dollars per share)			$ 25.00
8.625% Series C Preferred Stock | London Interbank Offered Rate (LIBOR)
Class Of Stock [Line Items]
Dividend payment rate, variable, basis spread on variable rate			5.927%		5.927%
7.875% Series D Preferred Stock
Class Of Stock [Line Items]
Preferred stock, coupon authorized		7.875%	7.875%			7.875%
Preferred stock, liquidation preference (in dollars per share)			$ 25.00		$ 25.00	$ 25.00
Preferred stock, shares issued (in shares)		4,600,000	4,600,000		4,600,000	0
Offering price		$ 25.00
Proceeds from issuance of preferred stock, net		$ 110,500,000
Underwriting discounts and other offering expenses		$ 4,500,000
Preferred stock, shares outstanding (in shares)			4,600,000		4,600,000	0

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SHARE-BASED COMPENSATION (Details) - USD ($)		1 Months Ended	3 Months Ended		9 Months Ended
	May 31, 2021	Jun. 30, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vest in installments					4 years
Total unrecognized compensation costs related to unvested restricted stock			$ 4,900,000		$ 4,900,000
Cost is expected to be recognized over a weighted average period					3 years 8 months 12 days
Manager Pursuant To Management Agreement
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Cash awards, percentage (up to)					75.00%
Common stock awards, percentage (at least)					25.00%
Incentive management fee pursuant to the management agreement			0		$ 0	$ 0
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Recognized stock-based compensation expense			$ 771,000	$ 1.9	$ 961,000	$ 3,100,000
Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expiration period					2021-05
Grants in period (in shares)					0	0
Contractual term					10 years
2007 Omnibus Equity Compensation Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of share authorized for issue (in shares)			1,100,000		1,100,000
Share based compensation expiration period	2029-06	2031-06
Common shares granted			1,700,817		1,700,817

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SHARE-BASED COMPENSATION (Common Stock Activity) (Details) - Restricted Stock	9 Months Ended
	Sep. 30, 2021 $ / shares shares
Restricted common stock transactions
Unvested shares, beginning of period (in shares) | shares	11,610
Issued (shares) | shares	333,329
Vested (shares) | shares	(11,610)
Unvested shares, end of period (in shares) | shares	333,329
Weighted-Average Grant-Date Fair Value, beginning of period (in shares) | $ / shares	$ 6.46
Weighted-Average Grant-Date Fair Value, Issued | $ / shares	17.39
Weighted-Average Grant-Date Fair Value, Vested | $ / shares	6.46
Weighted-Average Grant-Date Fair Value, end of period (in shares) | $ / shares	$ 17.39

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SHARE-BASED COMPENSATION (Common Stock Expected to Vest) (Details) - Restricted Stock - shares	Sep. 30, 2021	Dec. 31, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
2022	83,331
2023	83,331
2024	83,331
2025	83,336
Total	333,329	11,610

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SHARE-BASED COMPENSATION (Status of Vested Stock Options) (Details) - Vested $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($) $ / shares shares
Number of Options
Outstanding beginning of period (in shares) | shares	3,333
Vested (in shares) | shares	0
Exercised (in shares) | shares	0
Forfeited (in shares) | shares	0
Expired (in shares) | shares	(3,333)
Outstanding end of period (in shares) | shares	0
Weighted Average Exercise Price
Outstanding beginning of period (in dollars per share) | $ / shares	$ 76.80
Vested (in dollars per share) | $ / shares	0
Exercised (in dollars per share) | $ / shares	0
Forfeited (USD per share) | $ / shares	0
Expired (in shares) | $ / shares	76.80
Outstanding end of period (in dollars per share) | $ / shares	$ 0
Weighted Average Remaining Contractual Term	0 years
Aggregate Intrinsic Value | $	$ 0

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2021	Sep. 30, 2020
Earnings Per Share [Abstract]
Net (loss) income	$ (4,928)	$ 13,639	$ 13,056	$ 8,159	$ (33,400)	$ (196,521)	$ 21,767	$ (221,762)
Net income allocated to preferred shares	(4,877)			(2,588)			(11,033)	(7,763)
NET (LOSS) INCOME ALLOCABLE TO COMMON SHARES	$ (9,805)			$ 5,571			$ 10,734	$ (229,525)
Weighted average number of common shares outstanding:
Weighted average number of common shares outstanding - basic	9,086,751			10,650,112			9,351,477	10,587,147
Weighted average number of warrants outstanding	466,661			314,492			466,661	105,596
Total weighted average number of common shares outstanding - basic	9,553,412			10,964,604			9,818,138	10,692,743
Effect of dilutive securities - unvested restricted stock	0			1,682			18,465	0
Weighted average number of common shares outstanding - diluted	9,553,412			10,966,286			9,836,603	10,692,743
NET (LOSS) INCOME PER COMMON SHARE - BASIC	$ (1.03)			$ 0.51			$ 1.09	$ (21.47)
NET (LOSS) INCOME PER COMMON SHARE - DILUTED	$ (1.03)			$ 0.51			$ 1.09	$ (21.47)

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EARNINGS PER SHARE (Additional Information) (Details)	Sep. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Aug. 31, 2017	Jan. 31, 2015
4.50% Convertible Senior Notes
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Debt instrument, interest rate, stated percentage	4.50%	4.50%	4.50%	4.50%
8.00% Convertible Senior Notes
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Debt instrument, interest rate, stated percentage	8.00%		8.00%		8.00%

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DISTRIBUTIONS (Details) - $ / shares	3 Months Ended					9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Class Of Stock [Line Items]
REIT required taxable income distribution, percentage (at least)						90.00%
REIT taxable income distribution required for exempt federal income taxes, percentage						100.00%
Common Stock
Class Of Stock [Line Items]
Dividend per share (in dollars per share)	$ 0				$ 0
Series C Preferred Stock
Class Of Stock [Line Items]
Dividend per share (in dollars per share)	0.5390625	$ 0.5390625	$ 0.5390625	$ 0.5390625	$ 1.62		$ 1.6171875
Series D Preferred Stock
Class Of Stock [Line Items]
Dividend per share (in dollars per share)	$ 0.4921875	$ 0.377344

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DISTRIBUTIONS (Distributions Declared) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended					9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Sep. 30, 2020
Series C Preferred Stock
Class Of Stock [Line Items]
Date Paid	Nov. 01, 2021	Jul. 30, 2021	Apr. 30, 2021	Feb. 01, 2021		Oct. 30, 2020
Total Distributions Paid	$ 2,588	$ 2,588	$ 2,588	$ 2,587		$ 7,763
Distributions Per Share	$ 0.5390625	$ 0.5390625	$ 0.5390625	$ 0.5390625	$ 1.62	$ 1.6171875
Series D Preferred Stock
Class Of Stock [Line Items]
Date Paid	Nov. 01, 2021	Jul. 30, 2021
Total Distributions Paid	$ 2,264	$ 1,736
Distributions Per Share	$ 0.4921875	$ 0.377344

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($)
Accumulated Other Comprehensive Loss [Roll Forward]
Beginning balance	$ 334,382
Ending balance	443,269
Net Unrealized Loss on Derivatives
Accumulated Other Comprehensive Loss [Roll Forward]
Beginning balance	(9,978)
Amounts reclassified from accumulated other comprehensive loss	1,384
Ending balance	$ (8,594)

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RELATED PARTY TRANSACTIONS (Relationship with ACRES Capital Corp and Certain of its Subsidiaries) (Details)		3 Months Ended		9 Months Ended
	Jul. 31, 2020 USD ($) extension	Sep. 30, 2021 USD ($) shares	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) entity shares	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Related Party Transaction [Line Items]
Base management fees paid by the Company		$ 1,700,000	$ 1,284,000	$ 4,405,000	$ 4,728,000
General and administrative		2,664,000	5,295,000	8,533,000	11,552,000
Interest income		23,986,000	24,638,000	74,528,000	85,171,000
Accrued interest receivable		6,678,000		$ 6,678,000		$ 7,372,000
Vest in installments				4 years
Manager Pursuant To Management Agreement | ACRES Commercial Realty Corp
Related Party Transaction [Line Items]
Base management fees paid by the Company		1,700,000	898,000	$ 4,400,000	898,000
Incentive compensation		0	0	0	0
Incentive compensation payable and Servicing fees payable		0		0		0
Total indebtedness		1,100,000		1,100,000		442,000
General and administrative		899,000	432,000	3,500,000	432,000
Manager Pursuant To Management Agreement | ACRES Commercial Realty Corp | Other Liabilities
Related Party Transaction [Line Items]
Total indebtedness		819,000		$ 819,000		380,000
ACRES Capital Corp
Related Party Transaction [Line Items]
Number of securitization entities | entity				2
ACRES Capital Corp | XAN 2020-RSO9 Senior Notes
Related Party Transaction [Line Items]
Portfolio servicing fees		0	0	$ 0	0
Special servicing fees		0	0	14,000	0
ACRES Capital Corp | ACRES Commercial Realty Corp | Loan Evidenced by Promissory Note
Related Party Transaction [Line Items]
Related party transaction, loan amount	$ 12,000,000.0
Related party transaction, interest rate	3.00%
Related party transaction, monthly amortization payment	$ 25,000
Related party debt, maturity month and year	2026-07
Number of options to extend | extension	2
Related party debt, extension term	1 year
Related party debt, percentage of extension fee	0.50%
Principal balance		11,700,000		11,700,000		11,900,000
Accrued interest receivable		29,000		29,000		$ 0
ACRES Capital Corp | ACRES Commercial Realty Corp | Loan Evidenced by Promissory Note | Other Income (Expense)
Related Party Transaction [Line Items]
Interest income		$ 90,000	$ 62,000	$ 268,000	$ 62,000
ACRES Share Holdings, LLC
Related Party Transaction [Line Items]
Number of share authorized for issue (in shares) | shares		1,100,000		1,100,000
Common shares granted | shares		299,999		299,999
Shares of common stock vest percentage				25.00%
Vest in installments				4 years
Shares of common stock issued | shares		0

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RELATED PARTY TRANSACTIONS (Relationship with C-III and Certain of its Subsidiaries) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Related Party Transaction [Line Items]
Base management fees paid by the Company	$ 1,700,000	$ 1,284,000	$ 4,405,000	$ 4,728,000
General and administrative	$ 2,664,000	5,295,000	$ 8,533,000	11,552,000
Prior Manager Pursuant To Management Agreement | ACRES Commercial Realty Corp
Related Party Transaction [Line Items]
Base management fees paid by the Company		385,000		3,800,000
Incentive compensation		0		0
General and administrative		$ 727,000		$ 4,000,000.0

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RELATED PARTY TRANSACTIONS (Relationship with Resource Real Estate, LLC) (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Mar. 31, 2020	Jul. 31, 2017	Aug. 31, 2015	Feb. 28, 2015	Jul. 31, 2014
Resource Real Estate
Related Party Transaction [Line Items]
Special servicing fees	$ 0	$ 0
Resource Capital Corp. 2014-CRE2, Ltd.
Related Party Transaction [Line Items]
Closing transaction amount							$ 353,900,000
Resource Capital Corp. 2015-CRE3, Ltd.
Related Party Transaction [Line Items]
Closing transaction amount						$ 346,200,000
Resource Capital Corp. 2015-CRE4, Ltd.
Related Party Transaction [Line Items]
Closing transaction amount					$ 312,900,000
RCC 2017-CRE5
Related Party Transaction [Line Items]
Closing transaction amount				$ 376,700,000
XAN 2020-RSO8 Senior Notes
Related Party Transaction [Line Items]
Closing transaction amount			$ 522,600,000

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RELATED PARTY TRANSACTIONS (Relationship with C3AM and C-III Commercial Mortgage) (Details) - C-III Commercial Mortgage LLC - USD ($)	1 Months Ended	3 Months Ended	9 Months Ended
	May 31, 2019	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Related Party Transaction [Line Items]
Aggregate purchase price of loan acquired	$ 197,600,000
Deferred origination fee and exit fee excess percentage on outstanding principal	0.50%
Fees earned		$ 227,000	$ 361,000	$ 32,000
Outstanding payables		$ 0	$ 0		$ 48,000

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RELATED PARTY TRANSACTIONS (Relationship with Resource Real Estate Opportunity REIT) (Details) - Resource Real Estate Opportunity REIT - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Related Party Transaction [Line Items]
Expense in connection with agreement	$ 21,000	$ 67,000	$ 21,000
Payables for rent and professional services		$ 0
Agreements terminated date		Mar. 31, 2021

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Assets and Liabilities Measured at Fair Value) (Details) - Recurring Basis $ in Thousands	Dec. 31, 2020 USD ($)
Assets:
Investment securities available-for-sale	$ 2,080
Level 1
Assets:
Investment securities available-for-sale	0
Level 2
Assets:
Investment securities available-for-sale	0
Level 3
Assets:
Investment securities available-for-sale	$ 2,080

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Assets Measured on Recurring Basis) (Details) - Level 3 - Recurring Basis - CMBS $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation
Balance, January 1, 2021	$ 2,080
Included in earnings	878
Sales	(2,958)
Balance, September 30, 2021	$ 0

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Millions	1 Months Ended
	Mar. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash proceeds from sale of fixed-rate CRE loans	$ 4.8
Mezzanine loan | Expected Future Cash Flows | Measurement Input, Discount Rate | VIE, Not Primary Beneficiary
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value inputs, discount rate		0.1000
Preferred equity investments | Expected Future Cash Flows | Measurement Input, Discount Rate | VIE, Not Primary Beneficiary | Rating 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value inputs, discount rate			0.1208
Preferred equity investments | Expected Future Cash Flows | Measurement Input, Discount Rate | VIE, Not Primary Beneficiary | Rating 4
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value inputs, discount rate			0.1154
Senior Secured Financing Facility | Measurement Input, Discount Rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value inputs, discount rate		0.0575
Minimum | Level 3 | Loans Pledged as Collateral | Expected Future Cash Flows
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans receivable, interest rate, stated percentage		3.00%	4.10%
Maximum | Level 3 | Loans Pledged as Collateral | Expected Future Cash Flows
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans receivable, interest rate, stated percentage		9.75%	9.75%

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Fair Value, by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	$ 1,826,825	$ 1,507,682
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1)
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loan receivable - related party	0	0
Senior notes in CRE securitizations	0	0
Warehouse financing facilities	0	0
Junior subordinated notes	0	0
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1) | CRE whole loans
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	0	0
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1) | Mezzanine loan
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	0	0
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1) | Preferred equity investments
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		0
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1) | CRE Whole Loans, Fixed Rate | Other Assets
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		0
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1) | 4.50% Convertible Senior Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
4.50% Convertible Senior Notes	0	0
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1) | 5.75% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes	0
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1) | Senior Secured Financing Facility
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior secured financing facility	0	0
Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1) | 12.00% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes		0
Significant Other Observable Inputs (Level 2)
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loan receivable - related party	0	0
Senior notes in CRE securitizations	0	0
Warehouse financing facilities	0	0
Junior subordinated notes	0	0
Significant Other Observable Inputs (Level 2) | CRE whole loans
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	0	0
Significant Other Observable Inputs (Level 2) | Mezzanine loan
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	0	0
Significant Other Observable Inputs (Level 2) | Preferred equity investments
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		0
Significant Other Observable Inputs (Level 2) | CRE Whole Loans, Fixed Rate | Other Assets
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		0
Significant Other Observable Inputs (Level 2) | 4.50% Convertible Senior Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
4.50% Convertible Senior Notes	0	0
Significant Other Observable Inputs (Level 2) | 5.75% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes	0
Significant Other Observable Inputs (Level 2) | Senior Secured Financing Facility
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior secured financing facility	0	0
Significant Other Observable Inputs (Level 2) | 12.00% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes		0
Significant Unobservable Inputs (Level 3)
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loan receivable - related party	10,473	10,184
Senior notes in CRE securitizations	970,552	1,030,854
Warehouse financing facilities	320,516	13,516
Junior subordinated notes	43,519	31,955
Significant Unobservable Inputs (Level 3) | CRE whole loans
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	1,849,066	1,513,822
Significant Unobservable Inputs (Level 3) | Mezzanine loan
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	4,700	4,700
Significant Unobservable Inputs (Level 3) | Preferred equity investments
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		27,650
Significant Unobservable Inputs (Level 3) | CRE Whole Loans, Fixed Rate | Other Assets
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		4,809
Significant Unobservable Inputs (Level 3) | 4.50% Convertible Senior Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
4.50% Convertible Senior Notes	87,935	132,437
Significant Unobservable Inputs (Level 3) | 5.75% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes	149,670
Significant Unobservable Inputs (Level 3) | Senior Secured Financing Facility
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior secured financing facility	41,182	33,360
Significant Unobservable Inputs (Level 3) | 12.00% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes		58,910
Carrying Value
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loan receivable - related party	11,675	11,875
Senior notes in CRE securitizations	960,709	1,027,929
Warehouse financing facilities	320,465	12,258
Junior subordinated notes	51,548	51,548
Carrying Value | CRE whole loans
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	1,822,410	1,477,295
Carrying Value | Mezzanine loan
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	4,415	4,399
Carrying Value | Preferred equity investments
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		25,988
Carrying Value | CRE Whole Loans, Fixed Rate | Other Assets
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		4,809
Carrying Value | 4.50% Convertible Senior Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
4.50% Convertible Senior Notes	85,810	137,252
Carrying Value | 5.75% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes	146,474
Carrying Value | Senior Secured Financing Facility
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior secured financing facility	37,596	29,314
Carrying Value | 12.00% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes		46,426
Fair Value
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loan receivable - related party	10,473	10,184
Senior notes in CRE securitizations	970,552	1,030,854
Warehouse financing facilities	320,516	13,516
Junior subordinated notes	43,519	31,955
Fair Value | CRE whole loans
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	1,849,066	1,513,822
Fair Value | Mezzanine loan
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables	4,700	4,700
Fair Value | Preferred equity investments
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		27,650
Fair Value | CRE Whole Loans, Fixed Rate | Other Assets
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans and receivables		4,809
Fair Value | 4.50% Convertible Senior Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
4.50% Convertible Senior Notes	87,935	132,437
Fair Value | 5.75% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes	149,670
Fair Value | Senior Secured Financing Facility
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior secured financing facility	$ 41,182	33,360
Fair Value | 12.00% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Senior Unsecured Notes		$ 58,910

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Fair Value, by Balance Sheet Grouping) (Parenthetical) (Details) - USD ($)	Sep. 30, 2021	Aug. 16, 2021	Dec. 31, 2020	Sep. 30, 2020	Aug. 31, 2017
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Unamortized issuance costs and discounts	$ 17,304,000		$ 26,258,000
12.00% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Unamortized issuance costs and discounts	$ 320,000,000
4.50% Convertible Senior Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Debt instrument, interest rate, stated percentage	4.50%		4.50%	4.50%	4.50%
Unamortized issuance costs and discounts	$ 2,204,000		$ 6,498,000
5.75% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Debt instrument, interest rate, stated percentage	5.75%	5.75%
Unamortized issuance costs and discounts	$ 3,526,000
12.00% Senior Unsecured Notes
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Debt instrument, interest rate, stated percentage			12.00%
Unamortized issuance costs and discounts	$ 320,000		$ 3,574,000

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MARKET RISK AND DERIVATIVE INSTRUMENTS (Details) - Terminated interest rate swap	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Apr. 30, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) derivative	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Derivatives, Fair Value [Line Items]
Realized loss on derivatives, net	$ (11,800,000)
Gain (loss) on derivatives				$ (9,000,000.0)		$ (10,400,000)
Amortization expense reported in interest expense		$ 489,000	$ 489,000	1,500,000	$ 857,000
Unrealized gains (loss) on derivatives, net				$ 370,000		$ 438,000
Number of hedges terminated | derivative				2
Interest expense to fully amortize		$ 23,000	$ 23,000	$ 68,000	$ 69,000

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MARKET RISK AND DERIVATIVE INSTRUMENTS (Fair Value and Classification of Derivatives) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Other Income (Expense)
Derivatives, Fair Value [Line Items]
Realized and Unrealized Gain (Loss)		$ (67)
Interest rate swaps | Interest expense
Derivatives, Fair Value [Line Items]
Realized and Unrealized Gain (Loss)	$ (1,384)	$ (1,095)

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OFFSETTING OF FINANCIAL LIABILITIES (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Warehouse financing facilities
Gross Amounts of Recognized Liabilities	$ 320,465	$ 12,258
Gross Amounts Offset on the Consolidated Balance Sheets	0	0
Net Amounts of Liabilities Included on the Consolidated Balance Sheets	320,465	12,258
Gross Amounts Not Offset on the Consolidated Balance Sheets- Financial Instruments	320,465	12,258
Gross Amounts Not Offset on the Consolidated Balance Sheets- Cash Collateral Pledged	0	0
Net Amount	0	0
Fair value of securities pledged against term warehouse financing facilities	$ 421,600	$ 20,000

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COMMITMENTS AND CONTINGENCIES (Details)	1 Months Ended
	May 31, 2017 USD ($) Loan	Sep. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Loss Contingencies [Line Items]
Estimated litigation liability		$ 0	$ 0
XAN 2020-RSO9 Senior Notes
Loss Contingencies [Line Items]
Future advance reserve account to unfunded commitments		7,700,000
Commercial Real Estate Loans | CRE whole loans
Loss Contingencies [Line Items]
Loans held for investment, unfunded loan commitments		140,600,000	67,200,000
Commercial Real Estate Loans | Preferred equity investments
Loss Contingencies [Line Items]
Loans held for investment, unfunded loan commitments			2,500,000
Indemnification Agreement
Loss Contingencies [Line Items]
Estimated litigation liability		1,400,000	1,500,000
Indemnification Agreement | Pearlmark Mezzanine Realty Partners IV, L.P
Loss Contingencies [Line Items]
Number of instruments held | Loan	1
Indemnification Agreement | Pearlmark Mezzanine Realty Partners IV, L.P | Maximum
Loss Contingencies [Line Items]
Loss contingency, estimate of possible loss	$ 4,300,000			$ 536,000
PCM
Loss Contingencies [Line Items]
Outstanding demands to indemnify purchaser of residential mortgage loans		3,300,000	3,300,000
PCM | Indemnification Agreement
Loss Contingencies [Line Items]
Outstanding litigation demands		$ 0	$ 0

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Subsequent Events (Details) - Subsequent Event - USD ($)	Nov. 05, 2021	Oct. 04, 2021
Subsequent Event [Line Items]
Stock repurchase program, authorized amount (up to)	$ 20,000,000.0
Equity Distribution Agreement | Maximum | JonesTrading Institutional Services LLC | Series D Preferred Stock
Subsequent Event [Line Items]
Number of shares that may be issued or sold from time to time under agreement		$ 2,200,000
Commission fee payable of gross proceeds from sale of stock in percentage		3.00%