NEXPOINT REAL ESTATE FINANCE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following is a discussion and analysis of our financial condition and
results of operations. The following should be read in conjunction with our
financial statements and accompanying notes included herein and with our annual
report on Form 10-K for the year ended December 31, 2021 (our "Annual Report"),
filed with the Securities and Exchange Commission (the "SEC") on February 28,
2022. This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those projected,
forecasted, or expected in these forward-looking statements as a result of
various factors, including, but not limited to, those discussed below and
elsewhere in this quarterly report. See "Cautionary Statement Regarding
Forward-Looking Statements" in this report, and the "Risk Factors" in Part 1,
Item 1A, "Risk Factors" of our Annual Report.



Overview



We are a commercial mortgage REIT incorporated in Maryland on June 7, 2019. Our
strategy is to originate, structure and invest in first-lien mortgage loans,
mezzanine loans, preferred equity, multifamily properties and common stock
investments, as well as multifamily CMBS securitizations. We primarily focus on
investments in real estate sectors where our senior management team has
operating expertise, including in the multifamily, SFR, self-storage, life
science, hospitality and office sectors predominantly in the top 50 MSAs. In
addition, we target lending or investing in properties that are stabilized or
have a light-transitional business plan.



Our investment objective is to generate attractive, risk-adjusted returns for
stockholders over the long term. We seek to employ a flexible and relative-value
focused investment strategy and expect to re-allocate capital periodically among
our target investment classes. We believe this flexibility will enable us to
efficiently manage risk and deliver attractive risk-adjusted returns under a
variety of market conditions and economic cycles. For highlights of our recent
acquisition, financing and other activity, see "-Purchases and Dispositions in
the Quarter" and "-Liquidity and Capital Resources" below.



We are externally managed by our Manager, a subsidiary of our Sponsor,
an SEC-registered investment advisor, which has extensive real estate
experience, having completed as of June 30, 2022 approximately $16.9 billion of
gross real estate transactions since the beginning of 2012. In addition, our
Sponsor, together with its affiliates and related entities, including NexBank,
is one of the most experienced global alternative credit managers managing
approximately $20.0 billion of loans and debt or credit related investments as
of June 30, 2022 and has managed credit investments for over 25 years. We
believe our relationship with our Sponsor benefits us by providing access to
resources, including research capabilities, an extensive relationship network,
other proprietary information, scalability and a vast wealth of knowledge of
information on real estate in our target assets and sectors.



We elected to be treated as a REIT for US federal income tax purposes commencing with our taxable year ended December 31, 2020. We also intend to operate our business in a manner that will permit us to maintain one or more exclusions or exemptions from registration under the Investment Company Act.



On October 15, 2021, a lawsuit was filed by a trust formed in connection with
the Highland bankruptcy in the United States Bankruptcy Court for the Northern
District of Texas. The lawsuit makes claims against a number of entities,
including our Sponsor and James Dondero. The lawsuit does not include claims
related to our business or our assets or operations. Our Sponsor and Mr. Dondero
have informed us they believe the lawsuit has no merit and they intend to
vigorously defend against the claims. We do not expect the lawsuit will have a
material effect on our business, results of operations or financial condition.



Purchases and Dispositions in the Quarter

Acquisitions and Originations

The Company acquired or originated the following investments through the Subsidiary OPs in the three months ended. June 30, 2022. The amounts in the table below are as of the purchase or investment date:



                                                   Outstanding                                                                       Interest
                                                    Principal        Cost (% of                                                        Rate
Investment          Investment Date   Tranche         Amount         Par Value)       Coupon        Current Yield    Maturity Date     Type
                                                                                                                                     Floating
Preferred Equity       4/7/2022         N/A       $    2,678,278            99.0 %       10.75 %             10.86 %      9/1/2030       Rate
                                                                                                                                        Fixed
FRESB 2019-SB58        5/2/2022          B            40,727,072            92.6 %        4.35 %              4.69 %    11/25/2038       Rate
                                                                                                                                     Floating
Preferred Equity       5/3/2022         N/A            1,321,722            99.0 %       10.75 %             10.86 %      9/1/2030       Rate
                                                                                                                                     Floating
MSCR 2022-MN4          5/25/2022        M2             4,000,000           100.0 %        7.03 %              7.03 %     5/25/2052       Rate
                                                                                                                                     Floating
MSCR 2022-MN4          5/25/2022        B1             5,000,000           100.0 %       10.03 %             10.03 %     5/25/2052       Rate
                                                                                                                                     Floating
STAR 2021-SFR1         6/1/2022          G            10,419,000            95.1 %        4.08 %              4.29 %     4/17/2026       Rate
                                                                                                                                        Fixed
AMSR 2020-SFR4         6/1/2022         G2            10,074,000            95.1 %        4.87 %              5.12 %    11/19/2025       Rate
                                                                                                                                     Floating
Preferred Equity       6/8/2022         N/A            4,000,000            99.0 %        9.99 %             10.09 %      9/1/2030       Rate
                                                                                                                                     Floating
Mezzanine Loan         6/9/2022         N/A            4,500,000            99.0 %       11.50 %             11.61 %      6/9/2025       Rate
                                                  $   82,720,072                          5.82 %              6.06 %




Redemptions



The following investments redeemed during the three months ended June 30, 2022:



                                                                    Amortized        Redemption        Prepayment       Net Gain on
Investment                   Investment Date   Disposition Date    Cost
Basis         Proceeds         Penalties         Repayment
Mezzanine Loan                 12/27/2021         4/14/2022       $  33,992,809$  34,134,820$    853,371$     995,382
SFR Loan                        2/11/2020         4/25/2022           6,644,645         6,052,385        1,335,603           743,343
Preferred Equity                11/8/2022         6/28/2022           6,845,200         6,912,217          216,699           283,716
                                                                  $  47,482,654$  47,099,422$  2,405,673$   2,022,441




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Components of Our Revenues and Expenses


Net Interest Income


Interest income. Our earnings are primarily attributable to the interest income from mortgage loans, mezzanine loan and preferred equity investments. Loan premium/discount amortization and prepayment penalties are also included as components of interest income.



Interest expense. Interest expense represents interest accrued on our various
financing obligations used to fund our investments and is shown as a deduction
to arrive at net interest income.



The following table presents the components of net interest income for the six months ended. June 30, 2022 and 2021 (dollars in thousands):



                                                    For the Six Months Ended June 30,
                                          2022                                            2021
                        Interest                                        Interest
                        income/         Average                         income/         Average
                       (expense)      Balance (1)       Yield (2)      (expense)      Balance (1)       Yield (2)       $ Change       % Change
Interest income
SFR Loans,
held-for-investment    $   29,808$    752,414            7.92 %   $   17,427$    910,324            3.83 %   $   12,381           71.0 %
Mezzanine loans,
held-for-investment         7,073          153,713            9.20 %        5,608          120,312            9.32 %        1,465           26.1 %
Preferred equity,
held-for-investment         7,070           94,423           14.98 %        1,107           17,895           12.37 %        5,963          538.7 %
Convertible notes,
held-for-investment         2,545           47,821           10.64 %            -                -             N/A          2,545            N/A
CMBS structured
pass-through
certificates, at
fair value                  2,707           68,183            7.94 %        1,386           44,555            6.22 %        1,321           95.3 %
Bridge loan                   221            6,787            6.51 %            -                -             N/A            221            N/A
MSCR notes                     78            1,790            8.71 %            -                -             N/A             78            N/A
SFR pass-through
certificates                   92            3,231            5.70 %            -                -             N/A             92            N/A
Total interest
income                 $   49,594$  1,128,362            8.79 %   $   25,528$  1,093,086            4.67 %   $   24,066           94.3 %
Interest expense
Master repurchase
agreements, net            (3,470 )       (305,456 )          2.27 %       

(1,923 ) (165,998 ) 2.32 % (1,547) 80.4 % Long-term seller financing, net

             (7,941 )       (719,798 )          2.21 %       

(9,648) (836,317) 2.31 % 1,707 -17.7 % Unsecured notes, net (6,514) (200,796) 6.49% (2,515) (67,992) 7.40% (3,999) 159.0 % Total interest expense

                $  (17,925 )$ (1,226,050 )          2.92 %   $  (14,086 )$ (1,070,307 )          2.63 %   $   (3,839 )         27.3 %
Net interest income
(3)                    $   31,669$   11,442$   20,227          176.8 %



(1) Average balances for the SFR Loans, the mezzanine loan and preferred equity

are calculated based upon carrying values.

(2) Yield calculated on an annualized basis and includes prepayment penalties.

(3) Net interest income is calculated as the difference between total interest

    income and total interest expense.



The following table presents the components of net interest income for the three months ended. June 30, 2022 and 2021 (dollars in thousands):


                                                       For the Three Months Ended June 30,
                                              2022                                             2021
                           Interest                                         Interest
                            income/         Average                          income/         Average
                           (expense)      Balance (1)       Yield (2)       (expense)      Balance (1)       Yield (2)
Interest income
SFR Loans,
held-for-investment       $     7,670$    737,261            4.16 %   $     8,694$    906,269            3.84 %
Mezzanine loans,
held-for-investment             3,565          154,445            9.23 %         2,872          134,427            8.55 %
Preferred equity,
held-for-investment             3,274          102,461           12.78 %           538           17,233           12.49 %
Convertible bond,
held-for-investment             1,292           27,596           18.73 %             -                -             N/A
CMBS structured pass
through certificates,
at fair value                   1,429           63,604            8.99 %           775           47,340            6.55 %
Bridge loan                       221           13,500            6.55 %             -                -             N/A
MSCR notes                         78            3,560            8.76 %             -                -             N/A
SFR pass-through
certificates                       92            6,426            5.73 %             -                -             N/A
Total interest income     $    17,621$  1,108,852            6.36 %   $    12,879$  1,105,269            4.66 %
Interest expense
Repurchase agreements          (1,952 )       (312,041 )          2.50 %        (1,104 )       (173,957 )          2.54 %
Long-term seller
financing                      (3,832 )       (695,883 )          2.20 %        (4,719 )       (832,487 )          2.27 %
Unsecured Notes                (3,323 )       (204,500 )          6.50 %        (1,766 )        (99,137 )          7.13 %
Total interest expense    $    (9,107 )$ (1,212,424 )          3.00 %   $    (7,589 )$ (1,105,581 )          2.75 %
Net interest income (3)   $     8,514$     5,290

(1) Average balances for the SFR Loans, the mezzanine loan and preferred equity

are calculated based upon carrying values.

(2) Yield calculated on an annualized basis and includes prepayment penalties.

(3) Net interest income is calculated as the difference between total interest

    income and total interest expense.




Other Income (Loss)



Change in net assets related to consolidated CMBS variable interest entities.
Includes unrealized gain (loss) based on changes in the fair value of the assets
and liabilities of the CMBS trusts and net interest earned on the consolidated
CMBS trusts. See Note 4 to our consolidated financial statements for additional
information.



Change in unrealized gain (loss) on CMBS structured pass-through
certificates. Includes unrealized gain (loss) based on changes in the fair value
of the CMBS I/O Strips. See Note 6 to our consolidated financial statements for
additional information.



Change in unrealized gain on common stock investments. Includes unrealized gain
(loss) based on changes in the fair value of our common stock investments in NSP
and Private REIT. See Note 5 to our consolidated financial statements for
additional information.



Change in unrealized gain (loss) on MSCR notes. Includes unrealized gain (loss) based on changes in the fair value of our MSCR notes. See Note 6 to our consolidated financial statements for additional information.



Change in unrealized gain on SFR pass-through certificates. Includes unrealized
gain (loss) based on changes in the fair value of our SFR pass-through
certificates. See Note 6 to our consolidated financial statements for additional
information.



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Loan loss benefit (provision). Loan loss benefit (provision) represents the change in our allowance for loan losses. See Note 2 to our consolidated financial statements for additional information.

Realized losses. Realized losses include the excess, or deficiency, of net proceeds received, less the carrying value of such investments, as realized losses. The Company reverses cumulative unrealized gains or losses previously reported in its Consolidated Statements of Operations with respect to the investment sold at the time of the sale.

Other income. Includes placement fees, exit fees and other miscellaneous income items.



Operating Expenses



G&A expenses. G&A expenses include, but are not limited to, audit fees, legal
fees, listing fees, Board fees, equity-based and other compensation expenses,
investor-relations costs and payments of reimbursements to our Manager. The
Manager will be reimbursed for expenses it incurs on behalf of the
Company; however, our Manager is responsible, and we will not reimburse our
Manager or its affiliates, for the salaries or benefits to be paid to personnel
of our Manager or its affiliates who serve as our officers, except that 50% of
the salary of our VP of Finance is allocated to us, and we may grant equity
awards to our officers under the 2020 LTIP. Direct payment of operating expenses
by us, which includes compensation expense relating to equity awards granted
under the 2020 LTIP, together with reimbursement of operating expenses to our
Manager, plus the Annual Fee, may not exceed 2.5% of equity book value
determined in accordance with GAAP, for any calendar year or portion
thereof; provided, however, this limitation will not apply to Offering Expenses,
legal, accounting, financial, due diligence and other service fees incurred in
connection with extraordinary litigation and mergers and acquisitions and other
events outside the ordinary course of our business or any out-of-pocket
acquisition or due diligence expenses incurred in connection with the
acquisition or disposition of certain real estate related investments. To the
extent total corporate G&A expenses would otherwise exceed 2.5% of equity book
value, our Manager will waive all or a portion of its Annual Fee to keep our
total corporate G&A expenses at or below 2.5% of equity book value.



Loan servicing fees. We pay various service providers fees for loan servicing of
our SFR Loans, mezzanine loans and consolidated CMBS trusts. We classify the
expenses related to the administration of the SFR Loans and mezzanine loans as
servicing fees, while the fees associated with the CMBS trusts are included as a
component of the change in net assets related to consolidated CMBS VIEs.



Management fees. Management fees include fees paid to our Manager pursuant to the Management Agreement.

Results of Operations for the Three Months Ended June 30, 2022 and 2021

The following table sets forth a summary of our operating results for the three months ended. June 30, 2022 and 2021 (in thousands):



                                         For the Three Months Ended June
                                                       30,
                                            2022                 2021          $ Change        % Change
Net interest income                     $      8,514$      5,290$     3,224            60.9 %
Other income (loss)                            3,667               10,577          (6,910 )         -65.3 %
Operating expenses                            (3,728 )             (3,613 )          (115 )           3.2 %
Net income                                     8,453               12,254          (3,801 )         -31.0 %
Net (income) attributable to
preferred shareholders                          (882 )               (878 )            (4 )           0.5 %
Net (income) attributable to
redeemable noncontrolling interests           (2,548 )             (5,834 )         3,286           -56.3 %
Net income attributable to common
stockholders                            $      5,023$      5,542$      (519 )          -9.4 %




The change in our net income for the three months ended June 30, 2022, as
compared to the net income for the three months ended June 30, 2021, primarily
relates to an increase in net interest income offset by a decrease in other
income and an increase in operating expenses. Our net income attributable to
common stockholders for the three months ended June 30, 2022 was
approximately $5.0 million. We earned approximately $8.5 million in net interest
income, $3.7 million in other income, incurred operating expenses of $3.7
million, allocated approximately $0.9 million of income to preferred
stockholders and allocated approximately $2.5 million of income to redeemable
noncontrolling interest in the OP for the three months ended June 30, 2022.



Revenues



Net interest income. Net interest income was $8.5 million for the three months
ended June 30, 2022, compared to $5.3 million for the three months ended June
30, 2021, which was an increase of approximately $3.2 million. The increase
between the periods is primarily due to prepayment penalties related to early
paydowns offset by accelerated premium amortization. Additionally, an increase
in investments compared to the prior period also contributed to the increase
between the periods. As of June 30, 2022, we owned 76 discrete investments
compared to 64 as of June 30, 2021.



Other income. Other income was $3.7 million for the three months ended June 30,
2022, compared to $10.6 million for the three months ended June 30, 2021, which
was a decrease of approximately $6.9 million. This was primarily due to a
decrease in the change in net assets related to consolidated CMBS VIEs and
a decrease in fair value marks between the periods.



Expenses



G&A expenses. G&A expenses were $1.9 million for the three months ended June 30,
2022, compared to $1.8 million for the three months ended June 30, 2021, which
was an increase of approximately $0.1 million.



Loan servicing fees. Loan servicing fees were $1.1 million for the three months
ended June 30, 2022, compared to $1.3 million for the three months ended June
30, 2021, which was a decrease of approximately $0.2 million. The decrease
between the periods was primarily due to a decrease in SFR Loans and mezzanine
loans in the portfolio compared to the prior period.



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Management fees. Management fees were $0.8 million for the three months ended
June 30, 2022, compared to $0.5 million for the three months ended June 30,
2021, which was an increase of approximately $0.3 million. The increase between
the periods was primarily due to an increase in equity as defined by the
Management Agreement.



Results of Operations for the Six Months Ended June 30, 2022 and 2021

The following table sets forth a summary of our operating results for the six months ended. June 30, 2022 and 2021 (in thousands):


                                            For the Six Months Ended June
                                                         30,
                                                2022                2021        $ Change       % Change
Net interest income                        $        31,669$   11,442$  20,227          176.8 %
Other income                                         2,881           32,867       (29,986 )        -91.2 %
Operating expenses                                  (7,360 )         (6,985 )        (375 )          5.4 %
Net income                                          27,190           37,324       (10,134 )        -27.2 %
Net (income) attributable to preferred
shareholders                                        (1,756 )         (1,752 )          (4 )          0.2 %
Net (income) attributable to redeemable
noncontrolling interests                            (7,491 )        (21,663 )      14,172          -65.4 %
Net income attributable to common
stockholders                               $        17,943$   13,909$   4,034           29.0 %




The change in our net income for the six months ended June 30, 2022, as compared
to the net income for the six months ended June 30, 2021, primarily relates to
an increase in net interest income offset by a decrease in other income and an
increase in operating expenses. Our net income attributable to common
stockholders for the six months ended June 30, 2022 was
approximately $17.9 million. We earned approximately $31.7 million in net
interest income, $2.9 million in other income, incurred operating expenses
of $7.4 million, allocated approximately $1.8 million of income to preferred
stockholders and allocated approximately $7.5 million of income to redeemable
noncontrolling interest in the OP for the six months ended June 30, 2022.



Revenues



Net interest income. Net interest income was $31.7 million for the six months
ended June 30, 2022, compared to $11.4 million for the six months ended June 30,
2021, which was an increase of approximately $20.3 million. The increase between
the periods is primarily due to prepayment penalties related to early paydowns
offset by accelerated premium amortization. Additionally, an increase in
investments compared to the prior period also contributed to the increase
between the periods. As of June 30, 2022, we owned 76 discrete investments
compared to 64 as of June 30, 2021.



Other income. Other income was $2.9 million for the six months ended June 30,
2022, compared to $32.9 million for the six months ended June 30, 2021, which
was a decrease of approximately $30.0 million. This was primarily due to a
decrease in the change in net assets related to consolidated CMBS VIEs and
a decrease in fair value marks between the periods.



Expenses



G&A expenses. G&A expenses were $3.6 million for the six months ended June 30,
2022, compared to $3.3 million for the six months ended June 30, 2021, which
was an increase of approximately $0.3 million.



Loan servicing fees. Loan servicing fees were $2.2 million for the six months
ended June 30, 2022, compared to $2.6 million for the six months ended June 30,
2021, which was a decrease of approximately $0.4 million. The decrease between
the periods was primarily due to a decrease in SFR Loans and mezzanine loans in
the portfolio compared to the prior period.



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Management fees. Management fees were $1.5 million for the six months ended June
30, 2022, compared to $1.0 million for the six months ended June 30, 2021, which
was an increase of approximately $0.5 million. The increase between the periods
was primarily due to an increase in equity as defined by the Management
Agreement.




Key Financial Measures and Indicators

As a real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared, EAD, CAD and book value per share.

Earnings Per Share and Dividends Declared

The following table sets forth the calculation of basic and diluted net income per share and dividends declared per share (in thousands, except per share data):



                        For the Three Months Ended June                     

For the Six Months Ended June

                                      30,                                                30,
                           2022                2021          % Change         2022                2021          % Change
Net income
attributable to
common stockholders     $     5,023$     5,542           -9.4 %   $    17,943$    13,909           29.0 %
Net income
attributable to
redeemable
noncontrolling
interests                     2,548               5,834          -56.3 %         7,491              21,663          -65.4 %

Weighted-average
number of shares of
common stock
outstanding
Basic                        14,748               5,306          177.9 %        14,304               5,165          176.9 %
Diluted                      22,494              19,603           14.7 %        22,263              19,402           14.7 %
Net income per share,
basic                   $      0.34$      1.04          -67.4 %   $      1.25$      2.69          -53.4 %
Net income per share,
diluted                 $      0.34$      0.58          -42.0 %   $      1.14$      1.83          -37.7 %
Dividends declared
per share               $    0.5000$    0.4750            5.3 %   $    1.0000$    0.9500            5.3 %




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Earnings Available for Distribution and Cash Available for Distribution



EAD is a non-GAAP financial measure. EAD has replaced our prior presentation of
Core Earnings. In addition, Core Earnings results from prior reporting periods
have been relabeled EAD. In line with evolving industry practices, we believe
EAD more accurately reflects the principal purpose of the measure than the term
Core Earnings and will serve as a useful indicator for investors in
evaluating our performance and our long-term ability to pay distributions. EAD
is defined as the net income (loss) attributable to our common stockholders
computed in accordance with GAAP, including realized gains and losses not
otherwise included in net income (loss), excluding any unrealized gains or
losses or other similar non-cash items that are included in net income (loss)
for the applicable reporting period, regardless of whether such items are
included in other comprehensive income (loss), or in net income (loss) and
adding back amortization of stock-based compensation.



We use EAD to evaluate our performance, which excludes the effects of certain
GAAP adjustments and transactions that we believe are not indicative of our
current operations and to assess our long-term ability to pay distributions. We
believe providing EAD as a supplement to GAAP net income (loss) to our investors
is helpful to their assessment of our performance and our long term ability to
pay distributions. EAD does not represent net income or cash flows from
operating activities and should not be considered as an alternative to GAAP net
income, an indication of our GAAP cash flows from operating activities, a
measure of our liquidity or an indication of funds available for our cash needs.
Our computation of EAD may not be comparable to EAD reported by other REITs.



We also use EAD as a component of the management fee paid to our Manager. As
consideration for the Manager's services, we will pay our Manager an annual
management fee of 1.5% of Equity, paid monthly, in cash or shares of our common
stock at the election of our Manager. "Equity" means (a) the sum of (1) total
stockholders' equity immediately prior to our IPO, plus (2) the net proceeds
received from all issuances of our equity securities in and after the IPO, plus
(3) our cumulative EAD from and after the IPO to the end of the most recently
completed calendar quarter, (b) less (1) any distributions to our holders of
common stock from and after the IPO to the end of the most recently completed
calendar quarter and (2) all amounts that we have paid to repurchase for cash
the shares of our equity securities from and after the IPO to the end of the
most recently completed calendar quarter. In our calculation of Equity, we will
adjust our calculation of EAD to (i) remove the compensation expense relating to
awards granted under one or more of our long-term incentive plans that is added
back in our calculation of EAD and (ii) adjust net income (loss) attributable to
common stockholders for (x) one-time events pursuant to changes in GAAP and (y)
certain material non-cash income or expense items, in each case of (x) and (y)
after discussions between the Manager and independent directors of our Board and
approved by a majority of the independent directors of our Board. Additionally,
for the avoidance of doubt, Equity does not include the assets contributed to us
in the Formation Transaction.



CAD is a non-GAAP financial measure. We calculate CAD by adjusting EAD by adding
back amortization of premiums, depreciation and amortization of real estate
investment, amortization of deferred financing costs and by removing accretion
of discounts and non-cash items, such as stock dividends. We use CAD to evaluate
our performance and our current ability to pay distributions. We also believe
that providing CAD as a supplement to GAAP net income (loss) to our investors is
helpful to their assessment of our performance and our current ability to pay
distributions. CAD does not represent net income or cash flows from operating
activities and should not be considered as an alternative to GAAP net income, an
indication of our GAAP cash flows from operating activities, a measure of our
liquidity or an indication of funds available for our cash needs. Our
computation of CAD may not be comparable to CAD reported by other REITs.



The following table provides a reconciliation of EAD and CAD to GAAP net income
(loss) attributable to common stockholders for the three and six months ended
June 30, 2022 and 2021 (in thousands, except per share amounts):



                        For the Three Months Ended June                     

For the Six Months Ended June

                                      30,                                                30,
                           2022                2021          % Change         2022                2021          % Change
Net income
attributable to
common stockholders     $     5,023$     5,542           -9.4 %   $    17,943$    13,909           29.0 %
Adjustments
Amortization of
stock-based
compensation                    871                 557           56.4 %         1,544                 948           62.9 %
Unrealized (gains) or
losses (1)                    3,302              (2,659 )       -224.2 %         9,814              (8,586 )       -214.3 %
EAD attributable to
common stockholders     $     9,196$     3,440          167.3 %   $    29,301$     6,271          367.2 %

EAD per Diluted
Weighted-Average
Share                   $      0.60$      0.59            1.2 %   $      1.97$      1.12           76.4 %

Adjustments
Amortization of
premiums                $     2,945$       866          240.1 %   $    10,490$     1,484          606.9 %
Accretion of
discounts                    (2,479 )              (895 )        177.0 %        (4,788 )            (1,571 )        204.8 %
Depreciation and
amortization of real
estate investment               723                   -            N/A           1,442                   -            N/A
Amortization of
deferred financing
costs                             9                   -            N/A              18                   -            N/A
CAD attributable to
common stockholders     $    10,394$     3,411          204.7 %   $    36,463$     6,184          489.6 %

CAD per Diluted
Weighted-Average
Share                   $      0.68$      0.59           15.4 %   $      2.45$      1.10          122.7 %

Weighted-average
common shares
outstanding - basic          14,748               5,306          177.9 %        14,304               5,165          176.9 %
Weighted-average
common shares
outstanding - diluted
(2)                          15,356               5,815          164.1 %        14,870               5,615          164.8 %



(1) Unrealized gains are the net change in unrealized loss on investments held at

fair value applicable to common stockholders.

(2) Weighted-average diluted shares outstanding does not include dilutive effect

    of redeemable non-controlling interests.




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The following table provides a reconciliation of EAD and CAD to GAAP net income
including the dilutive effect of non-controlling interests for the three and six
months ended June 30, 2022 and 2021 (in thousands, except per share amounts):



                        For the Three Months Ended June                    

For the Six Months Ended June

                                      30,                                                30,
                           2022                2021          % Change           2022                2021         % Change
Net income
attributable to
common stockholders     $     5,023$     5,542           -9.4 %   $        17,943$   13,909           29.0 %
Net income
attributable to
redeemable
noncontrolling
interests                     2,548               5,834          -56.3 %             7,491           21,663          -65.4 %

Adjustments
Amortization of
stock-based
compensation                    871                 557           56.4 %             1,544              948           62.9 %
Unrealized (gains) or
losses (1)                    4,184              (3,859 )       -208.4 %            12,729          (20,335 )       -162.6 %
EAD                     $    12,626$     8,074           56.4 %   $        39,707$   16,185          145.3 %

EAD per Diluted
Weighted-Average
Share                   $      0.56$      0.41           36.3 %   $          1.78       $     0.83          113.8 %

Adjustments
Amortization of
premiums                $     3,854$     2,808           37.3 %   $        13,754$    5,288          160.1 %
Accretion of
discounts                    (3,244 )            (1,680 )         93.1 %            (6,274 )         (3,332 )         88.3 %
Depreciation and
amortization of real
estate investment               946                   -            N/A               1,890                -            N/A
Amortization of
deferred financing
costs                            12                   -            N/A                  24                -            N/A
CAD                     $    14,194$     9,202           54.2 %   $        49,101$   18,141          170.7 %

CAD per Diluted
Weighted-Average
Share                   $      0.63$      0.47           34.4 %   $          2.21       $     0.94          135.9 %

Weighted-average
common shares
outstanding - basic          14,748               5,306          177.9 %            14,304            5,165          176.9 %

Weighted-average

common shares
outstanding - diluted        22,494              19,603           14.7 %            22,263           19,402           14.7 %



(1) Unrealized gains are the net change in unrealized loss on investments held at

    fair value.



Book Value per Share / Unit



The following table calculates our book value per share (in thousands, except
per share data):



                                                                         December 31,
                                                      June 30, 2022          2021
Common stockholders' equity                          $       328,696$     200,503
Shares of common stock outstanding at period end              14,950        

9,164

Book value per share of common stock                 $         21.99     $       21.88

Due to the large noncontrolling interest in the OP (see Note 13 to our consolidated financial statements, for more information), we believe it is useful to also look at book value on a combined basis as shown in the table below (in thousands, except per share data):


                                                                         December 31,
                                                      June 30, 2022          2021
Common stockholders' equity                          $       328,696$     200,503
Redeemable noncontrolling interests in the OP                148,240        

261,423

Total equity                                         $       476,936     $  

461,926

Redeemable OP Units at period end                              7,138        

12,308

Shares of common stock outstanding at period end              14,950        

9,164

Combined shares of common stock and redeemable OP
Units                                                         22,088        

21,472

Combined book value per share / unit                 $         21.59     $       21.51




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Our Portfolio



Our portfolio consists of SFR Loans, CMBS B-Pieces, CMBS I/O Strips, mezzanine
loans, preferred equity investments, common stock investments, a multifamily
property, a bridge loan, MSCR notes and SFR pass-through certificates with a
combined unpaid principal balance of $3.2 billion as of June 30, 2022 and
assumes the CMBS Entities' assets and liabilities are not consolidated. The
following table sets forth additional information relating to our portfolio as
of June 30, 2022 (dollars in thousands):



                                          Current                                                                                                Remaining
                         Investment      Principal                                                                                               Term (3)
                                                          Net Equity
      Investment (1)        Date          Amount             (2)           

Location Property Type Coupon Current Yield (years)

     SFR Loans
1    Senior loan         2/11/2020      $   508,700$   75,658               Various    Single-family        4.65 %              4.37 %         

6.18

2    Senior loan         2/11/2020           10,312            1,583               Various    Single-family        5.35 %              5.23 %         

5.59

3    Senior loan         2/11/2020            5,442              718               Various    Single-family        5.33 %              5.25 %         

1.09

4    Senior loan         2/11/2020           10,265            1,531               Various    Single-family        5.30 %              4.99 %         

6.18

5    Senior loan         2/11/2020            5,504              820               Various    Single-family        5.24 %              4.91 %         

6.26

6    Senior loan         2/11/2020           51,304            7,234               Various    Single-family        4.74 %              4.56 %         

3.26

7    Senior loan         2/11/2020            9,583            1,425               Various    Single-family        6.10 %              5.67 %         

6.26

8    Senior loan         2/11/2020           37,110            5,445               Various    Single-family        5.55 %              5.11 %         

6.35

9    Senior loan         2/11/2020            5,760              857               Various    Single-family        5.99 %              5.56 %         

6.43

10   Senior loan         2/11/2020            5,219              784               Various    Single-family        5.46 %              5.13 %         

6.51

11   Senior loan         2/11/2020            8,844            1,340               Various    Single-family        5.88 %              5.53 %         

6.51

12   Senior loan         2/11/2020            6,484              925               Various    Single-family        4.83 %              4.75 %         

1.59

13   Senior loan         2/11/2020            4,609              698               Various    Single-family        5.35 %              5.07 %         

6.60

14   Senior loan         2/11/2020            7,541            1,142               Various    Single-family        5.34 %              5.05 %         

6.60

15   Senior loan         2/11/2020            6,634            1,006               Various    Single-family        5.46 %              5.17 %         

6.67

16   Senior loan         2/11/2020           10,523            1,548               Various    Single-family        4.72 %              4.59 %          3.67
     Total                                  693,834          102,714                                               4.81 %              4.53 %          5.86

     CMBS B-Piece
1    CMBS B-Piece        2/11/2020           25,967 (4)        8,481               Various      Multifamily        6.14 %              6.15 %          3.66
2    CMBS B-Piece        2/11/2020           34,338 (4)       15,517               Various      Multifamily        6.80 %              6.79 %          4.41
3    CMBS B-Piece        4/23/2020           81,999 (4)       32,263               Various      Multifamily        3.62 %              5.71 %          7.66
4    CMBS B-Piece        7/30/2020           31,444 (4)       12,614               Various      Multifamily        9.80 %              9.80 %          4.99
5    CMBS B-Piece         8/6/2020          108,643 (4)       30,927               Various      Multifamily        0.00 %              6.41 %          7.99
6    CMBS B-Piece        4/20/2021           65,148 (4)       23,439               Various      Multifamily        6.54 %              6.54 %          8.66
7    CMBS B-Piece        6/30/2021          108,305 (4)       30,591               Various      Multifamily        0.00 %              7.98 %          4.51
8    CMBS B-Piece        12/9/2021           57,289 (4)       21,213               Various      Multifamily        5.54 %              5.54 %          2.32
9    CMBS B-Piece         5/2/2022           39,969 (4)       11,551               Various      Multifamily        4.35 %              4.69 %         16.42
     Total                                  553,102          186,596                                               3.46 %              6.62 %          6.76

     CMBS I/O Strips
1    CMBS I/O Strip      5/18/2020           17,590 (5)          729               Various      Multifamily        2.09 %             15.03 %        

24.25

2 CMBS I/O Strips 8/6/2020 1,180,379 (5) 3,479

       Various      Multifamily        0.10 %             15.39 %         

7.99

3CMBS I/O Strips 8/6/2020 108,643 (5) 7,853

       Various      Multifamily        3.09 %             15.73 %         

7.99

4 CMBS I/O Strips 4/28/2021 (6) 64,836 (5) 1,634

       Various      Multifamily        1.71 %             15.75 %         

7.58

5    CMBS I/O Strip      5/27/2021           20,000 (5)        1,270               Various      Multifamily        3.50 %             15.38 %         

7.91

6    CMBS I/O Strip       6/7/2021            4,266 (5)          165               Various      Multifamily        2.39 %             18.23 %         

6.41

7CMBS I/O Strip 6/11/2021 (7) 122,937 (5) 3,675

       Various      Multifamily        1.36 %             14.97 %         

6.91

8    CMBS I/O Strip      6/21/2021           27,542 (5)          691               Various      Multifamily        1.30 %             18.52 %         

7.91

9    CMBS I/O Strip      8/10/2021           25,000 (5)          988               Various      Multifamily        1.96 %             15.58 %         

7.82

10   CMBS I/O Strip      8/11/2021            6,942 (5)          533               Various      Multifamily        3.20 %             13.53 %         

9.07

11   CMBS I/O Strip      8/24/2021            1,625 (5)          277               Various      Multifamily        2.70 %             14.21 %         

8.58

12   CMBS I/O Strip       9/1/2021           34,625 (5)        4,148               Various      Multifamily        2.04 %             15.11 %         

7.99

13   CMBS I/O Strip      9/11/2021           20,902 (5)        4,247               Various      Multifamily        3.05 %             13.55 %          9.24
     Total                                1,635,287           29,689                                               0.67 %             15.42 %          8.08

     Mezzanine Loan
1    Mezzanine           6/12/2020            7,500            7,500           Houston, TX      Multifamily       11.00 %             11.00 %          1.00
2    Mezzanine           10/20/2020           5,470            2,276        Wilmington, DE      Multifamily        7.50 %              7.30 %          6.84
3    Mezzanine           10/20/2020          10,380            4,332       White Marsh, MD      Multifamily        7.42 %              7.21 %          9.01
4    Mezzanine           10/20/2020          14,253            5,953      Philadelphia, PA      Multifamily        7.59 %              7.37 %          6.93
5    Mezzanine           10/20/2020           3,700            1,538     Daytona Beach, FL      Multifamily        7.83 %              7.62 %          6.26
6    Mezzanine           10/20/2020          12,000            5,008            Laurel, MD      Multifamily        7.71 %              7.49 %          8.76
7    Mezzanine           10/20/2020           3,000            1,252      Temple Hills, MD      Multifamily        7.32 %              7.11 %          9.09
8    Mezzanine           10/20/2020           1,500              626      Temple Hills, MD      Multifamily        7.22 %              7.01 %          9.09
9    Mezzanine           10/20/2020           5,540            2,305          Lakewood, NJ      Multifamily        7.33 %              7.13 %          6.84
10   Mezzanine           10/20/2020           6,829            2,839          Rosedale, MD      Multifamily        7.53 %              7.33 %          6.51
11   Mezzanine           10/20/2020           3,620            1,511      North Aurora, IL      Multifamily        7.42 %              7.21 %          9.01
12   Mezzanine           10/20/2020           9,610            4,011      Cockeysville, MD      Multifamily        7.42 %              7.21 %          9.01
13   Mezzanine           10/20/2020           7,390            3,084            Laurel, MD      Multifamily        7.42 %              7.21 %          9.01
14   Mezzanine           10/20/2020           1,082              452         Vancouver, WA      Multifamily        8.70 %              8.45 %          8.35
15   Mezzanine           10/20/2020           2,135              887             Tyler, TX      Multifamily        7.74 %              7.53 %          6.26
16   Mezzanine           10/20/2020           1,190              495         Las Vegas, NV      Multifamily        7.71 %              7.50 %          6.67
17   Mezzanine           10/20/2020           3,310            1,377           Atlanta, GA      Multifamily        6.91 %              6.72 %          7.01
18   Mezzanine           10/20/2020           2,880            1,197        Des Moines, IA      Multifamily        7.89 %              7.68 %          6.35
19   Mezzanine           10/20/2020           4,010            1,667         Urbandale, IA      Multifamily        7.89 %              7.68 %          6.35
20   Mezzanine           1/21/2021           24,844           24,560       Los Angeles, CA      Multifamily       14.75 %             14.92 %          1.56
21   Mezzanine           11/18/2021          12,600           12,483            Irving, TX      Multifamily       11.75 %             11.86 %          6.43
22   Mezzanine           12/29/2021           7,760            7,688            Rogers, AR      Multifamily       11.75 %             11.86 %          2.53
23   Mezzanine            6/9/2022            4,500            4,456            Rogers, AR      Multifamily       11.50 %             11.61 %          2.95
     Total                                  155,103           97,497                                               9.53 %              9.44 %          5.96

     Preferred Equity
1    Preferred Equity    5/29/2020           10,000           10,000           Houston, TX      Multifamily       11.00 %             11.00 %          

7.84

2    Preferred Equity    9/29/2021            7,237            7,212     Holly Springs, NC     Life Science       10.00 %             10.03 %        

1.25

3    Preferred Equity    10/26/2021           9,750            9,671           Atlanta, GA      Multifamily       11.00 %             11.09 %          

2.36

4    Preferred Equity    12/28/2021          46,847           46,847         Las Vegas, NV      Multifamily       10.50 %             10.50 %          

9.68

5    Preferred Equity    1/27/2022           19,496           19,514         Vacaville, CA     Life Science       10.00 %              9.99 %          

1.25

6    Preferred Equity     4/7/2022            4,000            3,961          Beaumont, TX     Self-Storage       10.75 %             10.86 %          

8.18

7    Preferred Equity     6/8/2022            4,000            3,960            Temple, TX     Self-Storage        9.99 %             10.09 %          8.18
     Total                                  101,330          101,165                                              10.46 %             10.47 %          6.45

     Common Stock
1    Common Stock        11/6/2020              N/A           58,923                   N/A     Self-Storage         N/A                 N/A             N/A
2    Common Stock        4/14/2022              N/A           27,884                   N/A     Ground Lease         N/A                 N/A             N/A
     Total                                                    86,807

     Real Estate
1    Real Estate         12/31/2021             N/A (8)       28,228         Charlotte, NC      Multifamily         N/A                 N/A             N/A

     Bridge Loan
1    Bridge Loan         3/31/2022           13,500           13,468         Las Vegas, NV      Multifamily        6.25 %              6.27 %          0.25

     MSCR Notes
1    MSCR Note           5/25/2022            4,000            3,986               Various      Multifamily       10.03 %             10.03 %         29.92
2    MSCR Note           5/25/2022            5,000            4,823               Various      Multifamily        7.03 %              7.03 %         29.92
     Total                                    9,000            8,809                                               8.36 %              8.36 %         29.92
     SFR Pass-Through
     Certificate
     SFR Pass-Through
1    Certificate          6/1/2022           10,074            9,480               Various    Single-family        4.87 %              5.12 %         

3.39

     SFR Pass-Through
2    Certificate          6/1/2022           10,419            9,986               Various    Single-family        4.08 %              4.29 %          3.80
     Total                                   20,493           19,466                                               4.47 %              4.69 %          3.60



(1) Our total portfolio represents the current principal amount of the

consolidated SFR Loans, CMBS I/O Strips, mezzanine loans, preferred equity,

    common stock, multifamily property, bridge loan, MSCR notes and SFR
    pass-through certificates as well as the net equity of our CMBS B-Piece
    investments.

(2) Net equity represents the carrying value less borrowings collateralized by

the investment.

(3) The weighted-average life is weighted on the current principal balance and

assumes no prepayments. The maturity date for preferred equity investments

represents the maturity date of the senior mortgage, as the preferred equity

investments require repayment upon the sale or refinancing of the asset.

(4) The CMBS B-Pieces are shown on an unconsolidated basis reflecting the value.

of our investments.

(5) The number shown represents the notional value on which interest is

calculated for the CMBS I/O Strips. CMBS I/O Strips receive no principal

payments, and the notional value decreases as the underlying loans are paid

off.

The Company, through the Subsidiary OPs, purchased approximately $50.0
(6) million and $15.0 million aggregate notional amount of the X1 interest-only

tranche of the FHMS K-107 CMBS I/O Strip on April 28, 2021 and May 4, 2021,

respectively.

The Company, through the Subsidiary OPs, purchased approximately $80.0

million, $35.0 million, $40.0 million and $50.0 million aggregate notional (7) amount of the X1 interest-only tranche of the FRESB 2019-SB64 CMBS I/O Strip

on June 11, 2021 and September 29, 2021, February 3, 2022 and March 18, 2022,

respectively.

(8) Real Estate is a 204-unit multifamily property.

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The following table details overall statistics for our portfolio as of June 30, 2022 (dollars in thousands):


                                   Total         Floating Rate       Fixed Rate       Common Stock       Real Estate
                                 Portfolio        Investments       Investments        Investment        Investment
Number of investments                    76                  15               58                  2                 1
Principal balance (1)           $ 1,617,547$       304,809$  1,312,738                N/A               N/A
Carrying value                  $ 1,700,112$       303,004$  1,249,872$       86,808$      60,428
Weighted-average cash coupon           5.13 %              6.69 %           4.77 %              N/A               N/A
Weighted-average all-in yield          5.88 %              7.88 %           5.40 %              N/A               N/A



(1) Cost is used in lieu of principal balance for CMBS I/O Strips.

Liquidity and Capital Resources



Our short-term liquidity requirements consist primarily of funds necessary to
pay for our ongoing commitments to repay borrowings, maintain our investments,
make distributions to our stockholders and other general business needs. Our
investments generate liquidity on an ongoing basis through principal and
interest payments, prepayments and dividends. We believe that our available
cash, expected operating cash flows, and potential debt or equity financings
will provide sufficient funds for our operations, anticipated scheduled debt
service payments, potential obligations to purchase up to $18.6 million of the
Preferred Units and dividend requirements for the twelve-month period following
June 30, 2022.



Our long-term liquidity requirements consist primarily of acquiring additional
investments, scheduled debt payments and distributions. We expect to meet our
long-term liquidity requirements through various sources of capital, which may
include future debt or equity issuances, net cash provided by operations and
other secured and unsecured borrowings. Our leverage is matched in term and
structure to provide stable contractual spreads which will protect us from
fluctuations in market interest rates over the long-term; however, there are a
number of factors that may have a material adverse effect on our ability to
access these capital sources, including the state of overall equity and credit
markets, our degree of leverage, borrowing restrictions imposed by lenders,
general market conditions for REITs and our operating performance and liquidity.
We believe that our various sources of capital, which may include future debt or
equity issuances, net cash provided by operations and other secured and
unsecured borrowings, will provide sufficient funds for our operations,
anticipated debt service payments, potential obligations to purchase Preferred
Units and dividend requirements for the long-term.



                                     Asset Metrics                                           Debt Metrics
Investment       Fixed/Floating Rate    Interest Rate    Maturity Date   Fixed/Floating Rate    Interest Rate    Maturity Date    Net Spread
SFR Loans
Senior loan             Fixed                 4.65%        9/1/2028             Fixed                 2.24%        9/1/2028           2.41%
Senior loan             Fixed                 5.35%        2/1/2028             Fixed                 3.51%        2/1/2028           1.84%
Senior loan             Fixed                 5.33%        8/1/2023             Fixed                 2.48%        8/1/2023           2.85%
Senior loan             Fixed                 5.30%        9/1/2028             Fixed                 2.79%        9/1/2028           2.51%
Senior loan             Fixed                 5.24%        10/1/2028            Fixed                 2.64%        10/1/2028          2.60%
Senior loan             Fixed                 4.74%        10/1/2025            Fixed                 2.14%        10/1/2025          2.60%
Senior loan             Fixed                 6.10%        10/1/2028            Fixed                 3.30%        10/1/2028          2.80%
Senior loan             Fixed                 5.55%        11/1/2028            Fixed                 2.70%        11/1/2028          2.85%
Senior loan             Fixed                 5.99%        12/1/2028            Fixed                 3.14%        12/1/2028          2.85%
Senior loan             Fixed                 5.46%        1/1/2029             Fixed                 2.97%        1/1/2029           2.49%
Senior loan             Fixed                 5.88%        1/1/2029             Fixed                 3.14%        1/1/2029           2.74%
Senior loan             Fixed                 4.83%        2/1/2024             Fixed                 2.40%        2/1/2024           2.43%
Senior loan             Fixed                 5.35%        2/1/2029             Fixed                 3.06%        2/1/2029           2.29%
Senior loan             Fixed                 5.34%        2/1/2029             Fixed                 2.98%        2/1/2029           2.36%
Senior loan             Fixed                 5.46%        3/1/2029             Fixed                 2.99%        3/1/2029           2.47%
Senior loan             Fixed                 4.72%        3/1/2026             Fixed                 2.45%        3/1/2026           2.27%

Mezzanine Loan
Mezzanine               Fixed                 7.50%        5/1/2029             Fixed                 0.30%        5/1/2029           7.20%
Mezzanine               Fixed                 7.42%        7/1/2031             Fixed                 0.30%        7/1/2031           7.12%
Mezzanine               Fixed                 7.59%        6/1/2029             Fixed                 0.30%        6/1/2029           7.29%
Mezzanine               Fixed                 7.83%        10/1/2028            Fixed                 0.30%        10/1/2028          7.53%
Mezzanine               Fixed                 7.71%        4/1/2031             Fixed                 0.30%        4/1/2031           7.41%
Mezzanine               Fixed                 7.32%        8/1/2031             Fixed                 0.30%        8/1/2031           7.02%
Mezzanine               Fixed                 7.22%        8/1/2031             Fixed                 0.30%        8/1/2031           6.92%
Mezzanine               Fixed                 7.33%        5/1/2029             Fixed                 0.30%        5/1/2029           7.03%
Mezzanine               Fixed                 7.53%        7/1/2031             Fixed                 0.30%        7/1/2031           7.23%
Mezzanine               Fixed                 7.42%        1/1/2029             Fixed                 0.30%        1/1/2029           7.12%
Mezzanine               Fixed                 7.42%        7/1/2031             Fixed                 0.30%        7/1/2031           7.12%
Mezzanine               Fixed                 7.42%        4/1/2031             Fixed                 0.30%        4/1/2031           7.12%
Mezzanine               Fixed                 8.70%        11/1/2030            Fixed                 0.30%        11/1/2030          8.40%
Mezzanine               Fixed                 7.74%        10/1/2028            Fixed                 0.30%        10/1/2028          7.44%
Mezzanine               Fixed                 7.71%        3/1/2029             Fixed                 0.30%        3/1/2029           7.41%
Mezzanine               Fixed                 6.91%        7/1/2029             Fixed                 0.30%        7/1/2029           6.61%
Mezzanine               Fixed                 7.89%        11/1/2028            Fixed                 0.30%        11/1/2028          7.59%
Mezzanine               Fixed                 7.89%        11/1/2028            Fixed                 0.30%        11/1/2028          7.59%




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Our primary sources of liquidity and capital resources to date consist of cash generated from our operating results and the following:


Freddie Mac Credit Facilities



Prior to the Formation Transaction, two of our subsidiaries entered into a loan
and security agreement, dated July 12, 2019, with Freddie Mac (the "Credit
Facility"). Under the Credit Facility, these entities borrowed approximately
$788.8 million in connection with their acquisition of senior pooled mortgage
loans backed by SFR properties (the "Underlying Loans"). No additional
borrowings can be made under the Credit Facility, and our obligations will be
secured by the Underlying Loans. The Credit Facility was assumed by the Company
as part of the Formation Transaction. As such, the remaining outstanding balance
of $788.8 million was contributed to the Company on February 11, 2020. Our
borrowings under the Credit Facility will mature on July 12, 2029; however, if
an Underlying Loan matures prior to July 12, 2029, we will be required to repay
the portion of the Credit Facility that is allocated to that loan (see Note 9 to
our consolidated financial statements for additional information). As of June
30, 2022, the outstanding balance on the Credit Facility was $633.9 million.



Repurchase Agreements



From time to time, we may enter into repurchase agreements to finance the
acquisition of our target assets. Repurchase agreements will effectively allow
us to borrow against loans and securities that we own in an amount equal to (1)
the market value of such loans and/or securities multiplied by (2) the
applicable advance rate. Under these agreements, we will sell our loans and
securities to a counterparty and agree to repurchase the same loans and
securities from the counterparty at a price equal to the original sales price
plus an interest factor. During the term of a repurchase agreement, we will
receive the principal and interest on the related loans and securities and pay
interest to the lender under the repurchase agreement. At any point in time, the
amounts and the cost of our repurchase borrowings will be based on the assets
being financed. For example, higher risk assets will result in lower advance
rates (i.e., levels of leverage) at higher borrowing costs. In addition, these
facilities may include various financial covenants and limited recourse
guarantees.



As discussed in Note 9 to our consolidated financial statements, in connection
with our recent CMBS acquisitions, we, through the OP and the Subsidiary
OPs, have borrowed approximately $312.4 million under our repurchase agreements
and posted approximately $2.1 billion par value of our CMBS B-Piece, CMBS I/O
Strip and SFR pass-through certificate investments as collateral. The CMBS
B-Pieces, CMBS I/O Strips and SFR pass-through certificates held as collateral
are illiquid and irreplaceable in nature. These assets are restricted solely to
satisfy the interest and principal balances owed to the lender.



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The table below provides additional details regarding recent borrowings under the master repurchase agreements:



                                                                                                          June 30, 2022
                                                                            Facility                                                                             Collateral
                                                                                                                                                                                           Weighted
                                                                                                    Weighted                                                                                average
                                                                                                     average            Weighted                                                             life
                                            Outstanding        Carrying      Final stated         interest rate       average life        Outstanding       Amortized       Carrying        (years)
                             Date issued    face amount         value          maturity                (1)             (years) (2)        face amount      cost basis       value (3)         (2)
Master Repurchase Agreements
CMBS
Mizuho(4)                      4/15/2020          312,355        312,355               N/A (5)              3.15 %              0.05         2,126,941         510,881         528,807           7.7



(1) Weighted-average interest rate using unpaid principal balances.

(2) Weighted-average life is determined using the maximum maturity date of the

corresponding loans, assuming all extension options are exercised by the

borrower.

(3) CMBS are shown at fair value on an unconsolidated basis.

On April 15, 2020, three of our subsidiaries entered into a master repurchase (4) agreement with Mizuho. Borrowings under these repurchase agreements are

collateralized by portions of the CMBS B-Pieces, CMBS I/O Strips and SFR

pass-through certificates. (5) The master repurchase agreement with Mizuho does not have a stated maturity

date. The transactions in place have a one-month to two-month tenor and are

    expected to roll accordingly.




At-The-Market Offering



On March 31, 2021, the Company, the OP and the Manager separately entered into
the 2021 Equity Distribution Agreements with the 2021 Sales Agents, pursuant to
which the Company could issue and sell from time to time shares of the Company's
common stock and Series A Preferred Stock having an aggregate sales price of up
to $100.0 million in the 2021 ATM Program. The 2021 Equity Distribution
Agreements provided for the issuance and sale of common stock or Series A
Preferred Stock by the Company through a sales agent acting as a sales agent or
directly to the sales agent acting as principal for its own account at a price
agreed upon at the time of sale. Effective as of December 16, 2021, the Company
terminated each 2021 Equity Distribution Agreement. As of the termination date,
pursuant to the 2021 Equity Distribution Agreements, the Company had sold
532,694 shares of its common stock and zero shares of Series A Preferred Stock
for total gross sales of $11.3 million. For additional information about the
2021 ATM Program, see Note 11 to our consolidated financial statements.



On March 15, 2022, the Company, the OP and the Manager separately entered into
the 2022 Equity Distribution Agreements with the 2022 Sales Agents, pursuant to
which the Company may issue and sell from time to time shares of the Company's
common stock and Series A Preferred Stock having an aggregate sales price of up
to $100.0 million in the 2022 ATM Program. The 2022 Equity Distribution
Agreements provide for the issuance and sale of common stock or Series A
Preferred Stock by the Company through a sales agent acting as a sales agent or
directly to the sales agent acting as principal for its own account at a price
agreed upon at the time of sale. As of  June 30, 2022, pursuant to the 2022
Equity Distribution Agreements, the Company has sold 501,600 shares of its
common stock and zero shares of Series A Preferred Stock for total gross sales
of $11.9 million. For additional information about the 2022 ATM Program, see
Note 11 to our consolidated financial statements.



Company Notes Offering


On April 20, 2021the Company issued $75.0 million in aggregate principal amount of its 5.75% Notes at a price equal to 99.5% of par value for proceeds of approximately $73.1 million after original issue discount and underwriting fees.



On December 20, 2021, the Company issued $60.0 million in aggregate principal
amount of its 5.75% Notes at a price equal to 102.8% of par value, including
accrued interest, for proceeds of approximately $60.9 million after original
issue discount and underwriting fees.



On January 25, 2022, the Company issued $35.0 million in aggregate principal
amount of its 5.75% Notes at a price equal to 100.9% of par value, including
accrued interest, for proceeds of approximately $35.1 million after original
issue discount and underwriting fees.



On May 20, 2022the Company purchased $3.0 million aggregate principal amount of its 5.75% Notes at a price equal to 96.3% par value, including accrued interest, for approximately $2.9 million. The purchased 5.75% Notes were canceled upon settlement.

On June 30, 2022the Company purchased $2.0 million aggregate principal amount of its 5.75% Notes at a price equal to 96.5% par value, including accrued interest, for approximately $2.0 million. The purchased 5.75% Notes were canceled upon settlement.



Secondary Public Offering



On August 18, 2021, the Company the OP and the Manager entered into the
Underwriting Agreement with Raymond James as representative of the several
Underwriters, pursuant to which the Company agreed to sell 2,000,000 Firm Shares
at a public offering price of $21.00 per share. The Company also granted the
Underwriters a 30-day option to purchase up to an additional 300,000 Option
Shares. The Firm Shares were issued on August 20, 2021. On September 8, 2021,
the Underwriters partially exercised the option to purchase 59,700 Option
Shares. The 59,700 Option Shares were issued on September 10, 2021. For
additional information about this public offering, see Note 11 to our
consolidated financial statements.



LIBOR Transition



Approximately 4.7% of our portfolio by unpaid principal balance as of June 30,
2022 pays interest at a variable rate that is tied to LIBOR, and it is
anticipated that future investments we make may have variable interest rates
tied to LIBOR. On March 5, 2021, the Financial Conduct Authority of the U.K.
(the "FCA") announced that all of the LIBOR settings will either cease to be
provided by any administrator or no longer be representative (i) immediately
after December 31, 2021, in the case of the 1-week and 2-month US dollar
settings; and (ii) immediately after June 30, 2023, in the case of the remaining
one-month, three-month, six-month and twelve-month US dollar settings. The
tenors that were extended to June 30, 2023 are more widely used and are the
tenors used in our LIBOR-based debt. The U.S.Federal Reserve, in conjunction
with the Alternative Reference Rates Committee, a steering committee convened by
the U.S.Federal Reserve Board and comprised of large U.S. financial
institutions, has identified as a best-practice replacement the Secured
Overnight Financing Rate ("SOFR"), a new index calculated by short-term
repurchase agreements backed by U.S.Treasury securities. Although there have
been issuances utilizing SOFR, it is unknown whether SOFR or another alternative
reference rate will attain market acceptance as a replacement for LIBOR. In
connection with the foregoing, we may need to renegotiate some of our agreements
to determine a replacement index or rate of interest. As of June 30, 2022, the
Company has not received any LIBOR transition notices under its loan agreements.
Any changes to benchmark interest rates could increase our financing costs,
which could impact our results of operations, cash flows and the market value of
our investments and result in mismatches with the interest rate of investments
that we are financing.


Other Potential Sources of Financing



We may seek additional sources of liquidity from further repurchase facilities,
other borrowings and future offerings of common and preferred equity and debt
securities and contributions from existing holders of the OP or
Subsidiary OPs. In addition, we may apply our existing cash and cash equivalents
and cash flows from operations to any liquidity needs. As of June 30, 2022, our
cash and cash equivalents were $52.7 million.



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Cash Flows



The following table presents selected data from our Consolidated Statements of
Cash Flows for the six months ended June 30, 2022 and June 30, 2021  (in
thousands):



                                                              For the Six Months Ended June 30,
                                                                 2022                    2021
Net cash provided by operating activities                  $          51,379       $         22,841
Net cash provided by investing activities                            709,305                 45,069
Net cash (used in) financing activities                             (739,973 )              (70,703 )

Net increase (decrease) in cash, cash equivalents and restricted cash

                                                       20,711                 (2,793 )

Cash, cash equivalents and restricted cash, beginning of period

                                                                33,232                 33,471
Cash, cash equivalents and restricted cash, end of
period                                                     $          53,943       $         30,678




Cash flows from operating activities. During the six months ended June 30, 2022,
net cash provided by operating activities was $51.4 million, compared to net
cash provided by operating activities of $22.8 million for the six months ended
June 30, 2021. This increase was primarily due to the interest income generated
by our investments and prepayment penalties related to early paydowns.



Cash flows from investing activities. During the six months ended June 30, 2022,
net cash provided by investing activities was $709.3 million, compared to net
cash provided by operating activities of $45.1 million for the six months ended
June 30, 2021. This increase was primarily driven by proceeds received from
payments on mortgage loans held in VIEs.



Cash flows from financing activities. During the six months ended June 30, 2022,
net cash used in financing activities was $740.0 million, compared to net
cash used in financing activities of $70.7 million for the six months ended June
30, 2021. This increase was primarily driven by distributions to bondholders of
VIEs.


Emerging Growth Company and Smaller Reporting Company Status



Section 107 of the JOBS Act provides that an emerging growth company can take
advantage of the extended transition period provided in Section 13(a) of the
Exchange Act, for complying with new or revised accounting standards applicable
to public companies. In other words, an emerging growth company can delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to take advantage of this extended
transition period. As a result of this election, our financial statements may
not be comparable to companies that comply with public company effective dates
for such new or revised standards. We may elect to comply with public company
effective dates at any time, and such election would be irrevocable pursuant to
Section 107(b) of the JOBS Act.



We are also a “smaller reporting company” as defined in Regulation SK under the Securities Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. We may be a smaller reporting company even after we are no longer an “emerging growth company.”


Income Taxes



We elected to be treated as a REIT for U.S. federal income tax purposes,
beginning with our taxable year ended December 31, 2020. We believe that our
organization and proposed method of operation will enable us to meet the
requirements for qualification and taxation as a REIT. To qualify as a REIT, we
must meet certain organizational and operational requirements, including a
requirement to distribute at least 90% of our annual REIT taxable income to
stockholders. As a REIT, we will be subject to federal income tax on our
undistributed REIT taxable income and net capital gain and to a 4% nondeductible
excise tax on any amount by which distributions we pay with respect to any
calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95%
of our capital gain net income and (3) 100% of our undistributed income from
prior years. Taxable income from certain non-REIT activities is managed through
a TRS and is subject to applicable federal, state, and local income and margin
taxes. We had no significant taxes associated with our TRS for the six months
ended June 30, 2022.



If we fail to qualify as a REIT in any taxable year, we will be subject to U.S.
federal income tax on our taxable income at regular corporate income tax rates,
and dividends paid to our stockholders would not be deductible by us in
computing taxable income. Any resulting corporate liability could be substantial
and could materially and adversely affect our net income and net cash available
for distribution to stockholders. Unless we were entitled to relief under
certain Code provisions, we also would be disqualified from re-electing to be
taxed as a REIT for the four taxable years following the year in which we failed
to qualify to be taxed as a REIT.



We evaluate the accounting and disclosure of tax positions taken or expected to
be taken in the course of preparing our tax returns to determine whether the tax
positions are "more-likely-than-not" (greater than 50 percent probability) of
being sustained by the applicable tax authority. Tax positions not deemed to
meet the more-likely-than-not threshold would be recorded as a tax benefit or
expense in the current year. Our management is required to analyze all open tax
years, as defined by the statute of limitations, for all major jurisdictions,
which include federal and certain states. We have no examinations in progress,
and none are expected at this time.



We recognize our tax positions and evaluate them using a two-step process.
First, we determine whether a tax position is more likely than not to be
sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. Second, we
will determine the amount of benefit to recognize and record the amount that is
more likely than not to be realized upon ultimate settlement. We had no material
unrecognized tax benefit or expense, accrued interest or penalties as of June
30, 2022.



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Dividends



We intend to make regular quarterly dividend payments to holders of our common
stock. We also intend to make the accrued dividend payments on the Series A
Preferred Stock, which are payable quarterly in arrears as provided in the
articles supplementary setting forth the terms of the Series A Preferred Stock.
U.S. federal income tax law generally requires that a REIT distribute annually
at least 90% of its REIT taxable income, without regard to the deduction for
dividends paid and excluding net capital gains. As a REIT, we will be subject to
federal income tax on our undistributed REIT taxable income and net capital gain
and to a 4% nondeductible excise tax on any amount by which distributions we pay
with respect to any calendar year are less than the sum of (1) 85% of our
ordinary income, (2) 95% of our capital gain net income and (3) 100% of our
undistributed income from prior years. We intend to make regular quarterly
dividend payments of all or substantially all of our taxable income, that is not
used to pay a dividend on the Series A Preferred Stock to holders of our common
stock out of assets legally available for this purpose, if and to the extent
authorized by our Board. Before we make any dividend payments, whether for U.S.
federal income tax purposes or otherwise, we must first meet both our operating
requirements and debt service on our debt payable. If our cash available for
distribution is less than our taxable income, we could be required to sell
assets, borrow funds or raise additional capital to make cash dividends, or we
may make a portion of the required dividend in the form of a taxable
distribution of stock or debt securities.



We will make dividend payments to holders of our common stock based on our
estimate of taxable earnings per share of common stock, but not earnings
calculated pursuant to GAAP. Our dividends and taxable income and GAAP earnings
will typically differ due to items such as depreciation and amortization,
fair-value adjustments, differences in premium amortization and discount
accretion and non-deductible G&A expenses. Our quarterly dividends per share of
our common stock may be substantially different than our quarterly taxable
earnings and GAAP earnings per share. Our Board declared our second quarterly
dividend of 2022 to common stockholders of $0.50 per share on April 25, 2022,
which was paid on June 30, 2022 to common stockholders of record as of June 15,
2022. On June 22, 2022, our Board declared a preferred stock dividend of
$0.53125 per share, which was paid on July 25, 2022 to preferred stockholders of
record as of July 14, 2022.


Off-Balance Sheet Arrangements



As of June 30, 2022, we had no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.



Commitments and Contingencies



Except as otherwise disclosed in Note 15 to our consolidated financial
statements, the Company is not aware of any contractual obligations, legal
proceedings or any other contingent obligations incurred in the normal course of
business that would have a material adverse effect on our consolidated financial
statements.


Critical Accounting Policies and Estimates



Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with GAAP. The preparation of these financial statements
requires our management to make judgments, assumptions and estimates that affect
the reported amounts of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. We evaluate these judgments,
assumptions and estimates for changes that would affect the reported amounts.
These estimates are based on management's historical industry experience and on
various other judgments and assumptions that are believed to be reasonable under
the circumstances. Actual results may differ from these judgments, assumptions
and estimates. Below is a discussion of the accounting policies and estimates
that involve significant estimation uncertainty that have or are reasonably
likely to have a material impact on our financial condition or results of
operations. A discussion of recent accounting pronouncements and our significant
accounting policies, including further discussion of the accounting policies
described below, can be found in Note 2 to our consolidated financial
statements.



Allowance for Loan Losses



The Company performs a quarterly evaluation of loans classified as held for
investment for impairment on a loan-by-loan basis in accordance with ASC
310-10-35, Receivables, Subsequent Measurement ("ASC 310-10-35"). If we deem
that it is probable that we will be unable to collect all amounts owed according
to the contractual terms of a loan, impairment of that loan is indicated. If we
consider a loan to be impaired, we will establish an allowance for loan losses,
through a valuation provision in earnings that reduces carrying value of the
loan to the present value of expected future cash flows discounted at the loan's
contractual effective rate or the fair value of the collateral, if repayment is
expected solely from the collateral. For non-impaired loans with no specific
allowance, the Company determines an allowance for loan losses in accordance
with ASC 450-20, Loss Contingencies ("ASC 450-20"), which represents
management's best estimate of incurred losses inherent in the portfolio at the
balance sheet date, excluding impaired loans and loans carried at fair value.
Management considers quantitative factors likely to cause estimated credit
losses, including default rate and loss severity rates. The Company also
evaluates qualitative factors such as macroeconomic conditions, evaluations of
underlying collateral, trends in delinquencies and non-performing assets.
Increases to (or reversals of) the allowance for loan loss are included in "Loan
loss benefit (provision)" on the accompanying Consolidated Statements of
Operations.



Significant judgment is required in determining impairment and in estimating the
resulting loss allowance, and actual losses, if any, could materially differ
from those estimates.



Valuation of NSP, Inc.



As of June 30, 2022, the Company owns approximately 25.8% of the total
outstanding shares of NSP, and, thus can exercise significant influence over
NSP. The Company elected the fair-value option in accordance with ASC 825-10-10.
On a quarterly basis, the Company hires an independent third-party valuation
firm to provide an updated fair value for subsequent measurement absent a
readily available market price. The valuation is determined using widely
accepted valuation techniques including the discounted cash flow methodology
whereby observable market terminal capitalization rates and discount rates are
applied to projected cash flows generated by self-storage assets owned by NSP.
The necessary inputs for the valuation include projected cash flows of NSP,
terminal capitalization rates and discount rates. These inputs are reflective of
public company comparables, but are assumptions and estimates. As a result, the
determination of fair value is uncertain because it involves subjective
judgments and estimates that are unobservable. For the six months ended June 30,
2022, the unrealized gain related to the change in fair value estimate is
$0.5 million. See Notes 5 and 10 for additional disclosures regarding the
valuation of NSP.



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REIT Tax Election



We elected to be treated as a REIT under Sections 856 through 860 of the Code.
To qualify as a REIT, we must meet a number of organizational and operational
requirements, including a requirement that we distribute at least 90% of our
"REIT taxable income," as defined by the Code, to our stockholders. Taxable
income from certain non-REIT activities is managed through a TRS and is subject
to applicable federal, state, and local income and margin taxes. We had no
significant taxes associated with our TRS for the six months ended June 30, 2022
and 2021. We believe that our organization and current and proposed method of
operation will allow us to qualify for taxation as a REIT, but no assurance can
be given that we will operate in a manner so as to qualify as a REIT.

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