BLACKSTONE MORTGAGE TRUST, INC. (Form: 10-K, Received: 02/11/2020 16:22:13)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

2023-032023-032022-082022-08LIBORLIBORLIBORLIBORLIBORLIBORLIBORLIBORLIBORLIBORLIBOR0P1Y2022-022022-02P3Y2029-12-312015 2017 2018 20192026-04-23L + 1.60%E + 1.41%L + 1.99%BBSY + 1.90%CDOR + 1.80%INDEX + 1.60%false2019FY0001061630--12-31BLACKSTONE MORTGAGE TRUST, INC.The collateral assets for the 2017 Single Asset Securitization include the total loan amount, of which we securitized $500.0 million. As of December 31, 2019, all of our loans financed by securitized debt obligations earned a floating rate of interest. As of December 31, 2018, 98% of our loans financed by securitized debt obligations earned a floating rate of interest. In addition to cash coupon, all-in yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees. All-in yield for the total portfolio assume applicable floating benchmark rates for weighted-average calculation.During the years ended December 31, 2019 and 2018, we recorded $43.8 million and $48.8 million, respectively, of interest expense related to our securitized debt obligations. Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. 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bxmt:Plans bxmt:Directors bxmt:DerivativeInstrument

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019

☐	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

1-14788

Blackstone Mortgage Trust, Inc.

(Exact name of Registrant as specified in its charter)


Maryland		94-6181186
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

345 Park Avenue, 42nd Floor

New York, New York 10154

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (212)

655-0220

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.01 per share	BXMT	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

☒

☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes

☐

☒

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

☒

☐

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

☒

☐

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:

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 Act). Yes

☐

☒

The aggregate market value of the outstanding class A common stock held by

non-affiliates

of the registrant was approximately $4.5 billion as of June 30, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter) based on the closing sale price on the New York Stock Exchange on that date.

As of February 4, 2020, there were

135,355,569

outstanding shares of class A common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this annual report on Form

10-K

incorporates information by reference from the registrant’s definitive proxy statement with respect to its 2020 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year.

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		Page
PART I.

ITEM 1.	BUSINESS		1

ITEM 1A.	RISK FACTORS		9

ITEM 1B.	UNRESOLVED STAFF COMMENTS		60

ITEM 2.	PROPERTIES		60

ITEM 3.	LEGAL PROCEEDINGS		60

ITEM 4.	MINE SAFETY DISCLOSURES		60

PART II.

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		61

ITEM 6.	SELECTED FINANCIAL DATA		62

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		63

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		87

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		89

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		89

ITEM 9A.	CONTROLS AND PROCEDURES		89

ITEM 9B.	OTHER INFORMATION		90

PART III.

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		91

ITEM 11.	EXECUTIVE COMPENSATION		91

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		91

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		91

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		91

PART IV.

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		92

ITEM 16.	FORM 10-K SUMMARY		100

SIGNATURES			101

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES			F- 1

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PART I.

ITEM 1.

BUSINESS

References herein to “Blackstone Mortgage Trust,” “company,” “we,” “us,” or “our” refer to Blackstone Mortgage Trust, Inc., a Maryland corporation, and its subsidiaries unless the context specifically requires otherwise.

Our Company

Blackstone Mortgage Trust is a real estate finance company that originates senior loans collateralized by commercial real estate in North America, Europe, and Australia. Our investment objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns primarily through dividends generated from current income from our loan portfolio. We are externally managed by BXMT Advisors L.L.C., or our Manager, a subsidiary of The Blackstone Group Inc., or Blackstone, and are a real estate investment trust, or REIT, traded on the New York Stock Exchange, or NYSE, under the symbol “BXMT.” Our principal executive offices are located at 345 Park Avenue, 42

Floor, New York, New York 10154. We were incorporated in Maryland in 1998, when we reorganized from a California common law business trust into a Maryland corporation.

We conduct our operations as a REIT for U.S. federal income tax purposes. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT. We also operate our business in a manner that permits us to maintain an exclusion from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act. We are organized as a holding company and conduct our business primarily through our various subsidiaries. We operate our business as one segment, which originates and acquires commercial mortgage loans and related investments.

Our Manager

We are externally managed and advised by our Manager, which is responsible for administering our business activities,

day-to-day

operations, and providing us the services of our executive management team, investment team, and appropriate support personnel.

Our Manager is a part of Blackstone’s alternative asset management business, which includes the management of investment vehicles focused on private equity, real estate, public debt and equity,

non-investment

grade credit, real assets, and secondary funds, all on a global basis. Through its different businesses, Blackstone had total assets under management of $571.1 billion as of December 31, 2019.

In connection with the performance of its duties, our Manager benefits from the resources, relationships, and expertise of the 506 professionals in Blackstone’s global real estate group, which is one of the largest real estate investment managers in the world with $163.2 billion of investor capital under management as of December 31, 2019. Kenneth Caplan and Kathleen McCarthy, who are the global

co-heads

of Blackstone’s real estate group, are members of our Manager’s investment committee.

Blackstone Real Estate Debt Strategies, or BREDS, was launched in 2008 within Blackstone’s global real estate group to pursue opportunities relating to debt and preferred equity investments globally, with a focus primarily on North America and Europe. Michael Nash, the global chairman of BREDS, serves as the executive chairman of our board of directors and is a member of our Manager’s investment committee.

In addition, Jonathan Pollack, the global head of BREDS, serves as one of our directors and is also a member of our Manager’s investment committee. As of December 31, 2019, 104 dedicated BREDS professionals, including 13 investment professionals based in London and Australia, managed $22.4 billion of investor capital.

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Our chief executive officer, chief financial officer, and other executive officers are senior Blackstone real estate professionals. None of our Manager, our executive officers, or other personnel supplied to us by our Manager is obligated to dedicate any specific amount of time to our business. Our Manager is subject to the supervision and oversight of our board of directors and has only such functions and authority as our board of directors delegates to it. Pursuant to a management agreement between our Manager and us, or our Management Agreement, our Manager is entitled to receive a base management fee, an incentive fee, and expense reimbursements. See Notes 12 and 17 to our consolidated financial statements and the information disclosed pursuant to Item 13 “Certain Relationships and Related Transactions, and Director Independence” in our definitive proxy statement with respect to our 2020 annual meeting of shareholders, which is incorporated by reference into this Annual Report on Form

10-K

for more detail on the terms of the Management Agreement.

Our Investment Strategy

Our investment strategy is to originate loans and invest in debt and related instruments supported by institutional quality commercial real estate in attractive locations. Through our Manager, we draw on Blackstone’s extensive real estate debt investment platform and its established sourcing, underwriting, and structuring capabilities in order to execute our investment strategy. In addition, we have access to Blackstone’s extensive network and Blackstone’s substantial real estate and other investment holdings, which provide our Manager access to market data on a scale not available to many competitors.

We directly originate,

co-originate,

and acquire debt instruments in conjunction with acquisitions, refinancings, and recapitalizations of commercial real estate in North America, Europe, and Australia. In the case of loans we acquire, we focus on performing loans that are supported by well-capitalized properties and portfolios. We believe that the scale and flexibility of our capital, as well as our Manager’s and Blackstone’s relationships, enables us to target opportunities with strong sponsorship and invest in large loans or other debt that is collateralized by high-quality assets and portfolios.

As market conditions evolve over time, we expect to adapt as appropriate. We believe our current investment strategy will produce significant opportunities to make investments with attractive risk-return profiles. However, to capitalize on the investment opportunities that may be present at various other points of an economic cycle, we may expand or change our investment strategy by targeting assets such as subordinate mortgage loans, mezzanine loans, preferred equity, real estate securities and note financings.

We believe that the diversification of our investment portfolio, our ability to actively manage those investments, and the flexibility of our strategy positions us to generate attractive returns for our stockholders in a variety of market conditions over the long term.

Our Portfolio

Our business is currently focused on originating or acquiring senior, floating rate mortgage loans that are secured by a first priority mortgage on commercial real estate assets primarily in the office, hotel, and multifamily sectors in North America, Europe, and Australia. These investments may be in the form of whole loans,

pari passu

participations within mortgage loans, or other similar structures. Although originating senior, floating rate mortgage loans is our primary area of focus, we also originate and acquire fixed rate loans and subordinate loans, including subordinate mortgage interests and mezzanine loans. This focused lending strategy is designed to generate attractive current income while protecting investors’ capital.

During the year ended December 31, 2019, we originated or acquired $8.6 billion of loans. Loan fundings during the year totaled $7.0 billion, with repayments of $4.8 billion, for net fundings of $2.1 billion.

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The following table details overall statistics for our investment portfolio as of December 31, 2019 ($

thousands):


				Total Investment Exposure
	Balance Sheet Portfolio (1)			Loan Exposure (1)(2)			Other Investments (3)			Total Investment Portfolio
Number of investments		128			128			1			129
Principal balance	$	16,277,343		$	16,965,864		$	930,021		$	17,895,885
Net book value	$	16,164,801		$	16,164,801		$	86,638		$	16,251,439
Unfunded loan commitments (4)	$	3,911,868		$	4,662,169		$	—		$	4,662,169
Weighted-average cash coupon (5)		L + 3.20	%		L + 3.25	%		L + 2.75	%		L + 3.22	%
Weighted-average all-in yield (5)		L + 3.55	%		L + 3.59	%		L + 3.00	%		L + 3.56	%
Weighted-average maximum maturity (years) (6)		3.8			3.8			5.4			3.9
Loan to value (LTV) (7)		64.8	%		64.9	%		42.6	%		63.7	%

(1)

Excludes investment exposure to the $89.0 million subordinate risk retention interest we own in the $930.0 million single asset securitization vehicle, or the 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.

(2)

In certain instances, we finance our loans through the

non-recourse

sale of a senior loan interest that is not included in our consolidated financial statements. Total loan exposure encompasses the entire loan we originated and financed, including $688.5 million of such

non-consolidated

senior interests that are not included in our balance sheet portfolio.

(3)

Includes investment exposure to the $930.0 million 2018 Single Asset Securitization. We do not consolidate the 2018 Single Asset Securitization on our consolidated financial statements, and instead reflect our $89.0 million subordinate risk retention investment as a component of other assets on our consolidated balance sheet. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.

(4)

Unfunded commitments will primarily be funded to finance our borrowers’ construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures. These commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.

(5)

The weighted-average cash coupon and

all-in

yield are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR, GBP LIBOR, EURIBOR, BBSY, and CDOR, as applicable to each loan. As of December 31, 2019, 97% of our loans by total loan exposure earned a floating rate of interest, primarily indexed to USD LIBOR, and $6.1 billion of such loans earned interest based on floors that are above the applicable index. The other 3% of our loans earned a fixed rate of interest, which we reflect as a spread over the relevant floating benchmark rates, as of December 31, 2019, for purposes of the weighted-averages. In addition to cash coupon,

all-in

yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.

(6)

Maximum maturity assumes all extension options are exercised by the borrower, however our loans and other investments may be repaid prior to such date. As of December 31, 2019, 59% of our loans and other investments were subject to yield maintenance or other prepayment restrictions and 41% were open to repayment by the borrower without penalty.

(7)	Based on LTV as of the dates loans and other investments were originated or acquired by us.

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The charts below detail the geographic distribution and types of properties securing our investment portfolio, as of December 31, 2019:

For additional information regarding our loan portfolio as of December 31, 2019, see Item 7 –“Management’s Discussion and Analysis of Financial Condition and Results of Operations – II. Loan Portfolio” and – “VI. Loan Portfolio Details” in this Annual Report on Form

10-K.

Financing Strategy

To maintain an adequate amount of available liquidity and execute our business plan, we look to a variety of sources. In addition to raising capital through public offerings of our equity and debt securities, our financing strategy includes credit facilities, asset-specific financings, a revolving credit agreement,

non-consolidated

senior interests, securitized debt obligations, and senior secured term loan facilities. In addition to our current mix of financing sources, we also expect to access additional forms of financings including resecuritizations and public and private, secured and unsecured debt issuances by us or our subsidiaries.

During the year ended December 31, 2019, we issued an aggregate 10.5 million shares of our class A common stock through a combination of an underwritten public offering and our

at-the-market

program, providing aggregate net proceeds of $372.3 million. Additionally, we entered into a $750.0 million senior secured term loan facility which bears interest at a rate of L + 2.25% per annum.

During the year ended December 31, 2019, we increased the size of six of our existing credit facilities, providing an aggregate additional $2.9 billion of credit capacity, and added two new credit facilities, providing an aggregate additional $577.0 million of credit capacity.

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The following table details our outstanding portfolio financing arrangements as of December 31, 2019 ($

thousands):


	Portfolio Financing Outstanding Principal Balance
	December 31, 2019
Credit facilities	$	9,753,059
Asset-specific financings		330,879
Non-consolidated senior interests (1)		688,521
Securitized debt obligations		1,189,642

Total portfolio financing	$	11,962,101

(1)

These

non-consolidated

senior interests provide structural leverage for our net investments which are reflected in the form of mezzanine loans or other subordinate interests on our balance sheet and in our results of operations.

The amount of leverage we employ for particular assets will depend upon our Manager’s assessment of the credit, liquidity, price volatility, and other risks of those assets and the related financing counterparties, the availability of particular types of financing at the time, and the financial covenants under our credit facilities. Our decision to use leverage to finance our assets will be at the discretion of our Manager and will not be subject to the approval of our stockholders. We currently expect that our leverage will not exceed, on a debt to equity basis, a ratio of

4-to-1.

We will endeavor to match the tenor, currency, and indices of our assets and liabilities, including in certain instances through the use of derivatives. We will also seek to limit the risks associated with recourse borrowing.

Subject to maintaining our qualification as a REIT, from time to time, we engage in hedging transactions that seek to mitigate the effects of fluctuations in interest rates or currencies on our cash flows. These hedging transactions could take a variety of forms, including interest rate or currency swaps or cap agreements, options, futures contracts, forward rate or currency agreements or similar financial instruments.

Floating Rate Portfolio

Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income. As of December 31, 2019, 97% of our loans by total loan exposure earned a floating rate of interest and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans. As of December 31, 2019, the remaining 3% of our loans by total loan exposure earned a fixed rate of interest, but are financed with liabilities that pay interest at floating rates, which resulted in a negative correlation to rising interest rates to the extent of our financing. In certain instances where we have financed fixed rate assets with floating rate liabilities, we have purchased interest rate swaps or caps to limit our exposure to increases in interest rates on such liabilities.

Investment Guidelines

Our board of directors has approved the following investment guidelines:

•

our Manager shall seek to invest our capital in a broad range of investments in, or relating to, public and/or private debt,

non-controlling

equity, loans and/or other interests (including “mezzanine” interests and/or options or derivatives related thereto) relating to real estate assets (including pools thereof), real estate companies, and/or real estate-related holdings;

•

prior to the deployment of capital into investments, our Manager may cause our capital to be invested in any short-term investments in money market funds, bank accounts, overnight repurchase agreements

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with primary federal reserve bank dealers collateralized by direct U.S. government obligations and other instruments or investments reasonably determined by our Manager to be of high quality;

•

not more than 25% of our equity, as defined in the Management Agreement with our Manager, will be invested in any individual investment without the approval of a majority of the investment risk management committee of our board of directors (it being understood, however, that for purposes of the foregoing concentration limit, in the case of any investment that is comprised (whether through a structured investment vehicle or other arrangement) of securities, instruments or assets of multiple portfolio issuers, such investment for purposes of the foregoing limitation shall be deemed to be multiple investments in such underlying securities, instruments and assets and not such particular vehicle, product or other arrangement in which they are aggregated);

•

any investment in excess of $350.0 million shall require the approval of a majority of the investment risk management committee of our board of directors;

•

no investment shall be made that would cause us to fail to qualify as a REIT under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code; and

•

no investment shall be made that would cause us or any of our subsidiaries to be regulated as an investment company under the Investment Company Act.

These investment guidelines may be amended, restated, modified, supplemented or waived upon the approval of a majority of our board of directors, which must include a majority of the independent directors, without the approval of our stockholders.

Competition

We are engaged in a competitive business. In our lending and investing activities, we compete for opportunities with a variety of institutional lenders and investors, including other REITs, specialty finance companies, public and private funds (including other funds managed by Blackstone and its affiliates), commercial and investment banks, commercial finance and insurance companies and other financial institutions. Several other REITs and other investment vehicles have raised significant amounts of capital, and may have investment objectives that overlap with ours, which may create additional competition for lending and investment opportunities. Some competitors may have a lower cost of funds and access to funding sources, such as the U.S. Government, that are not available to us. Many of our competitors are not subject to the operating constraints associated with REIT compliance or maintenance of an exclusion from regulation under the Investment Company Act. We could face increased competition from banks due to future legislative developments, such as amendments to key provisions of the Dodd-Frank Act, including provisions setting forth capital and risk retention requirements. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments and offer more attractive pricing or other terms than we would. Furthermore, competition for originations of and investments in assets we target may lead to decreasing yields, which may further limit our ability to generate targeted returns.

In the face of this competition, we have access to our Manager’s and Blackstone’s professionals and their industry expertise and relationships, which we believe provide us with a competitive advantage and help us assess risks and determine appropriate pricing for potential investments. We believe these relationships will enable us to compete more effectively for attractive investment opportunities. However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face. For additional information concerning these competitive risks, see Item 1A—“Risk Factors—Risks Related to Our Lending and Investment Activities.”

Employees

We do not have any employees. We are externally managed by our Manager pursuant to the Management Agreement. Our executive officers serve as officers of our Manager, and are employed by an affiliate of our Manager.

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Government Regulation

Our operations in North America, Europe, and Australia are subject, in certain instances, to supervision and regulation by U.S. and other governmental authorities, and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, which, among other things: (i) regulate credit-granting activities; (ii) establish maximum interest rates, finance charges and other charges; (iii) require disclosures to customers; (iv) govern secured transactions; and (v) set collection, foreclosure, repossession and claims-handling procedures and other trade practices. We are also required to comply with certain provisions of the Equal Credit Opportunity Act that are applicable to commercial loans. We intend to conduct our business so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act.

In our judgment, existing statutes and regulations have not had a material adverse effect on our business. In recent years, legislators in the United States and in other countries have said that greater regulation of financial services firms is needed, particularly in areas such as risk management, leverage, and disclosure. While we expect that additional new regulations in these areas will be adopted and existing ones may change in the future, it is not possible at this time to forecast the exact nature of any future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial condition, or results of operations or prospects.

Taxation of the Company

We have elected to be taxed as a REIT under the Internal Revenue Code for U.S. federal income tax purposes. We generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal income tax not to apply to our earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws.

Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of our assets and the sources of our income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state, and local income tax on our taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years.

Furthermore, we have one or more taxable REIT subsidiaries, or TRS, which are subject to federal, state, and local income tax on their net taxable income. See Item 1A—“Risk Factors—Risks Related to our REIT Status and Certain Other Tax Items” for additional tax status information.

Taxation of REIT Dividends

Under the Tax Cuts and Jobs Act of 2017, REIT dividends (other than capital gain dividends) received by

non-corporate

taxpayers may be eligible for a 20% deduction. This deduction is only applicable to investors in BXMT that receive dividends and does not have any impact on us. Without further legislation, the deduction would sunset after 2025. Investors should consult their own tax advisors regarding the effect of this change on their effective tax rate with respect to REIT dividends.

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Website Access to Reports

We maintain a website at

www.blackstonemortgagetrust.com

. We are providing the address to our website solely for the information of investors. The information on our website is not a part of, nor is it incorporated by reference into this report. Through our website, we make available, free of charge, our annual proxy statement, annual reports on Form

10-K,

quarterly reports on Form

10-Q,

current reports on Form

8-K

and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish them to, the Securities and Exchange Commission, or the SEC. The SEC maintains a website that contains these reports at

www.sec.gov

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ITEM 1A.

RISK FACTORS

FORWARD-LOOKING INFORMATION

This Annual Report on Form

10-K

contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Exchange Act, which involve certain known and unknown risks and uncertainties. Forward-looking statements predict or describe our future operations, business plans, business and investment strategies and portfolio management and the performance of our investments. These forward-looking statements are generally identified by their use of such terms and phrases as “intend,” “goal,” “estimate,” “expect,” “project,” “projections,” “plans,” “seeks,” “anticipates,” “will,” “should,” “could,” “may,” “designed to,” “foreseeable future,” “believe,” “scheduled” and similar expressions. Our actual results or outcomes may differ materially from those anticipated. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Our actual results may differ significantly from any results expressed or implied by these forward-looking statements. Some, but not all, of the factors that might cause such a difference include, but are not limited to:

•

the general political, economic, capital markets and competitive conditions in the United States and foreign jurisdictions where we invest;

•

the level and volatility of prevailing interest rates and credit spreads;

•

adverse changes in the real estate and real estate capital markets;

•

difficulty in obtaining financing or raising capital;

•

reductions in the yield on our investments and increases in the cost of our financing;

•

defaults by borrowers in paying debt service on outstanding indebtedness;

•

increased competition from entities engaged in mortgage lending and, or investing in our target assets;

•

adverse legislative or regulatory developments, including with respect to tax laws;

•

acts of God such as hurricanes, earthquakes and other natural disasters, acts of war and/or terrorism and other events that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investments;

•

deterioration in the performance of properties securing our investments that may cause deterioration in the performance of our investments and, potentially, principal losses to us;

•

adverse developments in the availability of desirable investment opportunities whether they are due to competition, regulation or otherwise;

•

difficulty in redeploying the proceeds from repayments of our existing investments;

•

difficulty in successfully managing our growth, including integrating new assets into our existing systems;

•

authoritative generally accepted accounting principles, or GAAP, or policy changes from such standard-setting bodies such as the Financial Accounting Standards Board, or FASB, the SEC, the Internal Revenue Service, or IRS, the New York Stock Exchange, or NYSE, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business; and

•

other factors, including those items discussed in the risk factors set forth below.

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Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We caution you not to place undue reliance on these forward-looking statements. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements. Moreover, unless we are required by law to update these statements, we will not necessarily update or revise any forward-looking statements included or incorporated by reference in this Annual Report after the date hereof, either to conform them to actual results or to changes in our expectations.

Risks Related to Our Lending and Investment Activities

Our loans and investments expose us to risks associated with debt-oriented real estate investments generally.

We seek to invest primarily in debt instruments relating to real estate-related assets. As such, we are subject to, among other things, risk of defaults by borrowers in paying debt service on outstanding indebtedness and to other impairments of our loans and investments. Any deterioration of real estate fundamentals generally, and in North America, Europe and Australia in particular, could negatively impact our performance by making it more difficult for borrowers of our mortgage loans, or borrower entities, to satisfy their debt payment obligations, increasing the default risk applicable to borrower entities, and/or making it more difficult for us to generate attractive risk-adjusted returns. Changes in general economic conditions will affect the creditworthiness of borrower entities and/or the value of underlying real estate collateral relating to our investments and may include economic and/or market fluctuations, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, decreases in property values, changes in the appeal of properties to tenants, changes in supply and demand, fluctuations in real estate fundamentals, the financial resources of borrower entities, energy supply shortages, various uninsured or uninsurable risks, natural disasters, political events, terrorism and acts of war, changes in government regulations, changes in real property tax rates and/or tax credits, changes in operating expenses, changes in interest rates, changes in inflation rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, negative developments in the economy and/or adverse changes in real estate values generally and other factors that are beyond our control.

We cannot predict the degree to which economic conditions generally, and the conditions for real estate debt investing in particular, will improve or decline. Any declines in the performance of the U.S. and global economies or in the real estate debt markets could have a material adverse effect on our business, financial condition, and results of operations.

Commercial real estate-related investments that are secured, directly or indirectly, by real property are subject to delinquency, foreclosure and loss, which could result in losses to us.

Commercial real estate debt instruments (e.g., mortgages, mezzanine loans and preferred equity) that are secured by commercial property are subject to risks of delinquency and foreclosure and risks of loss that are greater than similar risks associated with loans made on the security of single-family residential property. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of an income-producing property can be affected by, among other things:

•

tenant mix and tenant bankruptcies;

•

success of tenant businesses;

•

property management decisions, including with respect to capital improvements, particularly in older building structures;

•

property location and condition;

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•

competition from other properties offering the same or similar services;

•

changes in laws that increase operating expenses or limit rents that may be charged;

•

any liabilities relating to environmental matters at the property;

•

changes in global, national, regional, or local economic conditions and/or specific industry segments;

•

global trade disruption, significant introductions of trade barriers and bilateral trade frictions;

•

declines in global, national, regional or local real estate values;

•

declines in global, national, regional or local rental or occupancy rates;

•

changes in interest rates, foreign exchange rates, and in the state of the credit and securitization markets and the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate;

•

changes in real estate tax rates, tax credits and other operating expenses;

•

changes in governmental rules, regulations and fiscal policies, including income tax regulations and environmental legislation;

•

acts of God, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses; and

•

adverse changes in zoning laws.

In addition, we are exposed to the risk of judicial proceedings with our borrowers and entities we invest in, including bankruptcy or other litigation, as a strategy to avoid foreclosure or enforcement of other rights by us as a lender or investor. In the event that any of the properties or entities underlying or collateralizing our loans or investments experiences any of the foregoing events or occurrences, the value of, and return on, such investments could be reduced, which would adversely affect our results of operations and financial condition.

Fluctuations in interest rates and credit spreads could reduce our ability to generate income on our loans and other investments, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments.

Our primary interest rate exposures relate to the yield on our loans and other investments and the financing cost of our debt, as well as our interest rate swaps that we may utilize for hedging purposes. Changes in interest rates and credit spreads may affect our net income from loans and other investments, which is the difference between the interest and related income we earn on our interest-earning investments and the interest and related expense we incur in financing these investments. Interest rate and credit spread fluctuations resulting in our interest and related expense exceeding interest and related income would result in operating losses for us. Changes in the level of interest rates and credit spreads also may affect our ability to make loans or investments, the value of our loans and investments and our ability to realize gains from the disposition of assets. Increases in interest rates and credit spreads may also negatively affect demand for loans and could result in higher borrower default rates.

Our operating results depend, in part, on differences between the income earned on our investments, net of credit losses, and our financing costs. The yields we earn on our floating-rate assets and our borrowing costs tend to move in the same direction in response to changes in interest rates. However, one can rise or fall faster than the other, causing our net interest margin to expand or contract. In addition, we could experience reductions in the yield on our investments and an increase in the cost of our financing. Although we seek to match the terms of our liabilities to the expected lives of loans that we acquire or originate, circumstances may arise in which our liabilities are shorter in duration than our assets, resulting in their adjusting faster in response to changes in interest rates. For any period during which our investments are not match-funded, the income earned on such investments may respond more slowly to interest rate fluctuations than the cost of our borrowings. Consequently,

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changes in interest rates, particularly short-term interest rates, may immediately and significantly decrease our results of operations and cash flows and the market value of our investments. In addition, unless we enter into hedging or similar transactions with respect to the portion of our assets that we fund using our balance sheet, returns we achieve on such assets will generally increase as interest rates for those assets rise and decrease as interest rates for those assets decline.

We operate in a competitive market for lending and investment opportunities which may intensify, and competition may limit our ability to originate or acquire desirable loans and investments or dispose of assets we target, and could also affect the yields of these assets and have a material adverse effect on our business, financial condition and results of operations.

We operate in a competitive market for lending and investment opportunities, which may intensify. Our profitability depends, in large part, on our ability to originate or acquire our target assets on attractive terms. In originating or acquiring our target assets, we compete for opportunities with a variety of institutional lenders and investors, including other REITs, specialty finance companies, public and private funds (including funds managed by affiliates of Blackstone), commercial and investment banks, commercial finance and insurance companies and other financial institutions. Some of our competitors have raised, and may in the future raise, significant amounts of capital, and may have investment objectives that overlap with ours, which may create additional competition for lending and investment opportunities. Some competitors may have a lower cost of funds and access to funding sources that are not available to us, such as the U.S. government. Many of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exclusion from regulation under the Investment Company Act. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments, offer more attractive pricing or other terms and establish more relationships than us. Furthermore, competition for originations of and investments in our target assets may lead to decreasing yields, which may further limit our ability to generate desired returns. Also, as a result of this competition, desirable loans and investments in our target assets may be limited in the future and we may not be able to take advantage of attractive lending and investment opportunities from time to time, thereby limiting our ability to identify and originate or acquire loans or make investments that are consistent with our investment objectives. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations.

Prepayment rates may adversely affect our financial performance and the value of certain of our assets and are difficult to predict.

Our business is currently focused on originating floating-rate mortgage loans secured by commercial real estate assets. Generally, our mortgage loan borrowers may repay their loans prior to their stated maturities. In periods of declining interest rates and/or credit spreads, prepayment rates on loans generally increase. If general interest rates or credit spreads decline at the same time, the proceeds of such prepayments received during such periods may not be reinvested for some period of time or may be reinvested by us in assets yielding less than the yields on the assets that were prepaid.

Because our mortgage loans are generally not originated or acquired at a premium to par value, prepayment rates do not materially affect the value of such assets. However, the value of certain other assets may be affected by prepayment rates. For example, if we originate or acquire mortgage-related securities or a pool of mortgage securities in the future, we would anticipate that the underlying mortgages would prepay at a projected rate generating an expected yield. If we were to purchase such assets at a premium to par value, if borrowers prepay their loans faster than expected, the corresponding prepayments on any such mortgage-related securities would likely reduce the expected yield. Conversely, if we were to purchase such assets at a discount to par value, when borrowers prepay their loans slower than expected, the decrease in corresponding prepayments on the mortgage-related securities would likely reduce the expected yield.

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Prepayment rates on loans may be affected by a number of factors including, but not limited to, the then-current level of interest rates and credit spreads, the availability of mortgage credit, the relative economic vitality of the area in which the related properties are located, the servicing of the loans, possible changes in tax laws, other opportunities for investment, and other economic, social, geographic, demographic and legal factors beyond our control. Consequently, such prepayment rates can vary significantly from period to period and cannot be predicted with certainty. No strategy can completely insulate us from prepayment or other such risks and faster or slower prepayments may adversely affect our profitability and cash available for distribution to our stockholders.

Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.

As our loans and investments are repaid, we will have to redeploy the proceeds we receive into new loans and investments, repay borrowings under our credit facilities, pay dividends to our stockholders or repurchase outstanding shares of our class A common stock. It is possible that we will fail to identify reinvestment options that would provide returns or a risk profile that is comparable to the asset that was repaid. If we fail to redeploy the proceeds we receive from repayment of a loan in equivalent or better alternatives, our financial performance and returns to investors could suffer.

If we are unable to successfully integrate new assets or businesses and manage our growth, our results of operations and financial condition may suffer.

We have in the past and may in the future significantly increase the size and/or change the mix of our portfolio of assets or acquire or otherwise enter into new lines of business. We may be unable to successfully and efficiently integrate newly-acquired assets or businesses into our existing operations or otherwise effectively manage our assets or our growth effectively. In addition, increases in our portfolio of assets and/or changes in the mix of our assets or lines of business may place significant demands on our Manager’s administrative, operational, asset management, financial and other resources. Any failure to manage increases in size effectively could adversely affect our results of operations and financial condition.

The lack of liquidity in certain of our assets may adversely affect our business.

The illiquidity of certain of our assets may make it difficult for us to sell such investments if needed. Certain assets such as mortgages,

B-Notes,

mezzanine and other loans (including participations) and preferred equity, in particular, are relatively illiquid investments due to their short life, their potential unsuitability for securitization and the greater difficulty of recovery in the event of a borrower’s default. In addition, certain of our investments may become less liquid after our investment as a result of periods of delinquencies or defaults or turbulent market conditions, which may make it more difficult for us to dispose of such assets at advantageous times or in a timely manner. Moreover, many of the loans and securities we invest in are not registered under the relevant securities laws, resulting in limitations or prohibitions against their transfer, sale, pledge or their disposition. As a result, many of our investments are illiquid, and if we are required to liquidate all or a portion of our portfolio quickly, for example as a result of margin calls, we may realize significantly less than the value at which we have previously recorded our investments. Further, we may face other restrictions on our ability to liquidate an investment to the extent that we or our Manager (and/or its affiliates) has or could be attributed as having material,

non-public

information regarding the borrower entity. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be limited, which could adversely affect our results of operations and financial condition.

Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks relating to bankruptcy proceedings.

While our loans and investments focus primarily on “performing” real estate-related interests, our loans and investments may also include making distressed investments from time to time (e.g., investments in defaulted,

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out-of-favor

or distressed loans and debt securities) or may involve investments that become

“sub-performing”

“non-performing”

following our origination or acquisition thereof. Certain of our investments may include properties that are highly leveraged, with significant burdens on cash flow and, therefore, involve a high degree of financial risk. During an economic downturn or recession, loans or securities of financially or operationally troubled borrowers or issuers are more likely to go into default than loans or securities of other borrowers or issuers. Loans or securities of financially or operationally troubled issuers are less liquid and more volatile than loans or securities of borrowers or issuers not experiencing such difficulties. The market prices of such securities are subject to erratic and abrupt market movements and the spread between bid and ask prices may be greater than normally expected. Investment in the loans or securities of financially or operationally troubled borrowers or issuers involves a high degree of credit and market risk.

In certain limited cases (e.g., in connection with a workout, restructuring and/or foreclosing proceedings involving one or more of our investments), the success of our investment strategy will depend, in part, on our ability to effectuate loan modifications and/or restructure and improve the operations of our borrower entities. The activity of identifying and implementing successful restructuring programs and operating improvements entails a high degree of uncertainty. There can be no assurance that we will be able to identify and implement successful restructuring programs and improvements with respect to any distressed loans or investments we may have from time to time.

These financial or operating difficulties may never be overcome and may cause borrower entities to become subject to bankruptcy or other similar administrative proceedings. There is a possibility that we may incur substantial or total losses on our investments and in certain circumstances, become subject to certain additional potential liabilities that may exceed the value of our original investment therein. For example, under certain circumstances, a lender that has inappropriately exercised control over the management and policies of a debtor may have its claims subordinated or disallowed or may be found liable for damages suffered by parties as a result of such actions. In any reorganization or liquidation proceeding relating to our investments, we may lose our entire investment, may be required to accept cash or securities with a value less than our original investment and/or may be required to accept different terms, including payment over an extended period of time. In addition, under certain circumstances, payments to us may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance, preferential payment, or similar transaction under applicable bankruptcy and insolvency laws. Furthermore, bankruptcy laws and similar laws applicable to administrative proceedings may delay our ability to realize value from collateral for our loan positions, may adversely affect the economic terms and priority of such loans through doctrines such as equitable subordination or may result in a restructuring of the debt through principles such as the “cramdown” provisions of the bankruptcy laws.

Control may be limited over certain of our loans and investments.

Our ability to manage our portfolio of loans and investments may be limited by the form in which they are made. In certain situations, we:

•

acquire investments subject to rights of senior classes, special servicers or collateral managers under intercreditor, servicing agreements or securitization documents;

•

pledge our investments as collateral for financing arrangements;

•

acquire only a minority and/or a

non-controlling

participation in an underlying investment;

•

co-invest

with others through partnerships, joint ventures or other entities, thereby acquiring

non-controlling

interests; or

•

rely on independent third party management or servicing with respect to the management of an asset.

In addition, in circumstances where we originate or acquire loans relating to borrowers that are owned in whole or part by Blackstone-advised investment vehicles, we often forgo all

non-economic

rights under the loan,

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including voting rights, so long as Blackstone-advised investment vehicles own such borrowers above a certain threshold. Therefore, we may not be able to exercise control over all aspects of our loans or investments. Such financial assets may involve risks not present in investments where senior creditors, junior creditors, servicers third-party controlling investors or Blackstone-advised investment vehicles are not involved. Our rights to control the process following a borrower default may be subject to the rights of senior or junior creditors or servicers whose interests may not be aligned with ours. A partner or

co-venturer

may have financial difficulties resulting in a negative impact on such asset, may have economic or business interests or goals that are inconsistent with ours, or may be in a position to take action contrary to our investment objectives. In addition, we will generally pay all or a portion of the expenses relating to our joint ventures and we may, in certain circumstances, be liable for the actions of our partners or

co-venturers.

B-Notes,

mezzanine loans, and other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures will expose us to greater risk of loss.

We may originate or acquire

B-Notes,

mezzanine loans and other investments (such as preferred equity) that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures. To the extent we invest in subordinated debt or mezzanine tranches of an entity’s capital structure, such investments and our remedies with respect thereto, including the ability to foreclose on any collateral securing such investments, will be subject to the rights of holders of more senior tranches in the issuer’s capital structure and, to the extent applicable, contractual intercreditor,

co-lender

and/or participation agreement provisions. Significant losses related to such loans or investments could adversely affect our results of operations and financial condition.

As the terms of such loans and investments are subject to contractual relationships among lenders,

co-lending

agents and others, they can vary significantly in their structural characteristics and other risks. For example, the rights of holders of

B-Notes

to control the process following a borrower default may vary from transaction to transaction.

B-Notes,

mezzanine loans are by their nature structurally subordinated to more senior property-level financings. If a borrower defaults on our mezzanine loan or on debt senior to our loan, or if the borrower is in bankruptcy, our mezzanine loan will be satisfied only after the property-level debt and other senior debt is paid in full. As a result, a partial loss in the value of the underlying collateral can result in a total loss of the value of the mezzanine loan. In addition, even if we are able to foreclose on the underlying collateral following a default on a mezzanine loan, we would be substituted for the defaulting borrower and, to the extent income generated on the underlying property is insufficient to meet outstanding debt obligations on the property, may need to commit substantial additional capital and/or deliver a replacement guarantee by a credit worthy entity, which may include us, to stabilize the property and prevent additional defaults to lenders with existing liens on the property. In addition, mezzanine loans may have higher

loan-to-value

ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Significant losses related to our

B-Notes

and mezzanine loans would result in operating losses for us and may limit our ability to make distributions to our stockholders.

Loans on properties in transition will involve a greater risk of loss than conventional mortgage loans.

We have in the past and may in the future invest in transitional loans to borrowers who are typically seeking relatively short-term capital to be used in an acquisition or rehabilitation of a property. The typical borrower in a transitional loan has usually identified an undervalued asset that has been under-managed and/or is located in a recovering market. If the market in which the asset is located fails to improve according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset, the borrower may not receive a sufficient return on the asset to satisfy the transitional loan, and we bear the risk that we may not recover all or a portion of our investment.

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In addition, borrowers usually use the proceeds of a conventional mortgage to repay a transitional loan. Transitional loans therefore are subject to the risk of a borrower’s inability to obtain permanent financing to repay the transitional loan. In the event of any default under transitional loans that may be held by us, we bear the risk of loss of principal and

non-payment

of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount and unpaid interest of the transitional loan. To the extent we suffer such losses with respect to these transitional loans, it could adversely affect our results of operations and financial condition.

Risks of cost overruns and noncompletion of renovations of properties in transition may result in significant losses.

The renovation, refurbishment or expansion of a property by a borrower involves risks of cost overruns and noncompletion. Estimates of the costs of improvements to bring an acquired property up to standards established for the market position intended for that property may prove inaccurate. Other risks may include rehabilitation costs exceeding original estimates, possibly making a project uneconomical, environmental risks, delays in legal and other approvals (e.g., for condominiums) and rehabilitation and subsequent leasing of the property not being completed on schedule. If such renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged reduction of net operating income and may not be able to make payments on our investment on a timely basis or at all, which could result in significant losses.

There are increased risks involved with our construction lending activities.

Our construction lending activities, which include our investment in loans that fund the construction or development of real estate-related assets, may expose us to increased lending risks. Construction lending generally is considered to involve a higher degree of risk of

non-payment

and loss than other types of lending due to a variety of factors, including the difficulties in estimating construction costs and anticipating construction delays and, generally, the dependency on timely, successful completion and the

lease-up

and commencement of operations post-completion. In addition, since such loans generally entail greater risk than mortgage loans collateralized by income-producing property, we may need to increase our allowance for loan losses in the future to account for the likely increase in probable incurred credit losses associated with such loans. Further, as the lender under a construction loan, we may be obligated to fund all or a significant portion of the loan at one or more future dates. We may not have the funds available at such future date(s) to meet our funding obligations under the loan. In that event, we would likely be in breach of the loan unless we are able to raise the funds from alternative sources, which we may not be able to achieve on favorable terms or at all.

If a borrower fails to complete the construction of a project or experiences cost overruns, there could be adverse consequences associated with the loan, including a decline in the value of the property securing the loan, a borrower claim against us for failure to perform under the loan documents if we choose to stop funding, increased costs to the borrower that the borrower is unable to pay, a bankruptcy filing by the borrower, and abandonment by the borrower of the collateral for the loan.

Loans or investments involving international real estate-related assets are subject to special risks that we may not manage effectively, which could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders.

We invest a material portion of our capital in assets outside the United States and may increase the percentage of our investments outside the United States over time. Our investments in

non-domestic

real estate-related assets subject us to certain risks associated with international investments generally, including, among others:

•

currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another, which may have an adverse impact on the valuation of our assets or income, including for purposes of our REIT requirements;

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•

less developed or efficient financial markets than in the United States, which may lead to potential price volatility and relative illiquidity;

•

the burdens of complying with international regulatory requirements, including the requirements imposed by exchanges on which our international affiliates list debt securities issued in connection with the financing of our loans or investments involving international real-estate related assets, and prohibitions that differ between jurisdictions;

•

changes in laws or clarifications to existing laws that could impact our tax treaty positions, which could adversely impact the returns on our investments;

•

a less developed legal or regulatory environment, differences in the legal and regulatory environment or enhanced legal and regulatory compliance;

•

political hostility to investments by foreign investors;

•

higher rates of inflation;

•

higher transaction costs;

•

greater difficulty enforcing contractual obligations;

•

fewer investor protections;

•

certain economic and political risks, including potential exchange control regulations and restrictions on our

non-U.S.

investments and repatriation of profits from investments or of capital invested, the risks of political, economic or social instability, the possibility of expropriation or confiscatory taxation and adverse economic and political developments; and

•

potentially adverse tax consequences.

If any of the foregoing risks were to materialize, they could adversely affect our results of operations and financial condition and our ability to make distributions to our stockholders.

A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operations.

We believe the risks associated with our business will be more severe during periods of economic slowdown or recession if these periods are accompanied by declining real estate values. Declining real estate values will likely reduce the level of new mortgage and other real

estate-related

loan originations since borrowers often use appreciation in the value of their existing properties to support the purchase of or investment in additional properties. Borrowers may also be less able to pay principal and interest on our loans if the value of real estate weakens. Further, declining real estate values significantly increase the likelihood that we will incur losses on our loans in the event of default because the value of our collateral may be insufficient to cover its cost on the loan. Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect our Manager’s ability to invest in, sell and securitize loans, which would materially and adversely affect our results of operations, financial condition, liquidity and business and our ability to pay dividends to stockholders.

Market disruptions in a single country could cause a worsening of conditions on a regional and even global level, and economic problems in a single country are increasingly affecting other markets and economies. A continuation of this trend could result in problems in one country adversely affecting regional and even global economic conditions and markets. For example, concerns about the fiscal stability and growth prospects of certain European countries in the last economic downturn had a negative impact on most economies of the Eurozone and global markets. The occurrence of similar crises in the future could cause increased volatility in the economies and financial markets of countries throughout a region, or even globally.

Additionally, global trade disruption, significant introductions of trade barriers and bilateral trade frictions, together with any future downturns in the global economy resulting therefrom, could adversely affect our performance.

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Concerns regarding the stability of the sovereign debt of certain European countries and other geopolitical issues and market perceptions concerning the instability of the Euro, the potential

re-introduction

of individual currencies within the Eurozone, or the potential dissolution of the Euro entirely, could adversely affect our business, results of operations and financial condition.

A portion of our investments consists of assets secured by European collateral. The sovereign debt crisis experienced by several European Union (E.U.) countries, together with the risk of contagion to other more financially stable countries, raised a number of uncertainties regarding the stability and overall standing of the European Monetary Union. Concern over such uncertainties has been exacerbated by other geopolitical issues that may affect the Eurozone, including the vote by the United Kingdom (U.K.) to exit the E.U. Any further deterioration in the global or Eurozone economy could have a significant adverse effect on our activities and the value of any European collateral.

In addition, we currently hold assets and may acquire additional assets that are denominated in British Pounds Sterling and in Euros. Further deterioration in the Eurozone economy could have a material adverse effect on the value of our investment in such assets and amplify the currency risks faced by us.

If any country were to leave the Eurozone, or if the Eurozone were to break up entirely, the treatment of debt obligations previously denominated in Euros is uncertain. A number of issues would be raised, such as whether obligations that are expressed to be payable in Euros would be

re-denominated

into a new currency. The answer to this and other questions is uncertain and would depend on the way in which the

break-up

occurred and also on the nature of the transaction; the law governing it; which courts have jurisdiction in relation to it; the place of payment; and the place of incorporation of the payor. If we were to hold any investments in Euros at the time of any Eurozone exits or

break-up,

this uncertainty and potential

re-denomination

could have a material adverse effect on the value of our investments and the income from them.

The U.K.’s exit from the E.U. could adversely affect us.

In June 2016, voters in the U.K. approved a withdrawal of the U.K. from the E.U., commonly referred to as “Brexit.” While the U.K.’s withdrawal from the E.U. was completed on January 31, 2020, there remains considerable uncertainty about the terms of the U.K.’s trade agreements and other relationships with the E.U. following an

11-month

transition period. During the transition period the U.K. will continue to follow all of the E.U.’s rules and will maintain its current trading relationship with the E.U. Uncertainty over the terms and timing of the U.K.’s withdrawal from the E.U. has caused political and economic uncertainty in the U.K. and the rest of Europe and we expect that uncertainty over the terms of the trade and other agreements between the U.K. and the E.U. will continue to cause political and economic uncertainty, which could harm our business and financial results. In particular, Brexit caused significant volatility in global stock markets and currency exchange fluctuations. Consequently, our loans and investments denominated in British Pounds Sterling are subject to increased risks related to these currency rate fluctuations and our net assets in U.S. Dollar terms may decline. In addition, Brexit may also adversely affect commercial real estate fundamentals in the U.K. and E.U., including greater uncertainty for leasing prospects for properties with transitional loans, which could negatively impact the ability of our U.K and E.U.-based borrowers to satisfy their debt payment obligations to us, increasing default risk and/or making it more difficult for us to generate attractive risk-adjusted returns for our operations in the U.K.

The long-term effects of Brexit are expected to depend on, among other things, any agreements the U.K. makes to retain access to E.U. markets following the

11-month

transition. Brexit could adversely affect European or worldwide economic or market conditions and could contribute to instability in global financial and real estate markets. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate. Until the terms of the free trade and other agreements that the U.K. will eventually enter into with the E.U. are known it is not possible to determine the impact that the U.K.’s departure from the E.U. and/or any related matters may have on us; however, any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, business

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opportunities, results of operations, financial condition and cash flows. Likewise, similar actions taken by other European and other countries in which we operate could have a similar or even more profound impact.

The expected discontinuation of currently used financial reference rates and use of alternative replacement reference rates may adversely affect interest expense related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments.

LIBOR and certain other floating rate benchmark indices to which our floating rate loans and other loan agreements are tied, including, without limitation, the Euro Interbank Offered Rate, the Canadian Dollar Offered Rate and the Australian Bank Bill Swap Reference Rate (collectively, “IBORs”) are the subject of recent national, international and regulatory guidance and proposals for reform. In a speech on July 27, 2017, Andrew Bailey, the Chief Executive of the Financial Conduct Authority of the U.K., or the FCA, announced the FCA’s intention to cease sustaining LIBOR after 2021. The FCA has statutory powers to require panel banks to contribute to LIBOR where necessary. The FCA has decided not to ask, or to require, that panel banks continue to submit contributions to LIBOR beyond the end of 2021. The FCA has indicated that it expects that the current panel banks will voluntarily sustain LIBOR until the end of 2021. It is possible that the ICE Benchmark Administration Limited (formerly NYSE Euronext Rate Administration Limited), or the IBA, and the panel banks could continue to produce LIBOR on the current basis after 2021, if they are willing and able to do so, but we do not currently anticipate that LIBOR will survive in its current form, or at all. Other jurisdictions have also indicated they will implement reforms or phase-outs, which are currently scheduled to take effect at the end of calendar year 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of 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 Treasury securities, as its preferred alternative rate for LIBOR. At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the IBOR benchmarks is anticipated in coming years.

As of December 31, 2019, our loan portfolio included $15.2 billion of floating rate investments with maximum maturities extending past 2021 for which the interest rate was tied to an IBOR benchmark. Additionally, we had $11.6 billion of floating rate debt with maximum maturities extending past 2021 tied to IBOR benchmarks. Our loan agreements generally allow us to choose a new index based upon comparable information if the current index is no longer available. There is currently no definitive information regarding the future utilization of any IBOR benchmark or of any particular replacement rate. In addition, any IBOR benchmark may perform differently during any

phase-out

period than in the past. As such, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined and 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. In addition, we may need to renegotiate certain of our loan agreements with lenders and borrowers that extend past 2021, which could require us to incur significant expense and may subject us to disputes or litigation over the appropriateness or comparability to the relevant IBOR benchmark of the replacement reference rates. Moreover, the elimination of the IBOR benchmarks and/or changes to another index could result in mismatches with the interest rate of investments that we are financing. See “—Risks Related to Our Financing and Hedging—Our use of leverage may create a mismatch with the duration and interest rate of investments that we are financing”. In addition, the overall financial markets may be disrupted as a result of the

phase-out

or replacement of IBOR. We are assessing the impact of a potential transition from IBOR; however, we cannot reasonably estimate the impact of the transition at this time.

Transactions denominated in foreign currencies subject us to foreign currency risks.

We hold assets denominated in British Pounds Sterling, Euros, Canadian Dollars and Australian Dollars, and may acquire assets denominated in other foreign currencies, which exposes us to foreign currency risk. As a result, a change in foreign currency exchange rates may have an adverse impact on the valuation of our assets, as well as our income and cash flows. Any such changes in foreign currency exchange rates may impact the

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measurement of such assets or income for the purposes of our REIT tests and may affect the amounts available for payment of dividends on our class A common stock.

Our success depends on the availability of attractive investments and our Manager’s ability to identify, structure, consummate, leverage, manage and realize returns on our investments.

Our operating results are dependent upon the availability of, as well as our Manager’s ability to identify, structure, consummate, leverage, manage and realize returns on our investments. In general, the availability of favorable investment opportunities and, consequently, our returns, will be affected by the level and volatility of interest rates and credit spreads, conditions in the financial markets, general economic conditions, the demand for investment opportunities in our target assets and the supply of capital for such investment opportunities. We cannot assure you that our Manager will be successful in identifying and consummating investments that satisfy our rate of return objectives or that such investments, once made, will perform as anticipated.

Real estate valuation is inherently subjective and uncertain.

The valuation of real estate and therefore the valuation of any collateral underlying our loans is inherently subjective due to, among other factors, the individual nature of each property, its location, the expected future rental revenues from that particular property and the valuation methodology adopted. In addition, where we invest in construction loans, initial valuations will assume completion of the project. As a result, the valuations of the real estate assets against which we will make or acquire loans are subject to a large degree of uncertainty and are made on the basis of assumptions and methodologies that may not prove to be accurate, particularly in periods of volatility, low transaction flow or restricted debt availability in the commercial or residential real estate markets.

Our loans and investments may be concentrated in terms of geography, asset types and sponsors, which could subject us to increased risk of loss.

We are not required to observe specific diversification criteria, except as may be set forth in the investment guidelines adopted by our board of directors. Therefore, our investments may at times be concentrated in certain property types that may be subject to higher risk of default or foreclosure, or secured by properties concentrated in a limited number of geographic locations.

To the extent that our assets are concentrated in any one region, sponsor or type of asset, economic and business downturns generally relating to such type of asset, sponsor or region may result in defaults on a number of our investments within a short time period, which could adversely affect our results of operations and financial condition. In addition, because of asset concentrations, even modest changes in the value of the underlying real estate assets could have a significant impact on the value of our investment. As a result of any high levels of concentration, any adverse economic, political or other conditions that disproportionately affects those geographic areas or asset classes could have a magnified adverse effect on our results of operations and financial condition, and the value of our stockholders’ investments could vary more widely than if we invested in a more diverse portfolio of loans.

The due diligence process that our Manager undertakes in regard to investment opportunities may not reveal all facts that may be relevant in connection with an investment and if our Manager incorrectly evaluates the risks of our investments we may experience losses.

Before making investments for us, our Manager conducts due diligence that it deems reasonable and appropriate based on the facts and circumstances relevant to each potential investment. When conducting due diligence, our Manager may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of potential investment. Our Manager’s loss

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estimates may not prove accurate, as actual results may vary from estimates. If our Manager underestimates the asset-level losses relative to the price we pay for a particular investment, we may experience losses with respect to such investment.

Moreover, investment analyses and decisions by our Manager may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities. In such cases, the information available to our Manager at the time of making an investment decision may be limited, and they may not have access to detailed information regarding such investment. Therefore, we cannot assure you that our Manager will have knowledge of all circumstances that may adversely affect such investment.

Insurance on loans and real estate securities collateral may not cover all losses.

There are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods, hurricanes, terrorism or acts of war, which may be uninsurable or not economically insurable. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might result in insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed. Under these circumstances, the insurance proceeds received with respect to a property relating to one of our investments might not be adequate to restore our economic position with respect to our investment. Any uninsured loss could result in the corresponding nonperformance of or loss on our investment related to such property.

The impact of any future terrorist attacks and the availability of affordable terrorism insurance expose us to certain risks.

Terrorist attacks, the anticipation of any such attacks, and the consequences of any military or other response by the United States and its allies may have an adverse impact on the global financial markets and the economy in general. We cannot predict the severity of the effect that any such future events would have on the global financial markets, the economy or our business. Any future terrorist attacks could adversely affect the credit quality of some of our loans and investments. Some of our loans and investments will be more susceptible to such adverse effects than others, particularly those secured by properties in major cities or properties that are prominent landmarks or public attractions. We may suffer losses as a result of the adverse impact of any future terrorist attacks and these losses may adversely impact our results of operations.

In addition, the enactment of the Terrorism Risk Insurance Act of 2002, or TRIA, requires insurers to make terrorism insurance available under their property and casualty insurance policies and provides federal compensation to insurers for insured losses. TRIA was scheduled to expire at the end of 2020 but was reauthorized, with some adjustments to its provisions, in December 2019 for seven years through December 31, 2027. However, this legislation does not regulate the pricing of such insurance and there is no assurance that this legislation will be extended beyond 2027. The absence of affordable insurance coverage may adversely affect the general real estate lending market, lending volume and the market’s overall liquidity and may reduce the number of suitable investment opportunities available to us and the pace at which we are able to make investments. If the properties that we invest in are unable to obtain affordable insurance coverage, the value of those investments could decline and in the event of an uninsured loss, we could lose all or a portion of our investment.

We may need to foreclose on certain of the loans we originate or acquire, which could result in losses that harm our results of operations and financial condition.

We may find it necessary or desirable to foreclose on certain of the loans we originate or acquire, and the foreclosure process may be lengthy and expensive. If we foreclose on an asset, we may take title to the property securing that asset, and if we do not or cannot sell the property, we would then come to own and operate it as “real estate owned.” Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning an asset secured by that property. In addition, we may end up owning a property that we would not otherwise have decided to acquire directly at the price of our original investment or

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at all, and the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us.

Whether or not we have participated in the negotiation of the terms of any such loans, we cannot assure you as to the adequacy of the protection of the terms of the applicable loan, including the validity or enforceability of the loan and the maintenance of the anticipated priority and perfection of the applicable security interests. Furthermore, claims may be asserted by lenders or borrowers that might interfere with enforcement of our rights. Borrowers may resist foreclosure actions by asserting numerous claims, counterclaims and defenses against us, including, without limitation, lender liability claims and defenses, even when the assertions may have no basis in fact, in an effort to prolong the foreclosure action and seek to force the lender into a modification of the loan or a favorable

buy-out

of the borrower’s position in the loan. Foreclosure actions in some U.S. states can take several years or more to litigate and may also be time consuming and expensive in other U.S. states and foreign jurisdictions in which we do business. At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process, and could potentially result in a reduction or discharge of a borrower’s debt. Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value. Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us. Furthermore, any costs or delays involved in the foreclosure of the loan or a liquidation of the underlying property will further reduce the net sale proceeds and, therefore, increase any such losses to us.

The properties underlying our investments may be subject to unknown liabilities, including environmental liabilities, that could affect the value of these properties and as a result, our investments.

Collateral properties underlying our investments may be subject to unknown or unquantifiable liabilities that may adversely affect the value of our investments. Such defects or deficiencies may include title defects, title disputes, liens, servitudes or other encumbrances on the mortgaged properties. The discovery of such unknown defects, deficiencies and liabilities could affect the ability of our borrowers to make payments to us or could affect our ability to foreclose and sell the underlying properties, which could adversely affect our results of operations and financial condition.

Furthermore, to the extent we foreclose on properties with respect to which we have extended loans, we may be subject to environmental liabilities arising from such foreclosed properties. Under various U.S. federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. In addition, we could be subject to similar liabilities in applicable foreign jurisdictions.

If we foreclose on any properties underlying our investments, the presence of hazardous substances on a property may adversely affect our ability to sell the property and we may incur substantial remediation costs, therefore the discovery of material environmental liabilities attached to such properties could adversely affect our results of operations and financial condition.

We may be subject to lender liability claims, and if we are held liable under such claims, we could be subject to losses.

In recent years, a number of judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or stockholders. We cannot assure prospective investors that such claims will not arise or that we will not be subject to significant liability if a claim of this type did arise.

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Our investments in CMBS, CLOs, CDOs and other similar structured finance investments, as well as those we structure, sponsor or arrange, pose additional risks, including the risks of the securitization process and the risk that the special servicer, CT Investment Management Co., LLC, or CTIMCO, a subsidiary of Blackstone, may take actions that could adversely affect our interests.

We have invested in, and may from time to time in the future invest in, CMBS, CLOs, CDOs and other similar securities, and our investments may consist of subordinated classes of securities in a structure of securities secured by a pool of mortgages or loans. Accordingly, such securities may be the first or among the first to bear the loss upon a restructuring or liquidation of the underlying collateral and the last to receive payment of interest and principal, with only a nominal amount of equity or other debt securities junior to such positions. The estimated fair values of such subordinated interests tend to be much more sensitive to adverse economic downturns and underlying borrower developments than more senior securities. A projection of an economic downturn, for example, could cause a decline in the price of lower credit quality CMBS, CLOs or CDOs because the ability of borrowers to make principal and interest payments on the mortgages or loans underlying such securities may be impaired.

Subordinate interests such as the subordinated classes of securities in CMBS, CLOs, CDOs and similar structured finance investments generally are not actively traded and are relatively illiquid investments. Volatility in CMBS, CLO and CDO trading markets may cause the value of these investments to decline. In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral value is available to satisfy interest and principal payments and any other fees in connection with the trust or other conduit arrangement for such securities, we may incur significant losses.

With respect to the CMBS, CLOs and CDOs in which we have invested and may invest in the future, control over the related underlying loans will be exercised through CTIMCO, or another special servicer or collateral manager designated by a “directing certificateholder” or a “controlling class representative,” or otherwise pursuant to the related securitization documents. We have in the past and may in the future acquire classes of CMBS, CLOs or CDOs, for which we may not have the right to appoint the directing certificateholder or otherwise direct the special servicing or collateral management. With respect to the management and servicing of those loans, the related special servicer or collateral manager may take actions that could adversely affect our interests. See “—Risks Related to Our Financing and Hedging—We have utilized and may utilize in the future

non-recourse

securitizations to finance our loans and investments, which may expose us to risks that could result in losses” for a discussion of additional risks related to our securitization transactions

Any credit ratings assigned to our investments will be subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded.

Some of our investments, including the notes issued in our securitization transactions for which we are required to retain a portion of the credit risk, may be rated by rating agencies. Any credit ratings on our investments are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value and liquidity of our investments could significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us.

Investments in

non-conforming

and

non-investment

grade rated loans or securities involve increased risk of loss.

Many of our investments may not conform to conventional loan standards applied by traditional lenders and either will not be rated (as is typically the case for private loans) or will be rated as

non-investment

grade by the rating agencies. Private loans often are not rated by credit rating agencies.

Non-investment

grade ratings typically

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result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers’ credit history, the underlying properties’ cash flow or other factors. As a result, these investments should be expected to have a higher risk of default and loss than investment-grade rated assets. Any loss we incur may be significant and may adversely affect our results of operations and financial condition. There are no limits on the percentage of unrated or

non-investment

grade rated assets we may hold in our investment portfolio.

We may invest in derivative instruments, which would subject us to increased risk of loss.

Subject to maintaining our qualification as a REIT, we may invest in derivative instruments. A derivative instrument, especially one of a large notional size or referencing a less common underlying rate, index, instrument or asset, may not be liquid in all circumstances, so that in volatile markets we may not be able to close out a position without incurring a loss. The prices of derivative instruments, which commonly include swaps, futures, forwards and options, may be highly volatile and such instruments may subject us to significant losses. The value of such derivatives also depends upon the price of the underlying instrument or asset or the level of the reference market rate or index. Derivative instruments also are subject to the risk of

non-performance

by the relevant counterparty. In addition, actual or implied daily limits on price fluctuations and position limits on the exchanges or

over-the-counter,

or OTC, markets in which we may conduct our transactions in derivative instruments may prevent prompt liquidation of positions, subjecting us to the potential of greater losses. Derivative instruments that may be purchased or sold by us may include instruments that are purchased or sold OTC as bilateral transactions and not traded on an exchange. The risk of nonperformance by the obligor on such an OTC derivative instrument may be greater and the ease with which we can dispose of or enter into closing transactions with respect to such an instrument may be less than in the case of an exchange-traded instrument. In addition, significant disparities may exist between “bid” and “asked” prices for OTC derivative instruments. Such OTC derivatives are also subject to types and levels of investor protections or governmental regulation that may differ from exchange traded instruments.

In addition, we may invest in derivative instruments that are neither presently contemplated nor currently available, but which may be developed in the future, to the extent such opportunities are both consistent with our investment objectives and legally permissible. Any such investments may expose us to unique and presently indeterminate risks, the impact of which may not be capable of determination until such instruments are developed and/or we determine to make such an investment.

Provisions for loan losses are difficult to estimate.

Our provision for loan losses is evaluated on a quarterly basis. The determination of our provision for loan losses requires us to make certain estimates and judgments, which may be difficult to determine. Our estimates and judgments are based on a number of factors, including projected cash flow from the collateral securing our loans, debt structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at the maturity of a loan, potential for refinancing and expected market discount rates for varying property types, all of which remain uncertain and are subjective. Our estimates and judgments may not be correct and, therefore, our results of operations and financial condition could be severely impacted.

A new accounting standard will likely require us to increase our allowance for loan losses and may have a material adverse effect on our business, financial condition and results of operations.

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update

2016-13,

or ASU

2016-13.

ASU

2016-13

significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU

2016-13

will replace the incurred loss model under existing guidance with a current expected credit loss, or CECL, model for instruments measured at amortized cost, and require entities to record allowances for

available-for-sale

debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment

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model. ASU

2016-13

also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU

2016-13

is effective for fiscal years beginning after December 15, 2019.

The CECL reserve required under ASU

2016-13

is a valuation account that is deducted from the related loans’ and debt securities’ amortized cost basis on our consolidated balance sheets, and which will reduce our total stockholders’ equity. The initial CECL reserve recorded on January 1, 2020 will be reflected as a direct charge to retained earnings; however future changes to the CECL reserve will be recognized through net income on our consolidated statements of operations. While ASU

2016-13

does not require any particular method for determining the CECL allowance, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan.

Because our methodology for determining CECL allowances may differ from the methodologies employed by other companies, our CECL allowances may not be comparable with the CECL allowances reported by other companies.

In addition, other than a few narrow exceptions, ASU

2016-13

requires that all financial instruments subject to the CECL model have some amount of reserve to reflect the GAAP principal underlying the CECL model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors. Accordingly, we expect that the adoption of the CECL model will materially affect how we determine our allowance for loan losses and could require us to increase our allowance and recognize provisions for loan losses earlier in the lending cycle. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses. If we are required to materially increase our level of allowance for loan losses for any reason, such increase could adversely affect our business, financial condition and results of operations.

Some of our portfolio investments may be recorded at fair value and, as a result, there will be uncertainty as to the value of these investments.

Some of our portfolio investments may be in the form of positions or securities that are not publicly traded, but are recorded at estimated fair value. The fair value of securities and other investments that are not publicly traded may not be readily determinable. We will value these investments quarterly at fair value, which may include unobservable inputs. Because such valuations are subjective, the fair value of certain of our assets may fluctuate over short periods of time and our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our results of operations and financial condition could be adversely affected if our determinations regarding the fair value of these investments were materially higher than the values that we ultimately realize upon their disposal.

Risks Related to Our Financing and Hedging

Our significant amount of debt may subject us to increased risk of loss and could adversely affect our results of operations and financial condition.

We currently have outstanding indebtedness and, subject to market conditions and availability, we may incur a significant amount of additional debt through repurchase agreements, bank credit facilities (including term loans and revolving facilities), warehouse facilities and structured financing arrangements, public and private debt issuances (including through securitizations) and derivative instruments, in addition to transaction or asset specific funding arrangements. We may also issue additional debt or equity securities to fund our growth. The percentage of leverage we employ will vary depending on our available capital, our ability to obtain and access financing arrangements with lenders, the type of assets we are funding, whether the financing is recourse or

non-recourse,

debt restrictions contained in those financing arrangements and the lenders’ and rating agencies’ estimate of the stability of our investment portfolio’s cash flow. We may significantly increase the amount of leverage we utilize at any time without approval of our board of directors. In addition, we may leverage individual assets at substantially higher levels. Incurring substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that:

•

our cash flow from operations may be insufficient to make required payments of principal of and interest on our debt or we may fail to comply with covenants contained in our debt agreements, which is likely to result in (a) acceleration of such debt (and any other debt containing a cross-default or

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cross-acceleration provision), which we then may be unable to repay from internal funds or to refinance on favorable terms, or at all, (b) our inability to borrow undrawn amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, which would result in a decrease in our liquidity, and/or (c) the loss of some or all of our collateral assets to foreclosure or sale;

•

our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase in an amount sufficient to offset the higher financing costs;

•

we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; and

•

we may not be able to refinance any debt that matures prior to the maturity (or realization) of an underlying investment it was used to finance on favorable terms or at all.

There can be no assurance that a leveraging strategy will be successful, and such strategy may subject us to increased risk of loss and could adversely affect our results of operations and financial condition.

Our secured debt agreements impose, and additional lending facilities may impose, restrictive covenants, which may restrict our flexibility to determine our operating policies and investment strategy.

We borrow funds under secured debt agreements with various counterparties. The documents that govern these secured debt agreements and the related guarantees contain, and additional lending facilities may contain, customary affirmative and negative covenants, including financial covenants applicable to us that may restrict our flexibility to determine our operating policies and investment strategy. In particular, these agreements may require us to maintain specified minimum levels of capacity under our credit facilities and cash. As a result, we may not be able to leverage our assets as fully as we would otherwise choose, which could reduce our return on assets. If we are unable to meet these collateral obligations, our financial condition and prospects could deteriorate significantly. In addition, lenders may require that our Manager or one or more of our Manager’s executives continue to serve in such capacity. If we fail to meet or satisfy any of these covenants, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral. We may also be subject to cross-default and acceleration rights in our other debt arrangements. Further, this could also make it difficult for us to satisfy the distribution requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes.

Our master repurchase agreements require, and bank credit facilities, repurchase agreements or other financing that we may use in the future to finance our assets may require, us to provide additional collateral or pay down debt.

Our master repurchase agreements with various counterparties, any bank credit facilities (including term loans and revolving facilities), and additional repurchase agreements or other financing we may enter into in the future, involve the risk that the market value of the assets pledged or sold by us to the provider of the financing may decline in value, in which case the lender or counterparty may require us to provide additional collateral or lead to margin calls that may require us to repay all or a portion of the funds advanced. We may not have the funds available to repay our debt at that time, which would likely result in defaults unless we are able to raise the funds from alternative sources, including by selling assets at a time when we might not otherwise choose to do so, which we may not be able to achieve on favorable terms or at all. Posting additional margin would reduce our cash available to make other, higher yielding investments, thereby decreasing our return on equity. If we cannot meet these requirements, the lender or counterparty could accelerate our indebtedness, increase the interest rate on advanced funds and terminate our ability to borrow funds from it, which could materially and adversely affect our financial condition and ability to implement our investment strategy. In the case of repurchase transactions, if the value of the underlying security has declined as of the end of that term, or if we default on our obligations under the repurchase agreement, we will likely incur a loss on our repurchase transactions.

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Our use of leverage may create a mismatch with the duration and interest rate of the investments that we are financing.

We generally structure our leverage in order to minimize the difference between the term of our investments and the leverage we use to finance such investments. In the event that our leverage is for a shorter term than the financed investment, we may not be able to extend or find appropriate replacement leverage and that would have an adverse impact on our liquidity and our returns. In the event that our leverage is for a longer term than the financed investment, we may not be able to repay such leverage or replace the financed investment with an optimal substitute or at all, which will negatively impact our desired leveraged returns.

We also seek to structure our leverage such that we minimize the variability between the interest rate of our investments and the interest rate of our leverage – financing floating rate investments with floating rate leverage and fixed rate investments with fixed rate leverage. If such a product is not available to us from our lenders on reasonable terms, we may use hedging instruments to effectively create such a match. For example, in the case of fixed rate investments, we may finance such investments with floating rate leverage, but effectively convert all or a portion of the attendant leverage to fixed rate using hedging strategies.

Our attempts to mitigate such risk are subject to factors outside of our control, such as the availability to us of favorable financing and hedging options, which is subject to a variety of factors, of which duration and term matching are only two. A duration mismatch may also occur when borrowers prepay their loans faster or slower than expected. The risks of a duration mismatch are also magnified by the potential for the extension of loans in order to maximize the likelihood and magnitude of their recovery value in the event the loans experience credit or performance challenges. Employment of this asset management practice would effectively extend the duration of our investments, while our hedges or liabilities may have set maturity dates.

Interest rate fluctuations could increase our financing costs, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments.

To the extent that our financing costs are determined by reference to floating rates, such as LIBOR (or any replacement rate such as SOFR) or a Treasury index, the amount of such costs will depend on the level and movement of interest rates. In a period of rising interest rates, our interest expense on floating rate debt would increase, while any additional interest income we earn on our floating rate investments may be subject to caps and may not compensate for such increase in interest expense. At the same time, the interest income we earn on our fixed rate investments would not change, the duration and weighted average life of our fixed rate investments would increase and the market value of our fixed rate investments would decrease. Similarly, in a period of declining interest rates, our interest income on floating rate investments would decrease, while any decrease in the interest we are charged on our floating rate debt may be subject to floors and may not compensate for such decrease in interest income and interest we are charged on our fixed rate debt would not change. Any such scenario could adversely affect our results of operations and financial condition.

Our loans and investments may be subject to fluctuations in interest rates that may not be adequately protected, or protected at all, by our hedging strategies.

Our assets include loans with either floating interest rates or fixed interest rates. Floating rate loans earn interest at rates that adjust from time to time (typically monthly) based upon an index (typically

one-month

LIBOR). These floating rate loans are insulated from changes in value specifically due to changes in interest rates; however, the coupons they earn fluctuate based upon interest rates (again, typically

one-month

LIBOR) and, in a declining and/or low interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance. For more information about our risks related to the expected discontinuation of currently used financial reference rates, see “The expected discontinuation of currently used financial reference rates and use of alternative replacement reference rates may adversely affect interest expense related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments” above. Fixed interest rate loans, however, do not have

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adjusting interest rates and the relative value of the fixed cash flows from these loans will decrease as prevailing interest rates rise or increase as prevailing interest rates fall, causing potentially significant changes in value. We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors and other interest rate derivative products. We believe that no strategy can completely insulate us from the risks associated with interest rate changes and there is a risk that such strategies may provide no protection at all and potentially compound the impact of changes in interest rates. Hedging transactions involve certain additional risks such as counterparty risk, leverage risk, the legal enforceability of hedging contracts, the early repayment of hedged transactions and the risk that unanticipated and significant changes in interest rates may cause a significant loss of basis in the contract and a change in current period expense. We cannot make assurances that we will be able to enter into hedging transactions or that such hedging transactions will adequately protect us against the foregoing risks.

Accounting for derivatives under GAAP may be complicated. Any failure by us to meet the requirements for applying hedge accounting in accordance with GAAP could adversely affect our earnings. In particular, derivatives are required to be highly effective in offsetting changes in the value or cash flows of the hedged items (and appropriately designated and/or documented as such). If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in our reported net income.

Inability to access funding could have a material adverse effect on our results of operations, financial condition and business.

Our ability to fund our loans and investments may be impacted by our ability to secure bank credit facilities (including term loans and revolving facilities), warehouse facilities and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to transaction or asset specific funding arrangements and additional repurchase agreements on acceptable terms. We may also rely on short-term financing that would be especially exposed to changes in availability. Our access to sources of financing will depend upon a number of factors, over which we have little or no control, including:

•

general economic or market conditions;

•

the market’s view of the quality of our assets;

•

the market’s perception of our growth potential;

•

our current and potential future earnings and cash distributions; and

•

the market price of the shares of our class A common stock.

We may need to periodically access the capital markets to, among other things, raise cash to fund new loans and investments. Unfavorable economic or capital market conditions may increase our funding costs, limit our access to the capital markets or could result in a decision by our potential lenders not to extend credit. An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings and liquidity. In addition, any dislocation or weakness in the capital and credit markets could adversely affect our lenders and could cause one or more of our lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing. In addition, as regulatory capital requirements imposed on our lenders are increased, they may be required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price. We cannot make assurances that we will be able to obtain any additional financing on favorable terms or at all.

Any warehouse facilities that we may obtain in the future may limit our ability to originate or acquire assets, and we may incur losses if the collateral is liquidated.

We may utilize, if available, warehouse facilities pursuant to which we would accumulate loans in anticipation of a securitization or other financing, which assets would be pledged as collateral for such facilities until the

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securitization or other transaction is consummated. In order to borrow funds to originate or acquire assets under any future warehouse facilities, we expect that our lenders thereunder would have the right to review the potential assets for which we are seeking financing. We may be unable to obtain the consent of a lender to originate or acquire assets that we believe would be beneficial to us and we may be unable to obtain alternate financing for such assets. In addition, no assurance can be given that a securitization or other financing would be consummated with respect to the assets being warehoused. If the securitization or other financing is not consummated, the lender could demand repayment of the facility, and in the event that we were unable to timely repay, could liquidate the warehoused collateral and we would then have to pay any amount by which the original purchase price of the collateral assets exceeds its sale price, subject to negotiated caps, if any, on our exposure. In addition, regardless of whether the securitization or other financing is consummated, if any of the warehoused collateral is sold before the completion, we would have to bear any resulting loss on the sale.

We have utilized and may utilize in the future

non-recourse

securitizations to finance our loans and investments, which may expose us to risks that could result in losses.

We have utilized and may utilize in the future,

non-recourse

securitizations of certain of our portfolio investments to generate cash for funding new loans and investments and other purposes. These transactions generally involve creating a special-purpose entity, contributing a pool of our assets to the entity, and selling interests in the entity on a

non-recourse

basis to purchasers (whom we would expect to be willing to accept a lower interest rate to invest in investment-grade loan pools). We would expect to retain all or a portion of the equity and potentially other tranches in the securitized pool of loans or investments. In addition, we have retained in the past and may in the future retain a pari passu participation in the securitized pool of loans. Because of the interests we retain, in particular with respect to equity or similar subordinated tranches, actions taken by CTIMCO or any other entity that acts as special servicer may in the future conflict with our interests. See “—Risks Related to Our Lending and Investment Activities—Our investments in CMBS, CLOs, CDOs and other similar structured finance investments, as well as those we structure, sponsor or arrange, pose additional risks, including the risks of the securitization process and the risk that the special servicer, CT Investment Management Co., LLC, or CTIMCO, a subsidiary of Blackstone, may take actions that could adversely affect our interests.”

Prior to any such financing, we may use short-term facilities to finance the acquisition of securities until a sufficient quantity of investments had been accumulated, at which time we would refinance these facilities through a securitization, such as a CMBS, or issuance of CLOs, or the private placement of loan participations or other long-term financing. As a result, we would be subject to the risk that we would not be able to acquire, during the period that our short-term facilities are available, a sufficient amount of eligible investments to maximize the efficiency of a CMBS, CLO or private placement issuance. We also would be subject to the risk that we would not be able to obtain short-term credit facilities or would not be able to renew any short-term credit facilities after they expire should we find it necessary to extend our short-term credit facilities to allow more time to seek and acquire the necessary eligible investments for a long-term financing. The inability to consummate securitizations of our portfolio to finance our loans and investments on a long-term basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price, which could adversely affect our performance and our ability to grow our business. Moreover, conditions in the capital markets, including volatility and disruption in the capital and credit markets, may not permit a

non-recourse

securitization at any particular time or may make the issuance of any such securitization less attractive to us even when we do have sufficient eligible assets. We may also suffer losses if the value of the mortgage loans we acquire declines prior to securitization. Declines in the value of a mortgage loan can be due to, among other things, changes in interest rates and changes in the credit quality of the loan. In addition, we may suffer a loss due to the incurrence of transaction costs related to executing these transactions. To the extent that we incur a loss executing or participating in future securitizations for the reasons described above or for other reasons, it could materially and adversely impact our business and financial condition. In addition, the inability to securitize our portfolio may hurt our performance and our ability to grow our business.

In addition, the securitization of our portfolio might magnify our exposure to losses because any equity interest or other subordinate interest we retain in the issuing entity would be subordinate to the notes issued to investors

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and we would, therefore, absorb all of the losses sustained with respect to a securitized pool of assets before the owners of the notes experience any losses. Moreover, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or Dodd-Frank Act, contains a risk retention requirement for all asset-backed securities, which requires both public and private securitizers to retain not less than 5% of the credit risk of the assets collateralizing any asset-backed security issuance. Significant restrictions exist, and additional restrictions may be added in the future, regarding who may hold risk retention interests, the structure of the entities that hold risk retention interests and when and how such risk retention interests may be transferred. Therefore such risk retention interests will generally be illiquid. As a result of the risk retention requirements, we have and may in the future be required to purchase and retain certain interests in a securitization into which we sell mortgage loans and/or when we act as issuer, may be required to sell certain interests in a securitization at prices below levels that such interests have historically yielded and/or may be required to enter into certain arrangements related to risk retention that we have not historically been required to enter into. Accordingly, the risk retention rules may increase our potential liabilities and/or reduce our potential profits in connection with securitization of mortgage loans. It is likely, therefore, that these risk retention rules will increase the administrative and operational costs of asset securitizations.

We may be subject to losses arising from current and future guarantees of debt and contingent obligations of our subsidiaries or joint venture or

co-investment

partners.

We currently guarantee certain obligations of our subsidiaries under various arrangements that provide for significant aggregate borrowings and we may in the future guarantee the performance of additional subsidiaries’ obligations, including, but not limited to, additional repurchase agreements, derivative agreements and unsecured indebtedness. We also currently guarantee certain indebtedness incurred by our joint venture with Walker & Dunlop Inc. and in the future may agree to guarantee other indebtedness or other obligations incurred by other joint venture or

co-investment

partners. Such guarantees may be on a joint and several basis with such joint venture or

co-investment

partner, in which case we may be liable in the event such partner defaults on its guarantee obligation. The

non-performance

of such obligations may cause losses to us in excess of the capital we initially may have invested or committed under such obligations and there is no assurance that we will have sufficient capital to cover any such losses.

We are subject to counterparty risk associated with our debt obligations.

Our counterparties for critical financial relationships may include both domestic and international financial institutions. These institutions could be severely impacted by credit market turmoil, changes in legislation, allegations of civil or criminal wrongdoing and may as a result experience financial or other pressures. In addition, if a lender or counterparty files for bankruptcy or becomes insolvent, our borrowings under financing agreements with them may become subject to bankruptcy or insolvency proceedings, thus depriving us, at least temporarily, of the benefit of these assets. Such an event could restrict our access to financing and increase our cost of capital. If any of our counterparties were to limit or cease operation, it could lead to financial losses for us.

Hedging may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.

Subject to maintaining our qualification as a REIT, we may pursue various hedging strategies to seek to reduce our exposure to adverse changes in interest rates and fluctuations in currencies. Our hedging activity will vary in scope based on the level and volatility of interest rates, exchange rates, the type of assets held and other changing market conditions. Interest rate and currency hedging may fail to protect or could adversely affect us because, among other things:

•

interest rate, currency and/or credit hedging can be expensive and may result in us generating less net income;

•

available interest rate or currency hedges may not correspond directly with the interest rate or currency risk for which protection is sought;

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•

due to a credit loss, prepayment or asset sale, the duration of the hedge may not match the duration of the related asset or liability;

•

the amount of income that a REIT may earn from hedging transactions (other than hedging transactions that satisfy certain requirements of the Internal Revenue Code or that are done through a TRS (as defined below)) to offset interest rate losses is limited by U.S. federal income tax provisions governing REITs;

•

the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;

•

the hedging counterparty owing money in the hedging transaction may default on its obligation to pay;

•

we may fail to recalculate, readjust and execute hedges in an efficient manner; and

•

legal, tax and regulatory changes could occur and may adversely affect our ability to pursue our hedging strategies and/or increase the costs of implementing such strategies.

Any hedging activity in which we engage may materially and adversely affect our results of operations and cash flows. Therefore, while we may enter into such transactions seeking to reduce risks, unanticipated changes in interest rates, credit spreads or currencies may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio positions or liabilities being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and furthermore may expose us to risk of loss.

In addition, some hedging instruments involve additional risk because they are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities. Consequently, we cannot make assurances that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in significant losses. In addition, regulatory requirements with respect to derivatives, including eligibility of counterparties, reporting, recordkeeping, exchange of margin, financial responsibility or segregation of customer funds and positions are still under development and could impact our hedging transactions and how we and our counterparty must manage such transactions.

We are subject to counterparty risk associated with our hedging activities.

We are subject to credit risk with respect to the counterparties to derivative contracts (whether a clearing corporation in the case of exchange-traded instruments or another third party in the case of OTC instruments). If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative contract in a dissolution, assignment for the benefit of creditors, liquidation,

winding-up,

bankruptcy, or other analogous proceeding. In the event of the insolvency of a counterparty to a derivative transaction, the derivative transaction would typically be terminated at its fair market value. If we are owed this fair market value in the termination of the derivative transaction and its claim is unsecured, we will be treated as a general creditor of such counterparty, and will not have any claim with respect to the underlying security. We may obtain only a limited recovery or may obtain no recovery in such circumstances. In addition, the business failure of a counterparty with whom we enter into a hedging transaction will most likely result in its default, which may result in the loss of potential future value and the loss of our hedge and force us to cover our commitments, if any, at the then current market price.

We may enter into hedging transactions that could expose us to contingent liabilities in the future.

Subject to maintaining our qualification as a REIT, part of our investment strategy may involve entering into hedging transactions that could require us to fund cash payments in certain circumstances (such as the early

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termination of the hedging instrument caused by an event of default or other early termination event, or the decision by a counterparty to request margin securities it is contractually owed under the terms of the hedging instrument). The amount due with respect to an early termination would generally be equal to the unrealized loss of such open transaction positions with the respective counterparty and could also include other fees and charges. These economic losses will be reflected in our results of operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely affect our results of operations and financial condition.

We may fail to qualify for, or choose not to elect, hedge accounting treatment.

We generally account for derivative and hedging transactions in accordance with Topic 815 of the Financial Accounting Standards Board’s Accounting Standard Codification, or Topic 815. Under these standards, we may fail to qualify for, or choose not to elect, hedge accounting treatment for a number of reasons, including if we fail to satisfy Topic 815 hedge documentation and hedge effectiveness assessment requirements or our instruments are not highly effective. If we fail to qualify for, or choose not to elect, hedge accounting treatment, our operating results may suffer because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction or item.

If we enter into certain hedging transactions or otherwise invest in certain derivative instruments, failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements which could materially adversely affect our business and financial condition.

Rules under the Dodd-Frank Act establish a comprehensive regulatory framework for derivative contracts commonly referred to as “swaps.” Under this regulatory framework, mortgage real estate investment trusts, or mREITs, that trade in commodity interest positions (including swaps) are considered “commodity pools” and the operators of such mREITs would be considered “commodity pool operators,” or CPOs. Absent relief, a CPO must register with the U.S. Commodity Futures Trading Commission, or CFTC, and become a member of the National Futures Association, or NFA, which requires compliance with NFA’s rules and renders such CPO subject to regulation by the CFTC, including with respect to disclosure, reporting, recordkeeping and business conduct. We may from time to time, directly or indirectly, invest in instruments that meet the definition of “swap” under the Dodd-Frank Act rules, which may subject us to oversight by the CFTC. Our board of directors has appointed our Manager to act as our CPO in the event we are deemed a commodity pool.

In the event that we invest in commodity interests, absent relief, our Manager would be required to register as a CPO. Our Manager is exempt from registration as a CPO with the CFTC pursuant to certain

no-action

relief for the CPO of a qualifying mortgage REIT (and in that regard, we intend to identify as a “mortgage REIT” for U.S. federal income tax purposes). In addition, our Manager may in the future claim a different exemption from registration as a CPO with the CFTC. Therefore, unlike a registered CPO, our Manager will not be required to provide prospective investors with a CFTC compliant disclosure document, nor will our Manager be required to provide investors with periodic account statements or certified annual reports that satisfy the requirements of CFTC rules applicable to registered CPOs, in connection with any offerings of shares.

As an alternative to an exemption from registration, our Manager may register as a CPO with the CFTC and avail itself of certain disclosure, reporting and record-keeping relief under CFTC Rule 4.7.

The CFTC has substantial enforcement power with respect to violations of the laws over which it has jurisdiction, including anti-fraud and anti-manipulation provisions. Among other things, the CFTC may suspend or revoke the registration of a person who fails to comply, prohibit such a person from trading or doing business with registered entities, impose civil money penalties, require restitution and seek fines or imprisonment for criminal violations. Additionally, a private right of action exists against those who violate the laws over which the CFTC has jurisdiction or who willfully aid, abet, counsel, induce or procure a violation of those laws. In the

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event we fail to receive interpretive relief from the CFTC on this matter, are unable to claim an exemption from registration and fail to comply with the regulatory requirements of these new rules, we may be unable to use certain types of hedging instruments or we may be subject to significant fines, penalties and other civil or governmental actions or proceedings, any of which could adversely affect our results of operations and financial condition.

Risks Related to Our Relationship with Our Manager and its Affiliates

We depend on our Manager and its personnel for our success. We may not find a suitable replacement for our Manager if the Management Agreement is terminated, or if key personnel cease to be employed by our Manager or Blackstone or otherwise become unavailable to us.

We are externally managed and advised by our Manager, an affiliate of Blackstone. We currently have no employees and all of our officers are employees of Blackstone or its affiliates. We are completely reliant on our Manager, which has significant discretion as to the implementation of our investment and operating policies and strategies.

Our success depends to a significant extent upon the efforts, experience, diligence, skill, and network of business contacts of the officers and key personnel of our Manager and its affiliates. Our Manager is managed by senior professionals of Blackstone. These individuals evaluate, negotiate, execute and monitor our loans and investments and advise us regarding maintenance of our qualification as a REIT and exclusion from regulation under the Investment Company Act; therefore, our success depends on their skills and management expertise and continued service with our Manager and its affiliates. Furthermore, there is increasing competition among financial sponsors, investment banks and other real estate debt investors for hiring and retaining qualified investment professionals and there can be no assurance that such professionals will continue to be associated with us, our Manager or its affiliates or that any replacements will perform well.

In addition, we can offer no assurance that our Manager will remain our investment manager or that we will continue to have access to our Manager’s officers and key personnel. The current term of the Management Agreement extends to December 19, 2020 and may be renewed for additional

one-year

terms thereafter; provided, however, that our Manager may terminate the Management Agreement annually upon 180 days’ prior notice. If the Management Agreement is terminated and no suitable replacement is found to manage us, we may not be able to execute our business plan. Furthermore, we may incur certain costs in connection with a termination of the Management Agreement.

The personnel of our Manager, as our external manager, are not required to dedicate a specific portion of their time to the management of our business.

Neither our Manager nor any other Blackstone affiliate is obligated to dedicate any specific personnel exclusively to us, nor are they or their personnel obligated to dedicate any specific portion of their time to the management of our business. As a result, we cannot provide any assurances regarding the amount of time our Manager or its affiliates will dedicate to the management of our business and our Manager may have conflicts in allocating its time, resources and services among our business and any other investment vehicles and accounts our Manager (or its personnel) may manage. Each of our officers is also an employee of our Manager or another Blackstone affiliate, who has now or may be expected to have significant responsibilities for other investment vehicles currently managed by Blackstone and its affiliates. Consequently, we may not receive the level of support and assistance that we otherwise might receive if we were internally managed. Our Manager and its affiliates are not restricted from entering into other investment advisory relationships or from engaging in other business activities.

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Our Manager manages our portfolio pursuant to very broad investment guidelines and is not required to seek the approval of our board of directors for each investment, financing, asset allocation or hedging decision made by it, which may result in our making riskier loans and investments and which could adversely affect our results of operations and financial condition.

Our Manager is authorized to follow very broad investment guidelines that provide it with broad discretion over investment, financing, asset allocation and hedging decisions. Our board of directors will periodically review our investment guidelines and our loan and investment portfolio but will not, and will not be required to, review and approve in advance all of our proposed loans and investments or the Manager’s financing, asset allocation or hedging decisions. In addition, in conducting periodic reviews, our directors may rely primarily on information provided to them by our Manager or its affiliates. Subject to maintaining our REIT qualification and our exclusion from regulation under the Investment Company Act, our Manager has significant latitude within the broad investment guidelines in determining the types of loans and investments it makes for us, and how such loans and investments are financing or hedged, which could result in investment returns that are substantially below expectations or that result in losses, which could adversely affect our results of operations and financial condition.

Our Manager’s fee structure may not create proper incentives or may induce our Manager and its affiliates to make certain loans or investments, including speculative investments, which increase the risk of our loan and investment portfolio.

We pay our Manager base management fees regardless of the performance of our portfolio. Our Manager’s entitlement to base management fees, which is not based upon performance metrics or goals, might reduce its incentive to devote its time and effort to seeking loans and investments that provide attractive risk-adjusted returns for our portfolio. Because the base management fees are also based in part on our outstanding equity, our Manager may also be incentivized to advance strategies that increase our equity, and there may be circumstances where increasing our equity will not optimize the returns for our stockholders. Consequently, we are required to pay our Manager base management fees in a particular period despite experiencing a net loss or a decline in the value of our portfolio during that period.

In addition, our Manager has the ability to earn incentive fees each quarter based on our earnings, which may create an incentive for our Manager to invest in assets with higher yield potential, which are generally riskier or more speculative, or sell an asset prematurely for a gain, in an effort to increase our short-term net income and thereby increase the incentive fees to which it is entitled. If our interests and those of our Manager are not aligned, the execution of our business plan and our results of operations could be adversely affected, which could adversely affect our results of operations and financial condition.

We may compete with or enter into transactions with existing and future private and public investment vehicles established and/or managed by Blackstone or its affiliates, which may present various conflicts of interest that restrict our ability to pursue certain investment opportunities or take other actions that are beneficial to our business and/or result in decisions that are not in the best interests of our stockholders.

We are subject to conflicts of interest arising out of our relationship with Blackstone, including our Manager and its affiliates. Three Blackstone employees serve on our board of directors, including Michael B. Nash, the executive chairman of our board of directors and chairman of Blackstone Real Estate Debt Strategies, or BREDS, Stephen D. Plavin, our chief executive officer and president, and Jonathan Pollack, the global head of BREDS. In addition, our chief financial officer and our other executive officers are also employees of Blackstone and/or one or more of its affiliates, and we are managed by our Manager, a Blackstone affiliate. There is no guarantee that the policies and procedures adopted by us, the terms and conditions of the Management Agreement or the policies and procedures adopted by our Manager, Blackstone and their affiliates, will enable us to identify,

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adequately address or mitigate these conflicts of interest. Some examples of conflicts of interest that may arise by virtue of our relationship with our Manager and Blackstone include:

•

Broad and Wide-Ranging Activities

. Our Manager, Blackstone and their affiliates engage in a broad spectrum of activities, including a broad range of activities relating to investments in the real estate industry, and have invested or committed billions of dollars in capital through various investment funds, managed accounts and other vehicles affiliated with Blackstone. In the ordinary course of their business activities, our Manager, Blackstone and their affiliates may engage in activities where the interests of certain divisions of Blackstone and its affiliates, including our Manager, or the interests of their clients may conflict with the interests of our stockholders. Certain of these divisions and entities affiliated with our Manager have or may have an investment strategy similar to our investment strategy and therefore may compete with us. In particular, BREDS invests in a broad range of real estate-related debt investments via numerous different investment funds, managed accounts and other vehicles.

•

Blackstone’s Policies and Procedures

. Specified policies and procedures implemented by Blackstone and its affiliates, including our Manager, to mitigate potential conflicts of interest and address certain regulatory requirements and contractual restrictions may reduce the advantages across Blackstone’s and its affiliates’ various businesses that Blackstone expects to draw on for purposes of pursuing attractive investment opportunities. Because Blackstone has many different businesses, including the Blackstone Capital Markets Group, which Blackstone investment teams and portfolio entities may engage to advise on and to execute debt and equity financings, it is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and more legal and contractual restrictions than that to which it would otherwise be subject if it had just one line of business. In addressing these conflicts and regulatory, legal and contractual requirements across its various businesses, Blackstone has implemented certain policies and procedures (e.g., information walls) that may reduce the positive firm-wide synergies Blackstone could otherwise expect to utilize for purposes of identifying and managing attractive investments. For example, Blackstone may come into possession of material

non-public

information with respect to companies that are clients of Blackstone or its affiliates, in which our Manager may be considering making an investment. As a consequence, that information, which could be of benefit to our Manager, might become restricted to those other businesses and otherwise be unavailable to our Manager, and could also restrict our Manager’s activities. Additionally, the terms of confidentiality or other agreements with or related to companies in which any investment vehicle of Blackstone has or has considered making an investment or which is otherwise a client of Blackstone and its affiliates may restrict or otherwise limit the ability of Blackstone or its affiliates, including our Manager, to engage in businesses or activities competitive with such companies.

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Allocation of Investment Opportunities

Certain inherent conflicts of interest arise from the fact that Blackstone and its affiliates, including our Manager, will provide investment management and other services both to us and to any other person or entity, whether or not the investment objectives or guidelines of any such other person or entity are similar to ours, including, without limitation, the sponsoring, closing and/or managing of any investment funds, vehicles, REITs, accounts, products and/or other similar arrangements sponsored, advised, and/or managed by Blackstone or its affiliates, whether currently in existence or subsequently established (in each case, including any related successor funds, alternative vehicles, supplemental capital vehicles, surge funds, over-flow funds,

co-investment

vehicles, other entities formed in connection with Blackstone or its affiliates

side-by-side

or additional general partner investments with respect thereto, and portfolio companies/entities), which we refer to as the Blackstone Vehicles. The respective investment guidelines and programs of our business and the Blackstone Vehicles may or may not overlap, in whole or in part, and if there is any such overlap, investment opportunities will be allocated between us and the Blackstone Vehicles in a manner that may result in fewer investment opportunities being allocated to us than would have otherwise been the case in the absence of such Blackstone Vehicles. In particular, while our primary investment strategies differ from those of Blackstone’s latest flagship real estate debt fund, Blackstone Real Estate Debt Strategies III L.P. and related separately managed accounts, or

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BREDS III, and Blackstone Real Estate Income Trust, Inc., or BREIT, in that we generally seek to invest primarily in senior mortgage loans and other similar interests, BREDS III generally seeks to invest primarily in junior mortgage debt and mezzanine debt and with respect to debt investments BREIT generally seeks to invest primarily in senior mezzanine debt, a significant portion of the capital of BREDS III and BREIT (and/or other Blackstone Vehicles) may nonetheless be invested in investments that would also be appropriate for us. The allocation methodology applied between us and one or more of the Blackstone Vehicles may result in us not participating (and/or not participating to the same extent) in certain investment opportunities in which we would have otherwise participated had the related allocations been determined without regard to such guidelines and/or based only on the circumstances of those particular investments. Our Manager, Blackstone or their affiliates may also give advice to the Blackstone Vehicles that may differ from advice given to us even though their investment objectives may be the same or similar to ours.

As a result, we may invest in real estate-related debt investments alongside certain Blackstone Vehicles that are part of the BREDS program and other vehicles that include a focus on real estate-related debt investments, including, but not limited to, BREDS III and BREIT. To the extent any other Blackstone Vehicles otherwise have investment objectives or guidelines that overlap with ours, in whole or in part, investment opportunities that fall within such common objectives or guidelines will generally be allocated among one or more of us and such other Blackstone Vehicles on a basis that our Manager and applicable Blackstone affiliates determines to be fair and reasonable in its sole discretion, subject to (i) any applicable investment parameters, limitations and other contractual provisions applicable to us and such other Blackstone Vehicles, (ii) us and such other Blackstone Vehicles having available capital with respect thereto, and (iii) legal, tax, accounting, regulatory and other considerations deemed relevant by our Manager and its affiliates (including, without limitation, the relative risk-return profile of such investment and instrument type, the specific nature and terms of the investment, size and type of the investment, relative investment strategies and primary investment mandates, portfolio diversification concerns, the investment focus, guidelines, limitations, and strategy of each investment fund or vehicle,

co-investment

arrangements, the different liquidity positions and requirements in each fund or vehicle, underwritten leverage levels of a loan, portfolio concentration considerations, contractual obligations, other anticipated uses of capital, the source of the investment opportunity, credit ratings, the ability of a client, fund and/or vehicle to employ leverage, hedging, derivatives, syndication strategies or other similar strategies in connection with acquiring, holding or disposing of the particular investment opportunity, and any requirements or other terms of any existing leverage facilities, geographic focus, remaining investment period, the credit/default profile of an issuer, the extent of involvement of the respective teams of investment professionals dedicated to the Manager and other Blackstone Vehicles, the likelihood/immediacy of foreclosure or conversion to an equity or control opportunity, and other considerations deemed relevant in good faith in their sole discretion). There is no assurance that any conflicts will be resolved in our favor. Our Manager is entitled to amend its investment objectives or guidelines at any time without prior notice or our consent.

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Investments in Different Levels or Classes of an Issuer’s Securities

. We and the Blackstone Vehicles have made and in the future will likely make investments at different levels of an issuer’s or borrower’s capital structure (e.g., an investment by a Blackstone Vehicle in an equity, debt or mezzanine interest with respect to the same portfolio entity in which we own a debt interest or vice versa) or otherwise in different classes of the same issuer’s securities. We may make investments that are senior or junior to, or have rights and interests different from or adverse to, the investments made by the Blackstone Vehicles. Such investments may conflict with the interests of such Blackstone Vehicles in related investments, and the potential for any such conflicts of interests may be heightened in the event of a default or restructuring of any such investments. Actions may be taken for the Blackstone Vehicles that are adverse to us, including with respect to the timing and manner of sale and actions taken in circumstances of financial distress. In addition, in connection with such investments, Blackstone will generally seek to implement certain procedures to mitigate conflicts of interest which typically involve us maintaining a

non-controlling

interest in any such investment and a forbearance of rights, including

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certain

non-economic

rights, relating to the Blackstone Vehicles, such as where Blackstone may cause us to decline to exercise certain control- and/or foreclosure-related rights with respect to a portfolio entity (including following the vote of other third party lenders generally or otherwise recusing itself with respect to decisions), including with respect to defaults, foreclosures, workouts, restructurings and/or exit opportunities, subject to certain limitations. Our Management Agreement requires our Manager to keep our board of directors reasonably informed on a periodic basis in connection with the foregoing, including with respect to transactions that involve investments at different levels of an issuer’s or borrower’s capital structure, as to which our Manager has agreed to provide our board of directors with quarterly updates. We currently hold mortgage and mezzanine loans and other investments in which Blackstone affiliates have interests in the collateral securing or backing such investments. While Blackstone will seek to resolve any conflicts in a fair and equitable manner with respect to conflicts resolution among the Blackstone Vehicles generally, such transactions are not required to be presented to our board of directors for approval, and there can be no assurance that any conflicts will be resolved in our favor.

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Assignment and Sharing or Limitation of Rights

. We may invest alongside other Blackstone Vehicles and in connection therewith may, for legal, tax, regulatory or other reasons which may be unrelated to us, share with or assign to such other Blackstone Vehicles certain of our rights, in whole or in part, or to limit our rights, including certain control- and/or foreclosure-related rights with respect to such shared investments and/or otherwise agree to implement certain procedures to mitigate conflicts of interest which typically involve maintaining a

non-controlling

interest in any such investment and a forbearance of our rights, including certain

non-economic

rights (including following the vote of other third party lenders generally or otherwise being recused with respect to certain decisions, including with respect to defaults, foreclosures, workouts, restructurings and/or exit opportunities), subject to certain limitations. While it is expected that our participation in connection with any such investments and transactions would be negotiated by third parties on market prices, such investments and transactions will give rise to potential or actual conflicts of interest. We cannot make assurances that any such conflict will be resolved in our favor. To the extent we hold an interest in a loan or security that is different (including with respect to their relative seniority) than those held by such other Blackstone Vehicles (and vice versa), our Manager and its affiliates may be presented and/or may have limited or no rights with respect to decisions when the interests of the funds/vehicles are in conflict. Such sharing or assignment of rights could make it more difficult for us to protect our interests and could give rise to a conflict (which may be exacerbated in the case of financial distress) and could result in another Blackstone Vehicle exercising such rights in a way adverse to us.

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Providing Debt Financings in connection with Assets Owned by Other Blackstone Vehicles

. We have, and in the future are likely to provide financing (1) as part of the bid or acquisition by a third party to acquire interests in (or otherwise make an investment in the underlying assets of) a portfolio entity owned by one or more Blackstone Vehicles or their affiliates of assets or interests (and/or portfolios thereof) owned by a third party), (2) with respect to one or more portfolio entities or borrowers in connection with a proposed acquisition or investment by one or more Blackstone Vehicles or affiliates relating to such portfolio entities and/or their underlying assets and/or (3) in other transactions or in the ordinary course, with respect to portfolio entities in which other Blackstone Vehicles and/or affiliates currently hold or propose to acquire an interest. This may include making commitments to provide financing at, prior to or around the time that any such purchaser commits to or makes such investments. While the terms and conditions of any such debt commitments and related arrangements will generally be consistent with market terms, the involvement of us and/or such other Blackstone Vehicles or affiliates in such transactions may impact the market terms. For example, in the case of a loan extended to a portfolio entity by a financing syndicate in which we have agreed to participate on terms negotiated by a third party participant in the syndicate, it may have been necessary for the portfolio entity to offer better terms to lenders to fully subscribe the syndicate if we had not participated. In addition, any such transactions or arrangements may otherwise influence Blackstone’s decisions with respect to the management of us and/or such other Blackstone

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Vehicles and/or the relevant portfolio entity, which will give rise to potential or actual conflicts of interests and which may adversely impact us.

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Obtaining Financing from Other Blackstone Vehicles

. We may from time to time obtain financing from other Blackstone Vehicles (including the BREDS funds). We and/or Blackstone may face conflicts of interest in connection with any borrowings or disputes related to such financing agreement(s) which may adversely impact us.

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Pursuit of Differing Strategies

. At times, the investment professionals employed by our Manager or its affiliates and other investment vehicles affiliated with our Manager and/or Blackstone may determine that an investment opportunity may be appropriate for only some of the accounts, clients, entities, funds and/or investment vehicles for which he or she exercises investment responsibility, or may decide that certain of the accounts, clients, entities, funds and/or investment vehicles should take differing positions with respect to a particular security. In these cases, the investment professionals may place separate transactions for one or more accounts, clients, entities, funds and/or investment vehicles which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other accounts, clients, entities, funds and/or investment vehicles. For example, an investment professional may determine that it would be in the interest of another account to sell a security that we hold long, potentially resulting in a decrease in the market value of the security held by us.

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Variation in Financial and Other Benefits

. A conflict of interest arises where the financial or other benefits available to our Manager or its affiliates differ among the accounts, clients, entities, funds and/or investment vehicles that it manages. If the amount or structure of the base management fee, incentive fee and/or our Manager’s or its affiliates’ compensation differs among accounts, clients, entities, funds and/or investment vehicles (such as where certain funds or accounts pay higher base management fees, incentive fees, performance-based management fees or other fees), our Manager might be motivated to help certain accounts, clients, entities, funds and/or investment vehicles over us. Similarly, the desire to maintain assets under management or to enhance our Manager’s performance record or to derive other rewards, financial or otherwise, could influence our Manager in affording preferential treatment to those accounts, clients, entities, funds and/or investment vehicles that could most significantly benefit our Manager or its affiliates. Our Manager may, for example, have an incentive to allocate favorable or limited opportunity investments or structure the timing of investments to favor such accounts, clients, entities, funds and/or investment vehicles over us. Additionally, our Manager might be motivated to favor accounts, clients, entities, funds and/or investment vehicles in which it has an ownership interest or in which Blackstone and/or its affiliates have ownership interests. Conversely, if an investment professional at our Manager or its affiliates does not personally hold an investment in the fund but holds investments in other Blackstone affiliated vehicles, such investment professional’s conflicts of interest with respect to us may be more acute.

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Underwriting, Advisory and Other Relationships

. As part of its regular business, Blackstone provides a broad range of underwriting, investment banking, placement agent services and other services. In connection with selling investments by way of a public offering, a Blackstone broker-dealer may act as the managing underwriter or a member of the underwriting syndicate on a firm commitment basis and purchase securities on that basis. Blackstone may retain any commissions, remuneration, or other profits and receive compensation from such underwriting activities, which have the potential to create conflicts of interest. Blackstone may also participate in underwriting syndicates from time to time with respect to us or portfolio companies/entities of Blackstone Vehicles, or may otherwise be involved in the private placement of debt or equity securities issued by us or such portfolio companies/entities, or otherwise in arranging financings with respect thereto or advising on such transactions. Subject to applicable law, Blackstone may receive underwriting fees, placement commissions, or other compensation with respect to such activities, which will not be shared with us or our stockholders. Where Blackstone serves as underwriter with respect to the securities of a portfolio company/entity, we or the applicable Blackstone Vehicle holding such securities may be subject to a

“lock-up”

period

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following the offering under applicable regulations during which time our ability to sell any securities that we continue to hold is restricted. This may prejudice our ability to dispose of such securities at an opportune time.

In the regular course of its investment banking business, Blackstone represents potential purchasers, sellers and other involved parties, including corporations, financial buyers, management, shareholders and institutions, with respect to assets that are suitable for investment by us. In such case, Blackstone’s client would typically require Blackstone to act exclusively on its behalf, thereby precluding us from acquiring such assets. Blackstone is under no obligation to decline any such engagement to make the investment opportunity available to us.

Blackstone has long-term relationships with a significant number of corporations and their senior management. In determining whether to invest in a particular transaction on our behalf, our Manager may consider those relationships (subject to its obligations under the Management Agreement), which may result in certain transactions that our Manager will not undertake on our behalf in view of such relationships.

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Service Providers

. Certain of our service providers, or their affiliates (including accountants, administrators, lenders, brokers, attorneys, consultants, title agents, property managers and investment banking or commercial banking firms) also provide goods or services to or have business, personal or other relationships with Blackstone. For example, Blackstone may hold equity or other investments in companies or businesses in the real estate related information technology and other industries that may provide products or services to or otherwise contract with us or other Blackstone Vehicles. In connection with any such investment, Blackstone or other Blackstone Vehicles (or their respective portfolio companies/entities) may make referrals or introductions to other portfolio companies/entities in an effort, in part, to increase the customer base of such companies or businesses, and therefore the value of the investment, or because such referrals or introductions may result in financial incentives (including additional equity ownership) and/or milestones benefitting the referring or introducing party that are tied or related to participation by portfolio companies/entities. We will not share in any fees, economics or equity accruing to Blackstone or such other Blackstone Vehicles as a result of these relationships. In addition, we may enter into agreements regarding group procurement (such as a group purchasing organization), benefits management, purchase of title and/or other insurance policies (which will from time to time be pooled and discounted due to scale) from a third party or a Blackstone affiliate, and other similar operational, administrative, or management related initiatives that result in commissions, discounts or similar payments to Blackstone or its affiliates (including personnel), including related to a portion of the savings achieved. Such service providers may be sources of investment opportunities or

co-investors

or commercial counterparties. Such relationships may influence our Manager in deciding whether to select such service provider. In certain circumstances, service providers, or their affiliates, may charge different rates (including below-market rates or at no cost) or have different arrangements for services provided to Blackstone or its affiliates as compared to services provided to us, which in certain circumstances may result in more favorable rates or arrangements than those payable by us. In addition, in instances where multiple Blackstone businesses may be exploring a potential individual investment, certain of these service providers may choose to be engaged by other Blackstone affiliates rather than us.

In addition, certain advisors and service providers (including law firms) may temporarily provide their personnel to Blackstone, us or other funds advised by Blackstone or their portfolio companies pursuant to various arrangements including at cost or at no cost. While often we and such other Blackstone-advised funds and their portfolio companies are the beneficiaries of these types of arrangements, Blackstone is from time to time a beneficiary of these arrangements as well, including in circumstances where the advisor or service provider also provides services to us in the ordinary course. Such personnel may provide services in respect of multiple matters, including in respect of matters related to Blackstone, its affiliates and/or portfolio companies and any costs of such personnel may be allocated accordingly.

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CTIMCO, a subsidiary of Blackstone, acts as special servicer in connection with our CLO transaction and may act as special servicer in future securitization financing transactions. CTIMCO, in its capacity as special servicer, may be required to enforce obligations or undertake certain other actions that may conflict with our interests.

Lexington National Land Services, or LNLS, is a Blackstone affiliate that acts as an agent for one or more underwriters in issuing title policies and providing support services in connection with investments by us, other Blackstone Vehicles and their portfolio entities, affiliates and related parties and third parties, including, from time to time, our borrowers. LNLS focuses on transactions in rate-regulated U.S. states where the cost of title insurance is

non-negotiable.

LNLS currently does not perform services in nonregulated U.S. states related to our or other Blackstone Vehicles’ investments unless (i) in the context of a portfolio transaction that includes properties in rate regulated states, (ii) as part of a syndicate of title insurance companies where the rate is negotiated by other insurers or their agents, (iii) when a third party is paying all or a material portion of the premium or (iv) when LNLS provides support services for compensation to the underwriter. LNLS earns fees, which would have otherwise been paid to third parties, by providing title agency services and facilitating the placement of title insurance with underwriters and otherwise providing the support services described in (iv) above.

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Material, Non-Public Information

. We, directly or through Blackstone, our Manager or certain of their respective affiliates may come into possession of material

non-public

information with respect to an issuer in which we have invested or may invest. Should this occur, our Manager may be restricted from buying or selling securities, derivatives or loans of the issuer on our behalf until such time as the information becomes public or is no longer deemed material. Disclosure of such information to the personnel responsible for management of our business may be on a

need-to-know

basis only, and we may not be free to act upon any such information. Therefore, we and/or our Manager may not have access to material

non-public

information in the possession of Blackstone which might be relevant to an investment decision to be made by our Manager on our behalf, and our Manager may initiate a transaction or purchase or sell an investment which, if such information had been known to it, may not have been undertaken. Due to these restrictions, our Manager may not be able to initiate a transaction on our behalf that it otherwise might have initiated and may not be able to purchase or sell an investment that it otherwise might have purchased or sold, which could negatively affect our operations.

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Possible Future Activities

. Our Manager and its affiliates may expand the range of services that they provide over time. Except as and to the extent expressly provided in the Management Agreement, our Manager and its affiliates will not be restricted in the scope of its business or in the performance of any such services (whether now offered or undertaken in the future) even if such activities could give rise to conflicts of interest, and whether or not such conflicts are described herein. Our Manager, Blackstone and their affiliates continue to develop relationships with a significant number of companies, financial sponsors and their senior managers, including relationships with clients who may hold or may have held investments similar to those intended to be made by us. These clients may themselves represent appropriate investment opportunities for us or may compete with us for investment opportunities.

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Transactions with Blackstone Vehicles

From time to time, we may enter into purchase and sale transactions with Blackstone Vehicles. Such transactions will be conducted in accordance with, and subject to, the terms and conditions of the Management Agreement (including the requirement that sales to or acquisitions of investments from Blackstone, any Blackstone Vehicle or any of their affiliates be approved in advance by a majority of our independent directors) and our code of business conduct and ethics and applicable laws and regulations.

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Loan Refinancings

We may from time to time seek to participate in investments relating to the refinancing of loans held by the Blackstone Vehicles (including the BREDS funds). While it is expected that our participation in connection with such refinancing transactions will be at arms’ length and on market/contract terms, such transactions may give rise to potential or actual conflicts of interest.

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Other Affiliate Transactions

. Our Manager may on our behalf acquire debt issued by a borrower in which a separate equity or another debt investment has been made by Blackstone or its other affiliates, including the BREDS funds. In connection with investments in which we participate alongside other Blackstone Vehicles (including the BREDS funds), we may from time to time share certain rights with such other Blackstone Vehicles relating to such investments for legal, tax, regulatory or other similar reasons, including, in certain instances, certain control-related rights with respect to jointly-held investments. When making any such investments, there may be conflicting interests. There can be no assurance that the return on our investment will be equivalent to or better than the returns obtained by Blackstone or its other affiliates.

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Family Relationships

. Certain personnel and other professionals of Blackstone have family members or relatives that are actively involved in the industries and sectors in which we invest and/or have business, personal, financial or other relationships with companies in the real estate industry, which gives rise to potential or actual conflicts of interest. For example, such family members or relatives might be officers, directors, personnel or owners of companies or assets which are actual or potential investments of us or our other counterparties. Moreover, in certain instances, we may transact with companies that are owned by such family members or relatives or in respect of which such family members or relatives have other involvement. In most such circumstances, we will not be precluded from undertaking any of these investment activities or transactions. To the extent Blackstone determines appropriate, it may put in place conflict mitigation strategies with respect to a particular circumstance, such as internal information barriers or recusal, disclosure or other steps determined appropriate by the Manager.

Blackstone may enter into one or more strategic relationships in certain regions or with respect to certain types of investments that, although intended to provide greater opportunities for us, may require us to share such opportunities or otherwise limit the amount of an opportunity we can otherwise take.

Further conflicts could arise once we and Blackstone or its affiliates have made their respective investments. For example, if a company goes into bankruptcy or reorganization, becomes insolvent or otherwise experiences financial distress or is unable to meet its payment obligations or comply with covenants relating to securities held by us or by the Blackstone or its affiliates, Blackstone or its affiliates may have an interest that conflicts with our interests or Blackstone or its affiliates may have information regarding the company that we do not have access to. If additional financing is necessary as a result of financial or other difficulties, it may not be in our best interests to provide such additional financing. If Blackstone or its affiliates were to lose their respective investments as a result of such difficulties, the ability of our Manager to recommend actions in our best interests might be impaired.

Termination of the Management Agreement would be costly.

Termination of the Management Agreement without cause would be difficult and costly. Our independent directors review our Manager’s performance annually and the Management Agreement may be terminated each year upon the affirmative vote of at least

two-thirds

of our independent directors, based upon a determination that (i) our Manager’s performance is unsatisfactory and materially detrimental to us or (ii) the base management fee and incentive fee payable to our Manager are not fair (provided that in this instance, our Manager will be afforded the opportunity to renegotiate the management fee and incentive fees prior to termination). We are required to provide our Manager with 180 days prior notice of any such termination. Additionally, upon such a termination, or if we materially breach the Management Agreement and our Manager terminates the Management Agreement, the Management Agreement provides that we will pay our Manager a termination fee equal to three times the sum of the average annual base management fee and the average annual incentive fee earned during the

24-month

period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. These provisions increase the cost to us of terminating the Management Agreement and adversely affect our ability to terminate our Manager without cause.

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Our Manager maintains a contractual as opposed to a fiduciary relationship with us. Our Manager’s liability is limited under the Management Agreement and we have agreed to indemnify our Manager against certain liabilities.

Pursuant to the Management Agreement, our Manager does not assume any responsibility other than to render the services called for thereunder and is not responsible for any action of our board of directors in following or declining to follow its advice or recommendations. Our Manager maintains a contractual as opposed to a fiduciary relationship with us. Under the terms of the Management Agreement, our Manager and its affiliates and their respective directors, officers, employees and stockholders are not liable to us, our directors, our stockholders or any subsidiary of ours, or their directors, officers, employees or stockholders for any acts or omissions performed in accordance with and pursuant to the Management Agreement, except by reason of acts or omissions constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the Management Agreement. We have agreed to indemnify our Manager and its affiliates and their respective directors, officers, employees and stockholders with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of our Manager not constituting bad faith, willful misconduct, gross negligence, or reckless disregard of duties, performed or not performed in good faith in accordance with and pursuant to the Management Agreement. As a result, we could experience poor performance or losses for which our Manager would not be liable.

We do not own the Blackstone or BXMT name, but we may use it as part of our corporate name pursuant to a trademark license agreement with an affiliate of Blackstone. Use of the name by other parties or the termination of our trademark license agreement may harm our business.

We have entered into an amended and restated trademark license agreement, or Trademark License Agreement, with an affiliate of Blackstone pursuant to which it has granted us a fully

paid-up,

royalty-free,

non-exclusive,

non-transferable

license to use the names “Blackstone Mortgage Trust, Inc.” and “BXMT”. Under this agreement, we have a right to use these names for so long as our Manager (or another affiliate of Blackstone TM L.L.C., or Licensor) serves as our Manager (or another managing entity) and our Manager remains an affiliate of the Licensor under the Trademark License Agreement. The Trademark License Agreement may also be earlier terminated by either party as a result of certain breaches or for convenience upon 90 days’ prior written notice; provided that upon notification of such termination by us, the Licensor may elect to effect termination of the Trademark License Agreement immediately at any time after 30 days from the date of such notification. The Licensor and its affiliates, such as Blackstone, will retain the right to continue using the “Blackstone” and “BXMT” names. We will further be unable to preclude the Licensor from licensing or transferring the ownership of the “Blackstone” or “BXMT” names to third parties, some of whom may compete with us. Consequently, we will be unable to prevent any damage to goodwill that may occur as a result of the activities of the Licensor, Blackstone or others. Furthermore, in the event that the Trademark License Agreement is terminated, we would be required to, among other things, change our name and NYSE ticker symbol. Any of these events could disrupt our recognition in the market place, damage any goodwill we may have generated and otherwise harm our business.

Risks Related to Our Company

Our investment strategy or guidelines, asset allocation and financing strategy may be changed without stockholder consent.

Our Manager is authorized to follow broad investment guidelines that have been approved by our board of directors. Those investment guidelines, as well as our financing strategy or hedging policies with respect to investments, originations, acquisitions, growth, operations, indebtedness, capitalization and distributions, may be changed at any time without the consent of our stockholders. This could result in an investment portfolio with a different risk profile. A change in our investment strategy may increase our exposure to interest rate risk, default risk and real estate market fluctuations. Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described in this report. These changes could adversely affect our results of operations and financial condition.

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We must manage our portfolio so that we do not become an investment company that is subject to regulation under the Investment Company Act.

We conduct our operations so that we are not required to register as an investment company under the Investment Company Act. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an investment company if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. “Investment securities” exclude (A) U.S. government securities, (B) securities issued by employees’ securities companies and (C) securities issued by majority-owned subsidiaries which (i) are not investment companies and (ii) are not relying on the exception from the definition of investment company under Section 3(c)(1) or 3(c)(7) of the Investment Company Act. We conduct our operations so that we will not fall within the definition of investment company under Section 3(a)(1)(C) of the Investment Company Act, since less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis will consist of “investment securities.”

To avoid the need to register as an investment company, the securities issued to us by any wholly owned or majority-owned subsidiaries that are excluded from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis. While we monitor our holdings to ensure ongoing compliance with this test, there can be no assurance that we will be able to avoid the need to register as an investment company. This test limits the types of businesses in which we may engage through our subsidiaries. In addition, the assets we and our subsidiaries may originate or acquire are limited by the provisions of the Investment Company Act and the rules and regulations promulgated under the Investment Company Act, which may adversely affect our business.

We hold our assets primarily through direct or indirect wholly owned or majority-owned subsidiaries, certain of which are excluded from the definition of investment company pursuant to Section 3(c)(5)(C) of the Investment Company Act, which provides an exclusion for companies engaged primarily in investment in mortgages and other liens on or interests in real estate. In order to qualify for this exclusion, such subsidiaries must maintain, on the basis of positions taken by the SEC’s Division of Investment Management, or the Division, in interpretive and

no-action

letters, a minimum of 55% of the value of their total assets in mortgage loans and other related assets that are considered “mortgages and other liens on and interests in real estate,” which we refer to as Qualifying Interests, and a minimum of 80% in Qualifying Interests and real estate-related assets. In the absence of SEC or Division guidance that supports the treatment of other investments as Qualifying Interests, we will treat those other investments appropriately as real estate-related assets or miscellaneous assets depending on the circumstances. With respect to our subsidiaries that maintain this exclusion or another exclusion or exception under the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) thereof), our interests in these subsidiaries do not and will not constitute “investment securities.”

In August 2011, the SEC staff commenced an advance notice rulemaking initiative, indicating that it is reconsidering its interpretive policy under Section 3(c)(5)(C) and whether to advance rulemaking to define the basis for the exclusion. We cannot predict the outcome of this reconsideration or potential rulemaking initiative and its impact on our ability to rely on the exclusion. To the extent that the SEC or its staff provides more specific guidance regarding any of the matters bearing upon the requirements of Section 3(c)(5)(C) of the Investment Company Act, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC or its staff could further inhibit our ability to pursue the strategies we have chosen.

Because registration as an investment company would significantly affect our ability to engage in certain transactions or be structured in the manner we currently are, we intend to conduct our business so that we will continue to satisfy the requirements to avoid regulation as an investment company. If we do not meet these requirements, we could be forced to alter our investment portfolios by selling or otherwise disposing of a

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substantial portion of the assets that do not satisfy the applicable requirements or by acquiring a significant position in assets that are Qualifying Interests. In the past, when required due to the mix of assets in our balance sheet portfolio, and in connection with our reliance on the Section 3(c)(5)(C) exclusion, we have purchased agency residential mortgage-backed securities that represent the entire beneficial interests in the underlying pools of whole residential mortgage loans, which are treated as Qualifying Interests based on the Division’s positions. Such investments may not represent an optimum use of capital when compared to the available investments we and our subsidiaries target pursuant to our investment strategy and present additional risks to us. We continue to analyze our investments and may acquire other pools of whole loan residential mortgage-backed securities when and if required for compliance purposes. Altering our portfolio in this manner may have an adverse effect on our investments if we are forced to dispose of or acquire assets in an unfavorable market, and may adversely affect our stock price.

If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties, that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company, and that we would be subject to limitations on corporate leverage that would have an adverse impact on our investment returns. In order to comply with provisions that allow us to avoid the consequences of registration under the Investment Company Act, we may need to forego otherwise attractive opportunities and limit the manner in which we conduct our operations. Therefore, compliance with the requirements of the Investment Company Act may hinder our ability to operate solely on the basis of maximizing profits.

Rapid changes in the values of our other real estate-related investments may make it more difficult for us to maintain our qualification as a REIT or exclusion from regulation under the Investment Company Act.

If the market value or income potential of real estate-related investments declines, we may need to increase our real estate investments and income and/or liquidate our

non-qualifying

assets in order to maintain our REIT qualification or exclusion from Investment Company Act regulation. If the decline in real estate asset values and/or income occurs quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of any

non-qualifying

assets that we may own. We may have to make investment decisions that we otherwise would not make absent the REIT qualification and Investment Company Act considerations.

Changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.

The laws and regulations governing our operations, as well as their interpretation, may change from time to time, and new laws and regulations may be enacted. Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us or otherwise adversely affect our business. Certain regulations enacted in the E.U., including without limitation the Market Abuse Regulation and the Securitization Regulation, impose additional compliance costs on us and may increase our financing costs. Furthermore, if regulatory capital requirements—whether under the Dodd-Frank Act, Basel III (i.e., the framework for a comprehensive set of capital and liquidity standards for internationally active banking organizations, which was adopted in June 2011 by the Basel Committee on Banking Supervision, an international body comprised of senior representatives of bank supervisory authorities and central banks from 27 countries, including the United States) or other regulatory action—are imposed on private lenders that provide us with funds, or were to be imposed on us, they or we may be required to limit, or increase the cost of, financing they provide to us or that we provide to others. Among other things, this could potentially increase our financing costs, reduce our ability to originate or acquire loans and reduce our liquidity or require us to sell assets at an inopportune time or price.

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Various laws and regulations currently exist that restrict the investment activities of banks and certain other financial institutions but do not apply to us, which we believe creates opportunities for us to participate in certain investments that are not available to these more regulated institutions. However, President Trump has promised that the current administration will seek to deregulate the financial industry, including by amending the Dodd-Frank Act, which may decrease the restrictions on banks and other financial institutions and allow them to compete with us for investment opportunities that were previously not available to them. For example, in 2018, President Trump signed into law a bill easing the regulation and oversight of certain banks under the Dodd-Frank Act.

In addition, the results of the 2020 U.S. presidential election could have further impacts on our industry if new legislative or regulatory reforms are adopted. We are unable to predict at this time the effect of any such reforms.

Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the

non-bank

financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of

non-bank

credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.

In addition, the Iran Threat Reduction and Syria Human Rights Act of 2012, or ITRA, expands the scope of U.S. sanctions against Iran and Syria. In particular, Section 219 of the ITRA amended the Exchange Act to require companies subject to SEC reporting obligations under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or transactions involving Iran or other individuals and entities targeted by certain sanctions promulgated by the Office of Foreign Assets Control of the U.S. Department of the Treasury, or Treasury, engaged in by the reporting company or any of its affiliates during the period covered by the relevant periodic report. These companies are required to separately file with the SEC a notice that such activities have been disclosed in the relevant periodic reports, and the SEC is required to post this notice of disclosure on its website and send the report to the U.S. President and certain U.S. Congressional committees. The U.S. President thereafter is required to initiate an investigation and, within 180 days of initiating such an investigation with respect to certain disclosed activities, to determine whether sanctions should be imposed. Disclosure of such activity, even if such activity is not subject to sanctions under applicable law, and any sanctions actually imposed on us or our affiliates as a result of these activities, could harm our reputation and have a negative impact on our business.

State and foreign licensing requirements will cause us to incur expenses and our failure to be properly licensed may have a material adverse effect on us and our operations.

Non-bank

companies are generally required to hold licenses in a number of U.S. states and foreign jurisdictions to conduct lending activities. These licensing statutes vary from jurisdiction to jurisdiction and prescribe or impose various recordkeeping requirements; restrictions on loan origination and servicing practices, including limits on finance charges and the type, amount and manner of charging fees; disclosure requirements; requirements that licensees submit to periodic examination; surety bond and minimum specified net worth requirements; periodic financial reporting requirements; notification requirements for changes in principal officers, stock ownership or corporate control; restrictions on advertising; and requirements that loan forms be submitted for review. Obtaining and maintaining licenses will cause us to incur expenses and failure to be properly licensed under such laws or otherwise may have a material adverse effect on us and our operations.

Actions of the U.S. government, including the U.S. Congress, Federal Reserve Board, Treasury and other governmental and regulatory bodies, to stabilize or reform the financial markets, or market response to those actions, may not achieve the intended effect and may adversely affect our business.

In July 2010, the Dodd-Frank Act was signed into law, which imposes significant investment restrictions and capital requirements on banking entities and other organizations that are significant to U.S. financial stability. For instance, the

so-called

“Volcker Rule” provisions of the Dodd-Frank Act impose significant restrictions on the proprietary trading activities of banking entities and on their ability to sponsor or invest in private equity and hedge funds. It also subjects nonbank financial companies that have been designated as “systemically important”

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by the Financial Stability Oversight Council to increased capital requirements and quantitative limits for engaging in such activities, as well as consolidated supervision by the Federal Reserve Board. The Dodd-Frank Act also seeks to reform the asset-backed securitization market (including the mortgage-backed securities market) by requiring the retention of a portion of the credit risk inherent in the pool of securitized assets and by imposing additional registration and disclosure requirements. In October 2014, five federal banking and housing agencies and the SEC issued final credit risk retention rules, which generally require sponsors of asset-backed securities to retain at least 5% of the credit risk relating to the assets that underlie such asset-backed securities. These rules, which generally became effective in December 2016 with respect to new securitization transactions backed by mortgage loans other than residential mortgage loans, could restrict credit availability and could negatively affect the terms and availability of credit to fund our investments. See “—Risks Related to Our Financing and Hedging—We have utilized and may utilize in the future

non-recourse

securitizations to finance our loans and investments, which may expose us to risks that could result in losses.” While the full impact of the Dodd-Frank Act cannot be fully assessed, the Dodd-Frank Act’s extensive requirements may have a significant effect on the financial markets and may affect the availability or terms of financing from our lender counterparties and the availability or terms of mortgage-backed securities, which may, in turn, have an adverse effect on our business.

On December 16, 2015, the CFTC published a final rule governing margin requirements for uncleared swaps entered into by registered swap dealers and major swap participants who are not supervised by the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Farm Credit Administration and the Federal Housing Finance Agency (collectively, the “Prudential Regulators”), referred to as “covered swap entities,” and such rule was amended on November 19, 2018. The final rule generally requires covered swap entities, subject to certain thresholds and exemptions, to collect and post margin in respect of uncleared swap transactions with other covered swap entities and financial

end-users.

In particular, the final rule requires covered swap entities and financial

end-users

having “material swaps exposure,” defined as an average aggregate daily notional amount of uncleared swaps exceeding a certain specified amount, to collect and/or post (as applicable) a minimum amount of “initial margin” in respect of each uncleared swap; the specified amounts for material swaps exposure differ subject to a

phase-in

schedule until September 1, 2020, when the average aggregate daily notional amount will thenceforth be $8 billion as calculated from June, July and August of the previous calendar year. On October 16, 2019, the CFTC proposed to extend the

phase-in

schedule until September 1, 2021 for entities with smaller average daily aggregate notional amounts of swaps and certain other financial products. In addition, the final rule requires covered swap entities entering into uncleared swaps with other covered swap entities or

financial-end

users, regardless of swaps exposure, to post and/or collect (as applicable) “variation margin” in reflection of changes in the

mark-to-market

value of an uncleared swap since the swap was executed or the last time such margin was exchanged. The CFTC final rule is broadly consistent with a similar rule requiring the exchange of initial and variation margin adopted by the Prudential Regulators in October 2015, as amended, which apply to registered swap dealers, major swap participants, security-based swap dealers and major security-based swap participants that are supervised by one or more of the Prudential Regulators. These rules on margin requirements for uncleared swaps could adversely affect our business, including our ability to enter such swaps or our available liquidity.

The current regulatory environment may be impacted by future legislative developments, such as amendments to key provisions of the Dodd-Frank Act, including provisions setting forth capital and risk retention requirements. For example, on May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Reform Act”) was signed into law. Among other regulatory changes, the Reform Act amends various sections of the Dodd-Frank Act, including by modifying the Volcker Rule to exempt depository institutions that do not have, and are not controlled by a company that has, more than $10 billion in total consolidated assets and significant trading assets and liabilities. In July 2019, U.S. federal regulatory agencies adopted amendments to the Volcker Rule regulations to implement the Volcker Rule amendments included in the Reform Act, and also in 2019 such U.S. federal regulatory agencies adopted certain targeted amendments to the Volcker Rule regulations to simplify and tailor certain compliance requirements relating to the Volcker Rule. The ultimate consequences of the Reform Act and such regulatory developments on our business remain uncertain.

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We depend on our Manager to develop appropriate systems and procedures to control operational risk.

Operational risks arising from mistakes made in the confirmation or settlement of transactions, from transactions not being properly booked, evaluated or accounted for or other similar disruption in our operations may cause us to suffer financial losses, the disruption of our business, liability to third parties, regulatory intervention or damage to our reputation. We depend on our Manager and its affiliates to develop the appropriate systems and procedures to control operational risk. We rely heavily on our financial, accounting and other data processing systems. The ability of our systems to accommodate transactions could also constrain our ability to properly manage our portfolio. Generally, our Manager will not be liable for losses incurred due to the occurrence of any such errors.

Operational risks, including the risk of cyberattacks, may disrupt our businesses, result in losses or limit our growth.

We rely heavily on our and Blackstone’s financial, accounting, treasury, communications and other data processing systems. Such systems may fail to operate properly or become disabled as a result of tampering or a breach of the network security systems or otherwise. In addition, such systems are from time to time subject to cyberattacks, which may continue to increase in sophistication and frequency in the future. Attacks on Blackstone and its affiliates and their portfolio companies’ and service providers’ systems could involve, and in some instances have in the past involved, attempts that are intended to obtain unauthorized access to our proprietary information or personal identifying information of our stockholders, destroy data or disable, degrade or sabotage our systems, including through the introduction of computer viruses and other malicious code.

Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. Our information and technology systems as well as those of Blackstone, its portfolio entities and other related parties, such as service providers, may be vulnerable to damage or interruption from cyber security breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, usage errors by their respective professionals or service providers, power, communications or other service outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes. Cyberattacks and other security threats could originate from a wide variety of sources, including cyber criminals, nation state hackers, hacktivists and other outside parties. There has been an increase in the frequency and sophistication of the cyber and security threats Blackstone faces, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target Blackstone because Blackstone holds a significant amount of confidential and sensitive information about its and our investors, its portfolio companies and potential investments. As a result, we and Blackstone may face a heightened risk of a security breach or disruption with respect to this information. If successful, these types of attacks on our or Blackstone’s network or other systems could have a material adverse effect on our business and results of operations, due to, among other things, the loss of investor or proprietary data, interruptions or delays in the operation of our business and damage to our reputation. There can be no assurance that measures Blackstone takes to ensure the integrity of its systems will provide protection, especially because cyberattack techniques used change frequently or are not recognized until successful.

If unauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitive information, including nonpublic personal information related to shareholders (and their beneficial owners) and material nonpublic information. Although Blackstone has implemented, and its portfolio entities and service providers may implement, various measures to manage risks relating to these types of events, such systems could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease to function properly or fail to adequately secure private information. Blackstone does not control the cyber security plans and systems put in place by third party service providers, and such third party service providers may have limited indemnification obligations to Blackstone, its portfolio entities and us, each of which could be negatively impacted as a result. Breaches such as those

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involving covertly introduced malware, impersonation of authorized users and industrial or other espionage may not be identified even with sophisticated prevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately. The failure of these systems or of disaster recovery plans for any reason could cause significant interruptions in Blackstone’s, its affiliates’, their portfolio entities’ or our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to shareholders, material nonpublic information and the intellectual property and trade secrets and other sensitive information in the possession of Blackstone and portfolio entities. We, Blackstone or a portfolio entity could be required to make a significant investment to remedy the effects of any such failures, harm to their reputations, legal claims that they and their respective affiliates may be subjected to, regulatory action or enforcement arising out of applicable privacy and other laws, adverse publicity and other events that may affect their business and financial performance.

In addition, Blackstone operates in businesses that are highly dependent on information systems and technology. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. In addition, cybersecurity has become a top priority for regulators around the world. Many jurisdictions in which we and Blackstone operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the General Data Protection Regulation in the European Union that went into effect in May 2018. Some jurisdictions have also enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. Breaches in security could potentially jeopardize our or Blackstone’s, its employees’, or our investors’ or counterparties’ confidential and other information processed and stored in, and transmitted through, our or Blackstone’s computer systems and networks, or otherwise cause interruptions or malfunctions in our or Blackstone’s, its employees’, or our investors’, our counterparties’ or third parties’ operations, which could result in significant losses, increased costs, disruption of our business, liability to our investors and other counterparties, regulatory intervention or reputational damage. Furthermore, if we or Blackstone fail to comply with the relevant laws and regulations, it could result in regulatory investigations and penalties, which could lead to negative publicity and may cause our investors or Blackstone’s fund investors and clients to lose confidence in the effectiveness of our or Blackstone’s security measures.

Finally, we depend on our headquarters in New York City, where most of our Manager’s personnel are located, for the continued operation of our business. A disaster or a disruption in the infrastructure that supports our business, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, could have a material adverse impact on our ability to continue to operate our business without interruption. Blackstone’s disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.

Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions. Changes in accounting interpretations or assumptions could impact our ability to timely prepare consolidated financial statements.

Accounting rules for transfers of financial assets, securitization transactions, consolidation of variable interest entities, loan loss reserves and other aspects of our operations are highly complex and involve significant judgment and assumptions. These complexities could lead to a delay in preparation of financial information and the delivery of this information to our stockholders. Changes in accounting interpretations or assumptions could impact our consolidated financial statements and our ability to timely prepare our consolidated financial statements. Our inability to timely prepare our consolidated financial statements in the future would likely have a significant adverse effect on our stock price.

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Risks Related to our REIT Status and Certain Other Tax Items

If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability. Our taxable REIT subsidiaries are subject to income tax.

We expect to continue to operate so as to qualify as a REIT under the Internal Revenue Code. However, qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial or administrative interpretations exist. Notwithstanding the availability of cure provisions in the Internal Revenue Code, we could fail to meet various compliance requirements, which could jeopardize our REIT status. Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to continue to qualify as a REIT. If we fail to qualify as a REIT in any tax year, then:

•

we would be taxed as a regular domestic corporation, which under current laws, among other things, means being unable to deduct distributions to stockholders in computing taxable income and being subject to federal income tax on our taxable income at regular corporate income tax rates;

•

any resulting tax liability could be substantial and could have a material adverse effect on our book value;

•

unless we were entitled to relief under applicable statutory provisions, we would be required to pay taxes, and therefore, our cash available for distribution to stockholders would be reduced for each of the years during which we did not qualify as a REIT and for which we had taxable income; and

•

we generally would not be eligible to requalify as a REIT for the subsequent four full taxable years.

REITs, in certain circumstances, may incur tax liabilities that would reduce our cash available for distribution to our stockholders.

Even if we qualify and maintain our status as a REIT, we may become subject to U.S. federal income taxes and related state, local and foreign taxes. For example, net income from the sale of properties that are “dealer” properties sold by a REIT (a “prohibited transaction” under the Internal Revenue Code) will be subject to a 100% tax. We may not make sufficient distributions to avoid excise taxes applicable to REITs. Similarly, if we were to fail an income test (and did not lose our REIT status because such failure was due to reasonable cause and not willful neglect) we would be subject to tax on the income that does not meet the income test requirements. We also may decide to retain net capital gain we earn from the sale or other disposition of our investments and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are

tax-exempt,

such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and thereon seek a refund of such tax. We also may be subject to state, local and foreign taxes on our income or property, including franchise, payroll, mortgage recording and transfer taxes, either directly or at the level of the other companies through which we indirectly own our assets, such as our TRSs, which are subject to full U.S. federal, state, local and foreign corporate-level income taxes. Any taxes we pay directly or indirectly will reduce our cash available for distribution to our stockholders.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities and limit our expansion opportunities.

In order to qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, our sources of income, the nature of our investments in commercial real estate loans and related assets, the amounts we distribute to our stockholders and the ownership of our stock. We may also be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Therefore, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

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Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments.

In order to qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets. The remainder of our investments in securities cannot include more than 10% of the outstanding voting securities of any one issuer or 10% of the total value of the outstanding securities (other than securities that qualify for the straight debt safe harbor) of any one issuer unless we and such issuer jointly elect for such issuer to be treated as a “taxable REIT subsidiary”, or TRS, under the Internal Revenue Code. Debt will generally meet the “straight debt” safe harbor if the debt is a written unconditional promise to pay on demand or on a specified date a certain sum of money, the debt is not convertible, directly or indirectly, into stock, and the interest rate and the interest payment dates of the debt are not contingent on the profits, the borrower’s discretion or similar factors. The total value of all of our investments in TRSs cannot exceed 20% of the value of our total assets. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer other than a TRS. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of such calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate assets from our portfolio or not make otherwise attractive investments in order to maintain our qualification as a REIT. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

The REIT provisions of the Internal Revenue Code substantially limit our ability to hedge our liabilities. Any income from a properly and timely identified hedging transaction we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income tests that we must satisfy in order to maintain our qualification as a REIT. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as

non-qualifying

income for purposes of both of these gross income tests. As a result of these rules, we intend to limit our use of advantageous hedging techniques or implement those hedges through a domestic TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our TRS will generally not provide any tax benefit, except for being carried forward against future taxable income in the TRS.

Complying with REIT requirements may force us to borrow to make distributions to stockholders.

From time to time, our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available in these situations, we may be unable to distribute substantially all of our taxable income as required by the REIT provisions of the Internal Revenue Code. Therefore, we could be required to borrow funds, sell a portion of our assets at disadvantageous prices or find another alternative. These options could increase our costs or reduce the value of our equity.

Our charter does not permit any individual (including certain entities treated as individuals for this purpose) to own more than 9.9% of our class A common stock or of our capital stock, and attempts to acquire our class A common stock or any of our capital stock in excess of this 9.9% limit would not be effective without a prior exemption from those prohibitions by our board of directors.

For us to qualify as a REIT under the Internal Revenue Code, not more than 50% of the value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (including certain entities treated as individuals for this purpose) during the last half of a taxable year. For the purpose of preserving our qualification as a REIT for federal income tax purposes, among other purposes, our charter prohibits beneficial or constructive

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ownership by any individual (including certain entities treated as individuals for this purpose) of more than a certain percentage, currently 9.9%, by value or number of shares, whichever is more restrictive, of the outstanding shares of our class A common stock or our capital stock, which we refer to as the “Ownership Limit.” The constructive ownership rules under the Internal Revenue Code and our charter are complex and may cause shares of the outstanding class A common stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual. As a result, the acquisition of less than 9.9% of our outstanding class A common stock or our capital stock by an individual or entity could cause an individual to constructively own in excess of 9.9% of our outstanding class A common stock or our capital stock, respectively, and thus violate the Ownership Limit. There can be no assurance that our board of directors, as permitted in the charter, will increase, or will not decrease, this Ownership Limit in the future. Any attempt to own or transfer shares of our class A common stock in excess of the Ownership Limit without the consent of our board of directors will result in either the shares being transferred by operation of our charter to a charitable trust, and the person who attempted to acquire such excess shares not having any rights in such excess shares, or in the transfer being void.

The Ownership Limit may have the effect of precluding a change in control of us by a third party, even if such change in control would be in the best interests of our stockholders or would result in receipt of a premium to the price of our class A common stock (and even if such change in control would not reasonably jeopardize our REIT status).

We may choose to make distributions in our own stock, in which case you may be required to pay income taxes without receiving any cash dividends.

In connection with our qualification as a REIT, we are required to annually distribute to our stockholders at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain. In order to satisfy this requirement, we may make distributions that are payable in cash and/or shares of our class A common stock at the election of each stockholder. As a publicly offered REIT, if at least 20% of the total dividend is available to be paid in cash and certain other requirements are satisfied, the IRS will treat the stock distribution as a dividend (to the extent applicable rules treat such distribution as being made out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes). Taxable stockholders receiving such distributions will be required to include the full amount of such distributions as ordinary dividend income. As a result, U.S. stockholders may be required to pay income taxes with respect to such distributions in excess of the cash portion of the distribution received. Accordingly, U.S. stockholders receiving a distribution of our shares may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution. If a U.S. stockholder sells the stock that it receives as part of the distribution in order to pay this tax, the sales proceeds may be less than the amount it must include in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to certain

non-U.S.

stockholders, we may be required to withhold U.S. tax with respect to such distribution, including in respect of all or a portion of such distribution that is payable in stock, by withholding or disposing of part of the shares included in such distribution and using the proceeds of such disposition to satisfy the withholding tax imposed. In addition, if a significant number of our stockholders determine to sell shares of our class A common stock in order to pay taxes owed on dividend income, such sale may put downward pressure on the market price of our class A common stock.

Although the IRS recently addressed some of the tax aspects of such a taxable cash/stock distribution in a 2017 Revenue Procedure, no assurance can be given that the IRS will not impose requirements in the future with respect to taxable cash/stock distributions, including on a retroactive basis, or assert that the requirements for such taxable cash/stock distributions have not been met.

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Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

Currently, the maximum tax rate applicable to qualified dividend income payable to certain

non-corporate

U.S. stockholders is 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rate. Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause certain

non-corporate

investors to perceive investments in REITs to be relatively less attractive than investments in the stocks of

non-REIT

corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our class A common stock.

Under current law, for taxable years before January 1, 2026, REIT dividends (other than capital gain dividends and qualified dividends) received by

non-corporate

taxpayers may be eligible for a 20% deduction, which if allowed in full equates to a maximum effective U.S. federal income tax rate on ordinary REIT dividends of 29.6%. Prospective investors should consult their own tax advisors regarding the effect of this rule on their effective tax rate with respect to REIT dividends.

We are largely dependent on external sources of capital to finance our growth.

As with other REITs, but unlike corporations generally, our ability to finance our growth must largely be funded by external sources of capital because we generally will have to distribute to our stockholders 90% of our REIT taxable income in order to qualify as a REIT, including taxable income where we do not receive corresponding cash. Our access to external capital will depend upon a number of factors, including general market conditions, the market’s perception of our growth potential, our current and potential future earnings, cash distributions and the market price of our class A common stock.

Our investments in certain debt instruments may cause us to recognize “phantom income” for U.S. federal income tax purposes even though no cash payments have been received on the debt instruments, and certain modifications of such debt by us could cause the modified debt to not qualify as a good REIT asset, thereby jeopardizing our REIT qualification.

Our taxable income may substantially exceed our net income as determined under GAAP, and differences in timing between the recognition of taxable income and the actual receipt of cash may occur. For example, we may acquire assets, including debt securities requiring us to accrue original issue discount, or OID, or recognize market discount income, that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets referred to as “phantom income.” Moreover, we are generally required to take account of certain amounts in taxable income no later than the time such amounts are reflected on certain financial statements. The application of this rule may require the accrual of taxable income with respect to our debt instruments, such as OID, earlier than would be the case under the general tax rules, causing our “phantom income” to increase. In addition, if a borrower with respect to a particular debt instrument encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income with the effect that we will recognize income but will not have a corresponding amount of cash available for distribution to our stockholders.

As a result of the foregoing, we may generate less cash flow than taxable income in a particular year and find it difficult or impossible to meet the REIT distribution requirements in certain circumstances. In such circumstances, we may be required to (a) sell assets in adverse market conditions, (b) borrow on unfavorable terms, (c) distribute amounts that would otherwise be used for future acquisitions or used to repay debt, or (d) make a taxable distribution of our shares of class A common stock as part of a distribution in which stockholders may elect to receive shares of class A common stock or (subject to a limit measured as a percentage of the total distribution) cash, in order to comply with the REIT distribution requirements.

Moreover, we may acquire distressed loans or other distressed debt investments that require subsequent modification by agreement with the borrower. If the amendments to the outstanding debt are “significant

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modifications” under the applicable Treasury Regulations, the modified debt may be considered to have been reissued to us in a

debt-for-debt

taxable exchange with the borrower. In certain circumstances, this deemed reissuance may prevent a portion of the modified debt from qualifying as a good REIT asset if the underlying security has declined in value and would cause us to recognize income to the extent the principal amount of the modified debt exceeds our adjusted tax basis in the unmodified debt.

The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations.

Securitizations could result in the creation of taxable mortgage pools for federal income tax purposes. As a REIT, so long as we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. However, we would be precluded from selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for tax purposes. Certain categories of stockholders, moreover, such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain

tax-exempt

stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. In addition, to the extent that our stock is owned by

tax-exempt

“disqualified organizations,” such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business income, we may incur a corporate level tax on a portion of our income from the taxable mortgage pool. In that case, we may reduce the amount of our distributions to any disqualified organization whose stock ownership gave rise to the tax. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.

The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

We may originate or acquire mezzanine loans, for which the IRS has provided a safe harbor but not rules of substantive law. Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, it will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% and 95% gross income tests. We may originate or acquire mezzanine loans that do not meet all of the requirements of this safe harbor. In the event we own a mezzanine loan that does not meet the safe harbor, the IRS could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and income tests and, if such a challenge were sustained, we could fail to qualify as a REIT.

The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.

We have entered into financing arrangements that are structured as sale and repurchase agreements pursuant to which we would nominally sell certain of our assets to a counterparty and simultaneously enter into an agreement to repurchase these assets at a later date in exchange for a purchase price. Economically, these agreements are financings which are secured by the assets sold pursuant thereto. We believe that we would be treated for REIT asset and income test purposes as the owner of the assets that are the subject of any such sale and repurchase agreement notwithstanding that such agreements may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could assert that we did not own the assets during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT.

Liquidation of assets may jeopardize our REIT qualification.

To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with

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these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as “dealer” property.

Our ownership of and relationship with any TRS will be restricted, and a failure to comply with the restrictions would jeopardize our REIT status and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. The value of our interests in and, therefore, the amount of assets held in a TRS may also be restricted by our need to qualify for an exclusion from regulation as an investment company under the Investment Company Act. A TRS will pay federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. Further, current law imposes a disallowance of deductions for business interest expense (even if paid to third parties) in excess of the sum of a taxpayer’s business interest income and 30% of the adjusted taxable income of the business, which is its taxable income computed without regard to business interest income or expense, net operating losses or the pass-through income deduction (and for taxable years before 2022, excludes depreciation and amortization). The TRS rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an

arm’s-length

basis.

Any domestic TRS we own will pay federal, state and local income tax on its taxable income, and its

after-tax

net income will be available for distribution to us. Although we plan to monitor our investments in TRSs, there can be no assurance that we will be able to comply with the limitations discussed above or to avoid application of the 100% excise tax discussed above.

We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the price of our class A common stock.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. federal income tax laws applicable to investments similar to an investment in shares of our class A common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot make assurances that any such changes will not adversely affect the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. Stockholders are urged to consult with their tax advisors with respect to the impact of recent legislation on investments in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares. Although REITs generally receive certain tax advantages compared to entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has duties to us and could only cause such changes in our tax treatment if it determines that such changes are in the best interest of our company. The impact of tax reform on your investment in us is uncertain. Prospective investors should consult their own tax advisors regarding changes in tax laws.

Risks Related to Our Class A Common Stock

The market price of our class A common stock may fluctuate significantly.

The capital and credit markets have on occasion experienced periods of extreme volatility and disruption. The market price and liquidity of the market for shares of our class A common stock may be significantly affected by

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numerous factors, some of which are beyond our control and may not be directly related to our operating performance. Some of the factors that could negatively affect the market price of our class A common stock include:

•

our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects;

•

actual or perceived conflicts of interest with our Manager or other affiliates of Blackstone and individuals, including our executives;

•

equity issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur;

•

loss of a major funding source;

•

actual or anticipated accounting problems;

•

publication of research reports about us or the real estate industry;

•

changes in market valuations of similar companies;

•

adverse market reaction to the level of leverage we employ;

•

additions to or departures of our Manager’s or Blackstone’s key personnel;

•

speculation in the press or investment community;

•

our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts;

•

increases in market interest rates, which may lead investors to demand a higher distribution yield for our class A common stock, and would result in increased interest expenses on our debt;

•

a compression of the yield on our investments and an increase in the cost of our liabilities;

•

failure to maintain our REIT qualification or exclusion from Investment Company Act regulation;

•

price and volume fluctuations in the overall stock market from time to time;

•

general market and economic conditions, and trends including inflationary concerns, and the current state of the credit and capital markets;

•

significant volatility in the market price and trading volume of securities of publicly traded REITs or other companies in our sector, including us, which is not necessarily related to the operating performance of these companies;

•

changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs;

•

changes in the value of our portfolio;

•

any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

•

operating performance of companies comparable to us;

•

short-selling pressure with respect to shares of our class A common stock or REITs generally; and

•

uncertainty surrounding the strength of the U.S. economy particularly in light of budget deficit concerns and other U.S. and international political and economic affairs.

As noted above, market factors unrelated to our performance could also negatively impact the market price of our class A common stock. One of the factors that investors may consider in deciding whether to buy or sell our class A common stock is our distribution rate as a percentage of our stock price relative to market interest rates.

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If market interest rates increase, prospective investors may demand a higher distribution rate or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and conditions in the capital markets may affect the market value of our class A common stock.

Some provisions of our charter and bylaws and Maryland law may deter takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.

Some of the provisions of Maryland law and our charter and bylaws discussed below could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders by providing them with the opportunity to sell their shares at a premium to the then current market price.

Issuance of Stock Without Stockholder Approval

. Our charter authorizes our board of directors, without stockholder approval, to authorize the issuance of up to 200,000,000 shares of class A common stock and up to 100,000,000 shares of preferred stock. Our charter also authorizes our board of directors, without stockholder approval, to classify or reclassify any unissued shares of our class A common stock and preferred stock into other classes or series of stock and to amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that are authorized by the charter to be issued. Preferred stock may be issued in one or more classes or series, the terms of which may be determined by our board of directors without further action by stockholders. Prior to issuance of any such class or series, our board of directors will set the terms of any such class or series, including the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption. The issuance of any preferred stock could materially adversely affect the rights of holders of our class A common stock and, therefore, could reduce the value of the class A common stock. In addition, specific rights granted to future holders of our preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The power of our board of directors to cause us to issue preferred stock could, in certain circumstances, make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change in control, thereby preserving the current stockholders’ control.

Advance Notice Bylaw

. Our bylaws contain advance notice procedures for the introduction by a stockholder of new business and the nomination of directors by a stockholder. These provisions could, in certain circumstances, discourage proxy contests and make it more difficult for you and other stockholders to elect stockholder-nominated directors and to propose and, consequently, approve stockholder proposals opposed by management.

Maryland Takeover Statutes

. We are subject to the Maryland Business Combination Act, which could delay or prevent an unsolicited takeover of us. The statute substantially restricts the power of third parties who acquire, or seek to acquire, control of us to complete mergers and other business combinations without the approval of our board of directors even if such transaction would be beneficial to stockholders. “Business combinations” between such a third party acquirer or its affiliate and us are prohibited for five years after the most recent date on which the acquirer becomes an “interested stockholder.” An “interested stockholder” is defined as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the

two-year

period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding stock. If our board of directors approved in advance the transaction that would otherwise give rise to the acquirer attaining such status, the acquirer would not become an interested stockholder and, as a result, it could enter into a business combination with us. Our board of directors may, however, provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by it. Even after the lapse of the five-year prohibition period, any business combination with an interested stockholder must be recommended by our board of directors and approved by the affirmative vote of at least:

•

80% of the votes entitled to be cast by stockholders; and

•

two-thirds

of the votes entitled to be cast by stockholders other than the interested stockholder and affiliates and associates thereof.

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The super-majority vote requirements do not apply if the transaction complies with a minimum price and form of consideration requirements prescribed by the statute.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that an interested stockholder becomes an interested stockholder. Our board of directors has exempted any business combination involving a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell, our former chairman of the board, and his family and approved in advance the issuance of shares to W.R. Berkley. In addition, our board of directors has exempted any business combination involving Huskies Acquisition LLC, or Huskies Acquisition, an affiliate of Blackstone, or its affiliates as of September 27, 2012 or Blackstone and its affiliates beginning as of September 27, 2012; provided, however, that Huskies Acquisition or any of its affiliates as of September 27, 2012 and Blackstone and any of its affiliates beginning as of September 27, 2012 may not enter into any “business combination” with us without the prior approval of at least a majority of the members of our board of directors who are not affiliates or associates of Huskies Acquisition or Blackstone. As a result, these parties may enter into business combinations with us without compliance with the five-year prohibition or the super-majority vote requirements and the other provisions of the statute.

We are also subject to the Maryland Control Share Acquisition Act. With certain exceptions, the Maryland General Corporation Law provides that a holder of “control shares” of a Maryland corporation acquired in a “control share acquisition” has no voting rights with respect to those shares except to the extent approved by a vote of

two-thirds

of the votes entitled to be cast on the matter, excluding shares owned by the acquiring person or by our officers or by our directors who are our employees.

Control shares are voting shares of stock which, if aggregated with all other shares of stock owned or entitled to be voted (except solely by virtue of a revocable proxy) by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the specified ranges of voting power. Control shares do not include shares the acquirer is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. A control share acquisition means the acquisition of issued and outstanding control shares subject to certain exceptions. A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions, including an undertaking to pay expenses, may compel our board to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the control shares in question. If no request for a meeting is made, we may present the question at any stockholders meeting.

If voting rights are not approved at a stockholders meeting or if the acquiring person does not deliver the statement required by Maryland law, then, subject to certain conditions and limitations, we may redeem for fair value (determined without regard to the absence of voting rights) any or all of the control shares, except those for which voting rights have previously been approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer may then vote a majority of the shares entitled to vote, then all other stockholders may exercise appraisal rights, unless our charter or bylaws provide otherwise, which they currently do not. The fair value of the shares for purposes of these appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition. The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if we are a party to the transaction, nor does it apply to acquisitions approved or exempted by our charter or bylaws. Our bylaws contain a provision exempting the following persons from this statute: (i) a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell and his family; (ii) W.R. Berkley Corporation and any of its controlled affiliates; and (iii) Huskies Acquisition, or any person or entity that was an affiliate of Huskies Acquisition as of September 27, 2012 or by Blackstone or any of its affiliates.

We are also eligible to elect to be subject to the Maryland Unsolicited Takeovers Act, which permits our board of directors, without stockholder approval, to, among other things and notwithstanding any provision in our charter or bylaws, elect on our behalf to classify the terms of directors and to increase the stockholder vote required to remove a director and to provide that each vacancy on our board may be filled only by a majority of the

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remaining directors even if the remaining directors do not constitute a quorum and each director elected to fill a vacancy shall serve for the remainder of the full term of the class of directors in which the vacancy occurred. Such an election may significantly restrict the ability of third parties to wage a proxy fight for control of our board of directors as a means of advancing a takeover offer. If an acquirer were discouraged from offering to acquire us, or prevented from successfully completing a hostile acquisition, you could lose the opportunity to sell your shares at a favorable price.

Our charter contains provisions that are designed to reduce or eliminate duties of Blackstone and our directors with respect to corporate opportunities and competitive activities.

Our charter contains provisions designed to reduce or eliminate duties of Blackstone and its affiliates (as such term is defined in the charter), and of our directors or any person our directors control to refrain from competing with us or to present to us business opportunities that otherwise may exist in the absence of such charter provisions. Under our charter, Blackstone and its affiliates and our directors or any person our directors control will not be obligated to present to us opportunities unless those opportunities are expressly offered to such person in his or her capacity as a director or officer of Blackstone Mortgage Trust and those persons will be able to engage in competing activities without any restriction imposed as a result of Blackstone’s or its affiliates’ status as a stockholder or Blackstone’s affiliates’ status as officers or directors of Blackstone Mortgage Trust.

We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future.

We are generally required to distribute to our stockholders at least 90% of our REIT taxable income each year for us to qualify as a REIT under the Internal Revenue Code, which requirement we currently intend to satisfy through quarterly distributions of all or substantially all of our REIT taxable income in such year, subject to certain adjustments. Although we generally distribute and intend to continue distributing substantially all of our taxable income to holders of our class A common stock each year so as to comply with the REIT provisions of the Internal Revenue Code, we have not established a minimum distribution payment level and our ability to pay distributions may be adversely affected by a number of factors, including the risk factors described in this report. All distributions will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, liquidity, debt covenants, maintenance of our REIT qualification, applicable law and such other factors as our board of directors may deem relevant from time to time. We believe that a change in any one of the following factors could adversely affect our results of operations and impair our ability to pay distributions to our stockholders:

•

our ability to make profitable investments;

•

margin calls or other expenses that reduce our cash flow;

•

defaults in our asset portfolio or decreases in the value of our portfolio; and

•

the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.

As a result, no assurance can be given that the level of any distributions we make to our stockholders will achieve a market yield or increase or even be maintained over time, any of which could materially and adversely affect the market price of our class A common stock. We may use our net operating losses, to the extent available, carried forward to offset future REIT taxable income, and therefore reduce our dividend requirements. In addition, some of our distributions may include a return of capital, which would reduce the amount of capital available to operate our business.

In addition, distributions that we make to our stockholders will generally be taxable to our stockholders as ordinary income. However, a portion of our distributions may be designated by us as long-term capital gains to the extent that they are attributable to capital gain income recognized by us or may constitute a return of capital

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to the extent that they exceed our earnings and profits as determined for U.S. federal income tax purposes. A return of capital is not taxable, but has the effect of reducing the basis of a stockholder’s investment in our class A common stock.

Investing in our class A common stock may involve a high degree of risk.

The investments that we make in accordance with our investment objectives may result in a high amount of risk when compared to alternative investment options and volatility or loss of principal. Our investments may be highly speculative and aggressive, and therefore an investment in our class A common stock may not be suitable for someone with lower risk tolerance.

Future issuances of equity or debt securities, which may include securities that would rank senior to our class A common stock, may adversely affect the market price of the shares of our class A common stock.

The issuance of additional shares of our class A common stock, including in connection with the conversion of our outstanding 4.375% Convertible Senior Notes due 2022 and/or our outstanding 4.75% Convertible Senior Notes due 2023, through equity distribution agreements we have entered into pursuant to which we may sell, from time to time, up to an aggregate sales price of $500.0 million of our class A common stock or in connection with other future issuances of our class A common stock or shares of preferred stock or securities convertible or exchangeable into equity securities, may dilute the ownership interest of our existing holders of our class A common stock. If we decide to issue debt or equity securities which would rank senior to our class A common stock, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our class A common stock and may result in dilution to owners of our class A common stock. We and, indirectly, our stockholders will bear the cost of issuing and servicing such securities. Because our decision to issue additional equity or debt securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future issuances. Also, we cannot predict the effect, if any, of future sales of our class A common stock, or the availability of shares for future sales, on the market price of our class A common stock. Sales of substantial amounts of class A common stock or the perception that such sales could occur may adversely affect the prevailing market price for the shares of our class A common stock. Therefore holders of our class A common stock will bear the risk of our future issuances reducing the market price of our class A common stock and diluting the value of their stock holdings in us.

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ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

Our principal executive and administrative offices are located in leased space at 345 Park Avenue, 42

Floor, New York, New York 10154. We do not own any real property. We consider these facilities to be suitable and adequate for the management and operations of our business.

ITEM 3.

LEGAL PROCEEDINGS

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2019, we were not involved in any material legal proceedings.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

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PART II.

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our class A common stock is listed for trading on the NYSE under the symbol “BXMT.” As of February 4, 2020 there were

239

holders of record of our class A common stock. This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers.

We generally intend to distribute each year substantially all of our taxable income (which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles, or GAAP) to our stockholders so as to comply with the REIT provisions of the Internal Revenue Code. In addition, our

dividend policy remains subject to revision at the discretion of our board of directors. All distributions will be made at the discretion of our board of directors and will depend upon, among other things, our actual results of operations and liquidity. These results and our ability to pay distributions will be affected by various factors, including our taxable income, our financial condition, our maintenance of REIT status, applicable law, and other factors as our board of directors deems relevant.

Issuer Purchases of Equity Securities

We did not purchase any shares of our class A common stock during the three months ended December 31, 2019.

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ITEM 6.

SELECTED FINANCIAL DATA

The following selected consolidated historical financial data should be read in conjunction with the information set forth under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto that appear on pages

F-2

F-47

of this report.


	Years ended December 31,
(in thousands, except per share data)	2019		2018		2017		2016		2015
Operating Data:
Interest and related income	$	882,679	$	756,109	$	537,915	$	497,974	$	410,635
Interest and related expense		458,503		359,625		234,870		184,270		152,416

Income from loans and other investments, net	$	424,176	$	396,484	$	303,045	$	313,704	$	258,219
Net income	$	307,393	$	285,813	$	217,968	$	246,440	$	211,885
Net income attributable to Blackstone Mortgage Trust, Inc.	$	305,567	$	285,078	$	217,631	$	238,297	$	196,829

Per Share Data:
Net income from continuing operations per share of common stock
Basic and diluted	$	2.35	$	2.50	$	2.27	$	2.53	$	2.41
Net income per share of common stock
Basic and diluted	$	2.35	$	2.50	$	2.27	$	2.53	$	2.41
Dividends declared per share of common stock	$	2.48	$	2.48	$	2.48	$	2.48	$	2.28

	As of December 31,
	2019		2018		2017		2016		2015
Balance Sheet Data:
Total assets	$	16,551,871	$	14,467,375	$	10,258,825	$	8,812,615	$	9,376,573
Secured debt agreements, net		10,054,930		8,974,756		5,273,855		5,716,354		6,116,105
Secured term loan, net		736,142		—		—		—		—
Convertible notes, net		613,071		609,911		563,911		166,762		164,026
Total liabilities		12,767,190		11,092,768		7,341,419		6,319,012		6,870,842
Total equity		3,784,681		3,374,607		2,917,406		2,493,603		2,505,731

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form

10-K.

In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in Part, 1. Item 1A, “Risk Factors” in this Annual Report on Form

10-K.

Introduction

We conduct our operations as a REIT for U.S. federal income tax purposes. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT. We also operate our business in a manner that permits us to maintain an exclusion from registration under the Investment Company Act of 1940, as amended. We are organized as a holding company and conduct our business primarily through our various subsidiaries.

2019 Highlights

Operating results:

•

Net income of $305.6 million, or $2.35 per share, and Core Earnings of $350.7 million, or $2.70 per share.

•

Increased our book value per share to $27.82, an increase of $0.62 during the year.

Loan originations and acquisitions:

•

Loan originations and acquisitions totaled $8.6 billion during 2019, with an average loan size for directly originated loans of $231.9 million.

•

Portfolio of 129 investments as of December 31, 2019, with a weighted-average origination

loan-to-value

ratio of 63.7% and weighted-average

all-in

yield of L+3.56%.

Capital markets and financing activity:

•

Issued an aggregate 10.5 million shares of our class A common stock through a combination of an underwritten public offering and our

at-the-market

program, generating aggregate net proceeds of $372.3 million.

•

Entered into a $750.0 million senior secured term loan facility that bears interest at a rate of L+2.25% per annum.

Portfolio financing:

•

Financing capacity of $20.1 billion as of December 31, 2019, which includes credit facilities with 12 credit providers, as well as various asset-specific financings, securitized debt obligations, and senior loan interests, providing stable,

non-capital

markets-based

mark-to-market

financings.

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I. 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, Core Earnings, and book value per share. For the three months ended December 31, 2019, we recorded earnings per share of $0.59, declared a dividend of $0.62 per share, and reported $0.68 per share of Core Earnings. In addition, our book value per share as of December 31, 2019 was $27.82, an increase of $0.62 per share relative to December 31, 2018. For the year ended December 31, 2019, we recorded earnings per share of $2.35, declared aggregate dividends of $2.48 per share, and reported $2.70 per share of Core Earnings.

As further described below, Core Earnings is a measure that is not prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. We use Core Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan activity and operations.

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):


	Three Months Ended December 31, 2019		Year Ended December 31,
	Three Months Ended December 31, 2019		2019		2018
Net income (1)	$	78,931	$	305,567	$	285,078
Weighted-average shares outstanding, basic and diluted		134,832,323		130,085,398		113,857,238

Net income per share, basic and diluted	$	0.59	$	2.35	$	2.50

Dividends declared per share	$	0.62	$	2.48	$	2.48

(1)	Represents net income attributable to Blackstone Mortgage Trust.

Core Earnings

Core Earnings is a

non-GAAP

measure, which we define as GAAP net income (loss), including realized gains and losses not otherwise included in GAAP net income (loss), and excluding (i)

non-cash

equity compensation expense, (ii) depreciation and amortization, (iii) unrealized gains (losses), (iv) net income (loss) attributable to our legacy portfolio, and (v) certain

non-cash

items. Core Earnings may also be adjusted from time to time to exclude

one-time

events pursuant to changes in GAAP and certain other

non-cash

charges as determined by our Manager, subject to approval by a majority of our independent directors.

We believe that Core Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with GAAP. This adjusted measure helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. Although, according to the management agreement between our Manager and us, or our Management Agreement, we calculate the incentive and base management fees due to our Manager using Core Earnings before our incentive fee expense, we report Core Earnings after incentive fee expense, as we believe this is a more meaningful presentation of the economic performance of our class A common stock.

Core Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income, or an indication of our GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs. In addition, our methodology for calculating Core Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Core Earnings may not be comparable to the Core Earnings reported by other companies.

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The following table provides a reconciliation of Core Earnings to GAAP net income ($ in thousands, except per share data):


	Three Months Ended December 31, 2019		Year Ended December 31,
	Three Months Ended December 31, 2019		2019		2018
Net income (1)	$	78,931	$	305,567	$	285,078
Non-cash compensation expense		7,380		30,656		28,154
GE purchase discount accretion adjustment (2)		—		—		8,706
Hedging and foreign currency income, net (3)		4,767		14,172		6,723
Other items		68		300		2,084

Core Earnings	$	91,146	$	350,695	$	330,745

Weighted-average shares outstanding, basic and diluted		134,832,323		130,085,398		113,857,238

Core Earnings per share, basic and diluted	$	0.68	$	2.70	$	2.90

(1)

Represents net income attributable to Blackstone Mortgage Trust.

(2)

Historically, we have deferred in Core Earnings the accretion of a purchase discount attributable to a certain pool of GE portfolio loans acquired in May 2015, until repayment in full of the remaining loans in the pool was substantially assured. During the year ended December 31, 2018, it was determined that repayment of the remaining loans in the deferral pool was substantially assured. As such, the $8.7 million of deferred purchase discount, which has been previously recognized in GAAP net income, was realized in Core Earnings during the year ended December 31, 2018.

(3)

Primarily represents the forward points earned on our foreign currency forward contracts, which reflect the interest rate differentials between the applicable base rate for our foreign currency investments and USD LIBOR. These forward contracts effectively convert the rate exposure to USD LIBOR, resulting in additional interest income earned in U.S. dollar terms. These amounts are not included in GAAP net income, but rather as a component of Other Comprehensive Income in our consolidated financial statements.

Book Value Per Share

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


	December 31, 2019		December 31, 2018
Stockholders’ equity	$	3,762,583	$	3,364,124
Shares
Class A common stock		135,003,662		123,435,738
Deferred stock units		260,066		228,839

Total outstanding		135,263,728		123,664,577

Book value per share	$	27.82	$	27.20

II. Loan Portfolio

During the year ended December 31, 2019, we originated or acquired $8.6 billion of loans. Loan fundings during the year totaled $7.0 billion, with loan repayments of $4.8 billion. We generated interest income of $882.7 million and incurred interest expense of $458.5 million during the year, which resulted in $424.2 million of net interest income during the year ended December 31, 2019.

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Portfolio Overview

The following table details our loan origination activity ($ in thousands):


	Three Months Ended December 31, 2019			Year Ended December 31, 2019
Loan originations (1)	$	3,005,921		$	8,643,911
Loan fundings (2)	$	3,596,836		$	6,952,638
Loan repayments (3)		(2,234,719	)		(4,810,811	)

Total net fundings	$	1,362,117		$	2,141,827

(1)

Includes new loan originations and additional commitments made under existing loans.

(2)

Loan fundings during the three months and year ended December 31, 2019 include $26.1 million and $62.4 million, respectively, of additional fundings under related

non-consolidated

senior interests.

(3)

Loan repayments during the year ended December 31, 2019 include $61.1 million of additional repayments of loan exposure under related

non-consolidated

senior interests. There were no repayments during the three months ended December 31, 2019 related to

non-consolidated

senior interests.

The following table details overall statistics for our investment portfolio as of December 31, 2019 ($ in thousands):


				Total Investment Exposure
	Balance Sheet Portfolio (1)			Loan Exposure (1)(2)			Other Investments (3)			Total Investment Portfolio
Number of investments		128			128			1			129
Principal balance	$	16,277,343		$	16,965,864		$	930,021		$	17,895,885
Net book value	$	16,164,801		$	16,164,801		$	86,638		$	16,251,439
Unfunded loan commitments (4)	$	3,911,868		$	4,662,169		$	—		$	4,662,169
Weighted-average cash coupon (5)		L + 3.20	%		L + 3.25	%		L + 2.75	%		L + 3.22	%
Weighted-average all-in yield (5)		L + 3.55	%		L + 3.59	%		L + 3.00	%		L + 3.56	%
Weighted-average maximum maturity (years) (6)		3.8			3.8			5.4			3.9
Loan to value (LTV) (7)		64.8	%		64.9	%		42.6	%		63.7	%

(1)	Excludes investment exposure to the $89.0 million subordinate risk retention interest we own in the $930.0 million 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.

(2)

In certain instances, we finance our loans through the

non-recourse

non-consolidated

senior interests that are not included in our balance sheet portfolio.

(3)

(4)

(5)

The weighted-average cash coupon and

all-in

yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.

(6)

(7)	Based on LTV as of the dates loans and other investments were originated or acquired by us.

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The following table details the floating benchmark rates for our investment portfolio as of December 31, 2019 ($/

€

/£/A$/C$ in thousands):

Investment
Count

Currency

Total Investment
Portfolio

Floating Rate Index

(1)

Cash Coupon

(2)

All-in

Yield

(2)

103

$ 12,233,127

USD LIBOR

L + 3.17%

L + 3.52%

€

2,724,084

EURIBOR

E + 2.91%

E + 3.24%

£ 1,635,759

GBP LIBOR

L + 3.85%

L + 4.15%

A$ 515,259

BBSY

BBSY + 4.01%

BBSY + 4.22%

C$ 101,261

CDOR

CDOR + 3.27%

CDOR + 3.59%

129

$ 17,895,885

INDEX + 3.22%

INDEX + 3.56%

(1)

We use foreign currency forward contracts to protect the value or fix the amount of certain investments or cash flows in terms of the U.S. dollar. We earn forward points on our forward contracts that reflect the interest rate differentials between the applicable base rate for our foreign currency investments and USD LIBOR. These forward contracts effectively convert the foreign currency rate exposure for such investments to USD LIBOR.

(2)

The cash coupon and

all-in

yield of our fixed rate loans are reflected as a spread over USD LIBOR for purposes of the weighted-averages. In addition to cash coupon,

all-in

yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.

The charts below detail the geographic distribution and types of properties securing our investment portfolio, as of December 31, 2019:

Refer to section VI of this Item 7 for details of our loan portfolio, on a

loan-by-loan

basis.

Asset Management

We actively manage the investments in our loan portfolio and exercise the rights afforded to us as a lender, including collateral level budget approvals, lease approvals, loan covenant enforcement, escrow/reserve management, collateral release approvals, and other rights that we may negotiate.

As discussed in Note 2 to our consolidated financial statements, our Manager performs a quarterly review of our loan portfolio, assesses the performance of each loan, and assigns it a risk rating between “1” and “5,” from less

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risk to greater risk. The following table allocates the principal balance and total loan exposure balances based on our internal risk ratings ($ in thousands):


	December 31, 2019
Risk Rating	Number of Loans		Net Book Value		Total Loan Exposure (1)(2)
1		6	$	376,379	$	378,427
2		30		3,481,123		3,504,972
3		89		12,137,963		12,912,722
4		3		169,336		169,743
5		—		—		—

		128	$	16,164,801	$	16,965,864

(1)

In certain instances, we finance our loans through the

non-recourse

sale of a senior loan interest that is not included in our consolidated financial statements. See Note 2 to our consolidated financial statements for further discussion. Total loan exposure encompasses the entire loan we originated and financed, including $688.5 million of such

non-consolidated

senior interests as of December 31, 2019.

(2)

Excludes investment exposure to the $930.0 million 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for details of the subordinated risk retention interest we own in the 2018 Single Asset Securitization.

The weighted-average risk rating of our total loan exposure was 2.8 and 2.7 as of as of December 31, 2019 and December 31, 2018, respectively. The increase was driven primarily by new loans originated during 2019, the majority of which were rated 3 at origination.

Multifamily Joint Venture

As of December 31, 2019, our Multifamily Joint Venture held $670.5 million of loans, which are included in the loan disclosures above. Refer to Note 2 to our consolidated financial statements for additional discussion of our Multifamily Joint Venture.

Portfolio Financing

Our portfolio financing arrangements include secured credit facilities, asset-specific financings, a revolving credit agreement, loan participations sold,

non-consolidated

senior interests, and securitized debt obligations.

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The following table details our portfolio financing ($ in thousands):


	Portfolio Financing Outstanding Principal Balance
	December 31, 2019		December 31, 2018
Secured credit facilities	$	9,753,059	$	8,870,897
Asset-specific financings		330,879		81,739
Revolving credit agreement		—		43,845
Loan participations sold		—		94,528
Non-consolidated senior interests (1)		688,521		446,874
Securitized debt obligations		1,189,642		1,292,120

Total portfolio financing	$	11,962,101	$	10,830,003

(1)

These

non-consolidated

Secured Credit Facilities

The following table details our secured credit facilities ($ in thousands):


	December 31, 2019
	Credit Facility Borrowings						Collateral Assets (2)
Lender	Potential (1)		Outstanding		Available (1)		Collateral Assets (2)
Wells Fargo	$	2,056,769	$	2,018,057	$	38,712	$	2,621,806
Deutsche Bank		2,037,795		1,971,860		65,935		2,573,447
Barclays		1,629,551		1,442,083		187,468		2,044,654
Citibank		1,159,888		1,109,837		50,051		1,473,745
Bank of America		603,660		513,660		90,000		775,678
Morgan Stanley		524,162		468,048		56,114		706,080
Goldman Sachs		474,338		450,000		24,338		632,013
MetLife		417,677		417,677		—		536,553
Société Générale		333,473		333,473		—		437,130
US Bank – Multi. JV (3)		279,838		279,552		286		350,034
JP Morgan		303,288		259,062		44,226		386,545
Santander		239,332		239,332		—		299,597
Goldman Sachs – Multi. JV (3)		203,846		203,846		—		261,461
Bank of America – Multi. JV (3)		46,572		46,572		—		58,957

	$	10,310,189	$	9,753,059	$	557,130	$	13,157,700

(1)	Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are immediately available to us at our sole discretion under the terms of each credit facility.

(2)	Represents the principal balance of the collateral assets.

(3)	These facilities finance the loan investments of our consolidated Multifamily Joint Venture. Refer to Note 2 to our consolidated financial statements for additional discussion of our Multifamily Joint Venture.

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Asset-Specific Financings

The following table details our asset-specific financings ($ in thousands):


	December 31, 2019
Asset-Specific Financings	Count		Principal Balance		Book Value		Wtd. Avg. Yield/Cost (1)			Guarantee (2)		Wtd. Avg. Term (3)
Collateral assets		4	$	429,983	$	417,820		L+4.90	%		n/a		Mar. 2023
Financing provided		4	$	330,879	$	323,504		L+3.42	%	$	97,930		Mar. 2023

(1)

These floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each arrangement in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred origination fees / financing costs.

(2)	Other than amounts guaranteed on an asset-by-asset basis, borrowings under our asset-specific financings are non-recourse to us.

(3)	The weighted-average term is determined based on the maximum maturity of the corresponding loans, assuming all extension options are exercised by the borrower. Each of our asset-specific financings is term-matched to the corresponding collateral loans.

Revolving Credit Agreement

We have a $250.0 million full recourse secured revolving credit agreement with Barclays that is designed to finance first mortgage originations for up to nine months as a bridge to term financing or syndication. Advances under the agreement are subject to availability under a specified borrowing base and accrue interest at a per annum pricing rate equal to the sum of (i) an applicable base rate or Eurodollar rate and (ii) an applicable margin, in each case, dependent on the applicable type of loan collateral. The maturity date of the facility is April 4, 2020. As of December 31, 2019, we had no outstanding borrowings under the agreement.

Non-Consolidated

Senior Interests

In certain instances, we finance our loans through the

non-recourse

sale of a senior loan interest that is not included in our consolidated financial statements. These

non-consolidated

The following table details the subordinate interests retained on our balance sheet and the related

non-consolidated

senior interests as of December 31, 2019 ($ in thousands):


	December 31, 2019
Non-Consolidated Senior Interests	Count		Principal Balance		Book Value		Wtd. Avg. Yield/Cost (1)			Guarantee		Wtd. Avg. Term
Total loan		4	$	854,133		n/a		5.89	%		n/a		Nov. 2023
Senior participation		4		688,521		n/a		4.50	%	$	—		Nov. 2023

(1)

Our floating rate loans and related liabilities were indexed to the various benchmark rates relevant in each arrangement in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. In addition to cash coupon,

all-in

yield/cost includes the amortization of deferred fees / financing costs.

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Securitized Debt Obligations

The following table details our securitized debt obligations ($ in thousands):


	December 31, 2019
Securitized Debt Obligations	Count		Principal Balance		Book Value		Wtd. Avg. Yield/Cost (1)			Term (2)
Collateralized Loan Obligation
Collateral assets		18	$	897,522	$	897,522		L+3.43	%		Sep. 2022
Financing provided		1		715,022		712,517		L+1.98	%		Jun. 2035
2017 Single Asset Securitization
Collateral assets (3)		1		711,738		710,260		L+3.60	%		Jun. 2023
Financing provided		1		474,620		474,567		L+1.64	%		Jun. 2033
Total
Collateral assets		19	$	1,609,260	$	1,607,782		L+3.51	%

Financing provided (4)		2	$	1,189,642	$	1,187,084		L+1.84	%

(1)	In addition to cash coupon, all-in yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees. All-in yield for the total portfolio assume applicable floating benchmark rates for weighted-average calculation.

(2)

Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.

(3)	The collateral assets for the 2017 Single Asset Securitization include the total loan amount, of which we securitized $500.0 million.

(4)	During the year ended December 31, 2019, we recorded $47.2 million of interest expense related to our securitized debt obligations.

Refer to Notes 7 and 16 to our consolidated financial statements for additional details of our securitized debt obligations.

Corporate Financing

Secured Term Loan

In April 2019 we entered into a $500.0 million senior secured term loan facility, or the Secured Term Loan, with an interest rate of LIBOR plus 2.50%. In November 2019 we increased the Secured Term Loan to $748.8 million and decreased the interest rate to LIBOR plus 2.25%. As of December 31, 2019, the following Secured Term Loan was outstanding ($ in thousands):

Term Loan Issuance

Face Value

Interest Rate

All-in

Cost

(1)

Maturity

Term Loan B

746,878

L+2.25

L+2.52

April 23, 2026

(1)	Includes issue discount and transaction expenses that are amortized through interest expense over the life of the Secured Term Loan.

Refer to Notes 2 and 8 to our consolidated financial statements for additional discussion of our Secured Term Loan.

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Convertible Notes

As of December 31, 2019, the following convertible senior notes, or Convertible Notes, were outstanding ($ in thousands):


Convertible Notes Issuance	Face Value		Coupon Rate			All-in Cost (1)			Maturity
May 2017	$	402,500		4.38	%		4.85	%		May 5, 2022
March 2018	$	220,000		4.75	%		5.33	%		March 15, 2023

(1)	Includes issuance costs that are amortized through interest expense over the life of the Convertible Notes using the effective interest method.

Refer to Notes 2 and 9 to our consolidated financial statements for additional discussion of our Convertible Notes.

Floating Rate Portfolio

Our liabilities are generally currency and index-matched to each collateral asset, resulting in a net exposure to movements in benchmark rates that varies by currency silo based on the relative proportion of floating rate assets and liabilities. The following table details our loan portfolio’s net exposure to interest rates by currency as of December 31, 2019 ($/

€

/£/A$/C$ in thousands):


	USD			EUR			GBP			AUD			CAD
Floating rate loans (1)	$	11,303,106		€	2,724,084		£	1,266,921		A$	515,259		C$	54,196
Floating rate debt (1)(2)(3)		(8,656,170	)		(2,125,716	)		(711,900	)		(378,296	)		(60,076	)

Net floating rate exposure (4)	$	2,646,936		€	598,368		£	555,021		A$	136,963		C$	(5,880	)

(1)

(2)

Includes borrowings under secured debt agreements,

non-consolidated

senior interests, securitized debt obligations, and secured term loans.

(3)

Balance includes two interest rate swaps totaling C$17.3 million ($13.3 million as of December 31, 2019) that are used to hedge a portion of our fixed rate debt.

(4)

In addition, we have one interest rate cap of C$21.4 million ($16.5 million as of December 31, 2019) to limit our exposure to increases in interest rates.

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III. Our Results of Operations

Operating Results

The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2019, 2018, and 2017 ($ in thousands, except per share data):


	Year Ended December 31,						2019 vs 2018			Year Ended December 31,						2018 vs 2017
	2019			2018			$			2018			2017			$
Income from loans and other investments
Interest and related income	$	882,679		$	756,109		$	126,570		$	756,109		$	537,915		$	218,194
Less: Interest and related expenses		458,503			359,625			98,878			359,625			234,870			124,755

Income from loans and other investments, net		424,176			396,484			27,692			396,484			303,045			93,439
Other expenses
Management and incentive fees		78,435			74,834			3,601			74,834			54,841			19,993
General and administrative expenses		38,854			35,529			3,325			35,529			29,922			5,607

Total other expenses		117,289			110,363			6,926			110,363			84,763			25,600

Income before income taxes		306,887			286,121			20,766			286,121			218,282			67,839
Income tax (benefit) provision		(506	)		308			(814	)		308			314			(6	)

Net income		307,393			285,813			21,580			285,813			217,968			67,845

Net income attributable to non-controlling interests		(1,826	)		(735	)		(1,091	)		(735	)		(337	)		(398	)

Net income attributable to Blackstone Mortgage Trust, Inc.	$	305,567		$	285,078		$	20,489		$	285,078		$	217,631		$	67,447

Net income per share – basic and diluted	$	2.35		$	2.50		$	(0.15	)	$	2.50		$	2.27		$	0.23
Dividends declared per share	$	2.48		$	2.48		$	—		$	2.48		$	2.48		$	—

Income from loans and other investments, net

Income from loans and other investments, net increased $27.7 million during the year ended December 31, 2019 compared to the year ended December 31, 2018. The increase was primarily due to (i) an increase in the

weighted-average

principal balance of our loan portfolio by $3.0 billion during the year ended December 31, 2019, compared to the year ended December 31, 2018 and (ii) an increase in the weighted-average LIBOR and other floating rate indices in 2019, compared to 2018. This was offset by (i) the increase in the

weighted-average

principal balance of our outstanding financing arrangements, which increased by $2.6 billion during the year ended December 31, 2019, compared to the year ended December 31, 2018, and (ii) a decrease in

non-recurring

prepayment fee income.

Income from loans and other investments, net increased $93.4 million during the year ended December 31, 2018 compared to the year ended December 31, 2017. The increase was primarily due to (i) an increase in the weighted-average principal balance of our loan portfolio by $2.5 billion during the year ended December 31, 2018, compared to the year ended December 31, 2017, (ii) an increase in

non-recurring

prepayment fee income, and (iii) an increase in LIBOR and other floating rate indices during 2018. This was offset by the increase in the weighted-average principal balance of our outstanding financing arrangements, which increased by $2.0 billion during the year ended December 31, 2018, compared to the year ended December 31, 2017.

Other expenses

Other expenses include management and incentive fees payable to our Manager and general and administrative expenses. Other expenses increased by $6.9 million during the year ended December 31, 2019 compared to the year ended December 31, 2018 due to (i) an increase of $8.3 million of management fees payable to our Manager, primarily as a result of net proceeds received from the sale of shares of our class A common stock

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during 2018 and 2019, (ii) $2.5 million of additional

non-cash

restricted stock amortization related to shares awarded under our long-term incentive plans, and (iii) an increase of $823,000 of other general operating expenses. This was offset by a decrease of $4.7 million of incentive fees payable to our Manager as a result of an increased hurdle following our 2019 class A common stock issuance.

Other expenses increased by $25.6 million during the year ended December 31, 2018 compared to the year ended December 31, 2017 due to (i) an increase of $11.7 million of incentive fees payable to our Manager as a result of an increase in Core Earnings, (ii) an increase of $8.3 million of management fees payable to our Manager, primarily as a result of net proceeds received from the sale of shares of our class A common stock during 2017 and 2018, (iii) $4.1 million of additional

non-cash

restricted stock amortization related to shares awarded under our long-term incentive plans, and (iv) an increase of $1.5 million of other general operating expenses.

Net income attributable to

non-controlling

interests

During the years ended December 31, 2019, 2018, and 2017, we recorded $1.8 million, $735,000, and $337,000, respectively, of net income attributable to

non-controlling

interests related to our Multifamily Joint Venture.

Dividends per share

During the year ended December 31, 2019, we declared aggregate dividends of $2.48 per share, or $328.1 million. During 2018, we declared aggregate dividends of $2.48 per share, or $286.9 million. During 2017, we declared aggregate dividends of $2.48 per share, or $243.3 million.

The following table sets forth information regarding our consolidated results of operations for the three months ended December 31, 2019 and 2018 ($ in thousands, except per share data):


	Three Months Ended December 31,						2019 vs 2018
	2019			2018			$
Income from loans and other investments
Interest and related income	$	220,678		$	206,098		$	14,580
Less: Interest and related expenses		110,967			103,948			7,019

Income from loans and other investments, net		109,711			102,150			7,561
Other expenses
Management and incentive fees		20,159			18,586			1,573
General and administrative expenses		9,904			9,632			272

Total other expenses		30,063			28,218			1,845

Income before income taxes		79,648			73,932			5,716
Income tax provision		67			36			31

Net income		79,581			73,896			5,685

Net income attributable to non-controlling interests		(650	)		(253	)		(397	)

Net income attributable to Blackstone Mortgage Trust, Inc.	$	78,931		$	73,643		$	5,288

Net income per share – basic and diluted	$	0.59		$	0.61		$	(0.02	)
Dividends declared per share	$	0.62		$	0.62		$	—

Income from loans and other investments, net

Income from loans and other investments, net increased $7.6 million during the three months ended December 31, 2019 compared to the corresponding period in 2018. The increase was primarily due to (i) a $2.5 billion increase in the weighted-average principal balance of our loan portfolio for the three months ended December 31, 2019, compared to the corresponding period in 2018, and (ii) an increase in

non-recurring

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prepayment fee income. This was offset by (i) a $2.2 billion increase in the

weighted-average

principal balance of our outstanding financing arrangements during the three months ended December 31, 2019, compared to the corresponding period in 2018, and (ii) a decrease in LIBOR and other floating rate indices in 2019.

Other expenses

Other expenses are composed of management and incentive fees payable to our Manager and general and administrative expenses. Other expenses increased by $1.8 million during the three months ended December 31, 2019 compared to the corresponding period in 2018 due to (i) an increase of $1.7 million of management fees payable to our Manager and (ii) an increase of $558,000 of general operating expenses. This was offset by a $286,000 decrease in

non-cash

restricted stock amortization related to shares awarded under our long-term incentive plans.

Net income attributable to

non-controlling

interests

During the three months ended December 31, 2019 and 2018, we recorded $650,000 and $253,000, respectively, of net income attributable to

non-controlling

interests related to our Multifamily Joint Venture.

Dividends per share

During the three months ended December 31, 2019, we declared aggregate dividends of $0.62 per share, or $83.7 million. During the three months ended December 31, 2018, we declared aggregate dividends of $0.62 per share, or $76.5 million.

IV. Liquidity and Capital Resources

Capitalization

We have capitalized our business to date through, among other things, the issuance and sale of shares of our class A common stock, borrowings under secured debt agreements, and the issuance of secured term loans and issuance and sale of convertible notes. As of December 31, 2019, we had 135,003,662 shares of our class A common stock outstanding representing $3.8 billion of stockholders’ equity, $10.1 billion of borrowings under secured debt agreements, a $746.9 million Secured Term Loan, and $622.5 million of Convertible Notes outstanding.

As of December 31, 2019, our secured debt agreements consisted of secured credit facilities with an outstanding balance of $9.8 billion and $330.9 million of asset-specific financings. We also finance our business through

non-consolidated

senior interests. As of December 31, 2019, we had $688.5 million of

non-consolidated

senior interests outstanding. In addition, as of December 31, 2019, our consolidated balance sheet included $1.2 billion of securitized debt obligations related to our collateralized loan obligation, or the CLO, and our single asset securitization vehicle, or the 2017 Single Asset Securitization.

See Notes 5, 7, 8, and 9 to our consolidated financial statements for additional details regarding our secured debt agreements, securitized debt obligations, Secured Term Loan, and Convertible Notes, respectively.

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Debt-to-Equity

Ratio and Total Leverage Ratio

The following table presents our

debt-to-equity

ratio and total leverage ratio:


	December 31, 2019		December 31, 2018
Debt-to-equity ratio (1)		3.0x		2.8x
Total leverage ratio (2)		3.7x		3.7x

(1)

Represents (i) total outstanding secured debt agreements, secured term loans, and convertible notes, less cash, to (ii) total equity, in each case at period end.

(2)

Represents (i) total outstanding secured debt agreements, secured term loans, convertible notes, loan participations sold,

non-consolidated

senior interests, and securitized debt obligations, less cash, to (ii) total equity, in each case at period end.

Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents, available borrowings under our secured debt agreements, and net receivables from servicers related to loan repayments which are set forth in the following table ($ in thousands):


	December 31, 2019		December 31, 2018
Cash and cash equivalents	$	150,090	$	105,662
Available borrowings under secured debt agreements		598,840		359,618
Loan principal payments held by servicer, net (1)		1,965		4,855

	$	750,895	$	470,135

(1)

Represents loan principal payments held by our third-party servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related secured debt balance.

In addition to our current sources of liquidity, we have access to liquidity through public offerings of debt and equity securities. To facilitate such offerings, in July 2019, we filed a shelf registration statement with the Securities and Exchange Commission, or the SEC, that is effective for a term of three years and expires at the end of July 2022. The amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue. The securities covered by this registration statement include: (i) class A common stock; (ii) preferred stock; (iii) debt securities; (iv) depositary shares representing preferred stock; (v) warrants; (vi) subscription rights; (vii) purchase contracts; and (viii) units consisting of one or more of such securities or any combination of these securities. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

We may also access liquidity through a dividend reinvestment plan and direct stock purchase plan, under which 9,994,024 shares of class A common stock were available for issuance as of December 31, 2019, and our

at-the-

market stock offering program, pursuant to which we may sell, from time to time, up to $363.8 million of additional shares of our class A common stock as of December 31, 2019. Refer to Note 11 to our consolidated financial statements for additional details.

Our existing loan portfolio also provides us with liquidity as loans are repaid or sold, in whole or in part, and the proceeds from such repayments become available for us to reinvest.

Liquidity Needs

In addition to our ongoing loan origination activity, our primary liquidity needs include interest and principal payments under our $10.1 billion of outstanding borrowings under secured debt agreements, our Secured Term

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Loan, our Convertible Notes, our unfunded loan commitments, dividend distributions to our stockholders, and operating expenses.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of December 31, 2019 were as follows ($ in thousands):


	Total Obligation		Payment Timing
	Total Obligation		Less Than 1 Year		1 to 3 Years		3 to 5 Years		More Than 5 Years
Unfunded loan commitments (1)	$	3,911,868	$	369,034	$	2,714,402	$	828,432	$	—
Principal repayments under secured debt agreements (2)		10,083,938		142,648		2,878,421		6,770,155		292,714
Principal repayments of secured term loans (3)		746,878		7,488		14,975		14,975		709,440
Principal repayments of convertible notes (4)		622,500		—		402,500		220,000		—
Interest payments (2)(5)		1,297,253		372,262		629,184		254,124		41,683

Total (6)	$	16,662,437	$	891,432	$	6,639,482	$	8,087,686	$	1,043,837

(1)	The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the loan maturity date.

(2)	The allocation of repayments under our secured debt agreements for both principal and interest payments is based on the earlier of (i) the maturity date of each facility, or (ii) the maximum maturity date of the collateral loans, assuming all extension options are exercised by the borrower.

(3)	The Secured Term Loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments. Refer to Note 8 to our consolidated financial statements for further details on our secured term loan.

(4)	Reflects the outstanding principal balance of convertible notes, excluding any potential conversion premium. Refer to Note 9 to our consolidated financial statements for further details on our convertible notes.

(5)

Represents interest payments on our secured debt agreements, convertible notes, and Secured Term Loan. Future interest payment obligations are estimated assuming the interest rates in effect as of December 31, 2019 will remain constant into the future. This is only an estimate as actual amounts borrowed and interest rates will vary over time.

(6)	Total does not include $688.5 million of non-consolidated senior interests and $1.2 billion of securitized debt obligations, as the satisfaction of these liabilities will not require cash outlays from us.

We are also required to settle our foreign currency forward contracts and interest rate swaps with our derivative counterparties upon maturity which, depending on foreign exchange and interest rate movements, may result in cash received from or due to the respective counterparty. The table above does not include these amounts as they are not fixed and determinable. Refer to Note 10 to our consolidated financial statements for details regarding our derivative contracts.

We are required to pay our Manager a base management fee, an incentive fee, and reimbursements for certain expenses pursuant to our Management Agreement. The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. Refer to Note 12 to our consolidated financial statements for additional terms and details of the fees payable under our Management Agreement.

As a REIT, we generally must distribute substantially all of our net taxable income to stockholders in the form of dividends to comply with the REIT provisions of the Internal Revenue Code. Our taxable income does not necessarily equal our net income as calculated in accordance with GAAP, or our Core Earnings as described above.

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Cash Flows

The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash ($ in thousands):


	For the years ended December 31,
	2019			2018			2017
Cash flows provided by operating activities	$	304,037		$	290,002		$	227,461
Cash flows used in investing activities		(1,871,148	)		(4,251,659	)		(780,752	)
Cash flows provided by financing activities		1,612,552			3,957,708			574,742

Net increase (decrease) in cash, cash equivalents, and restricted cash	$	45,441		$	(3,949	)	$	21,451

We experienced a net increase in cash, cash equivalents, and restricted cash of $45.4 million for the year ended December 31, 2019, compared to a net decrease of $3.9 million for the year ended December 31, 2018. During 2019, we (i) received $4.9 billion of proceeds from loan principal collections, (ii) received $1.0 billion of net borrowings under our secured debt agreements, (iii) received $748.4 million of net proceeds from borrowings under our Secured Term Loan, and (iv) received $372.3 million of net proceeds from the issuance of shares of class A common stock. We used the proceeds from these activities to fund $6.9 billion of new loans during the year ended December 31, 2019.

We experienced a net decrease in cash, cash equivalents, and restricted cash of $3.9 million for the year ended December 31, 2018, compared to a net increase of $21.5 million for the year ended December 31, 2017. During 2018, we (i) borrowed a net $3.8 billion under our secured debt agreements, (ii) collected $3.1 billion of proceeds from loan principal repayments, (iii) received $476.4 million of net proceeds from the issuance of class A common stock, (iv) received $416.1 million in net proceeds from the 2018 Single Asset Securitization, and (v) received $214.8 million of net proceeds from the issuance of convertible notes. We used the proceeds from these activities to (i) fund $7.9 billion of new loans during 2018 and (ii) settle our November 2013 issuance of convertible notes for $219.2 million.

Refer to Note 3 to our consolidated financial statements for further discussion of our loan activity. Refer to Notes 5, 8, and 11 to our consolidated financial statements for additional discussion of our secured debt agreements, Secured Term Loan, and equity.

V. Other Items

Income Taxes

Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of our assets and the sources of our income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state and local income tax on our taxable income at regular corporate rates and we

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would not be able to qualify as a REIT for the subsequent four full taxable years. As of December 31, 2019 and 2018, we were in compliance with all REIT requirements.

Refer to Note 13 to our consolidated financial statements for additional discussion of our income taxes.

Off-Balance

Sheet Arrangements

We have no

off-balance

sheet arrangements.

Critical Accounting Policies

Our discussion and analysis of our 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 Manager to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. During 2019, our Manager reviewed and evaluated our critical accounting policies and believes them to be appropriate. The following is a summary of our significant accounting policies that we believe are the most affected by our Manager’s judgments, estimates, and assumptions:

Loans Receivable and Provision for Loan Losses

We originate and purchase commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. We are required to periodically evaluate each of these loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due to us pursuant to the contractual terms of the loan. If a loan is determined to be impaired, we write down the loan through a charge to the provision for loan losses. Impairment of these loans, which are collateral dependent, is measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by our Manager. Actual losses, if any, could ultimately differ from these estimates.

Our Manager performs a quarterly review of our portfolio of loans. In conjunction with this review, our Manager assesses the risk factors of each loan, and assigns it a risk rating based on a variety of factors, including, without limitation,

loan-to-value

ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a

5-point

scale, our loans are rated “1” through “5,” from less risk to greater risk relative to our loan portfolio in the aggregate, which ratings are defined as follows:

1 -

Very Low Risk

2 -

Low Risk

3 -

Medium Risk

4 -

High Risk/Potential for Loss:

A loan that has a risk of realizing a principal loss.

5 -

Impaired/Loss Likely:

A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss.

Current Expected Credit Losses

In June 2016, the Financial Accounting Standards Board, or FASB, issued ASU

2016-13

“Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments (Topic 326),” or

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ASU

2016-13.

ASU

2016-13

significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU

2016-13

available-for-sale

debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU

2016-13

is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of January 1, 2020.

The CECL reserve required under ASU

2016-13

requires that all financial instruments subject to the CECL model have some amount of loss reserve to reflect the GAAP principal underlying the CECL model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors.

We plan to estimate our CECL reserve primarily using the Weighted Average Remaining Maturity, or WARM method, which has been identified as an acceptable loss-rate method for estimating CECL reserves in the Financial Accounting Standards Board Staff Q&A Topic 326, No. 1. The WARM method requires us to reference historic loan loss data across a comparable data set and apply such loss rate to each of our loans over their expected remaining term, taking into consideration expected economic conditions over the relevant timeframe. We will apply the WARM method for the majority of our loan portfolio, which loans share similar risk characteristics. In certain instances, for loans with unique risk characteristics, we may instead use a probability-weighted model that considers the likelihood of default and expected loss given default for each such individual loan.

Application of the WARM method to estimate a CECL reserve requires significant judgment, including (i) the appropriate historical loan loss reference data, (ii) the expected timing and amount of future loan fundings and repayments, and (iii) the current credit quality of our portfolio and our expectations of performance and market conditions over the relevant time period. To estimate the historic loan losses relevant to our portfolio, we have augmented our historical loan performance, which includes zero loan losses since the launch of our senior loan origination business in 2013, with market loan loss data licensed from Trepp LLC. This database includes commercial mortgage-backed securities, or CMBS, issued since January 1, 1999 through December 31, 2019. Within this database, we focused our historical loss reference calculations on the most relevant subset of available CMBS data. We believe this CMBS data, which includes month-over-month loan and property performance, is the most relevant, available, and comparable dataset to our portfolio.

Our loans typically include commitments to fund incremental proceeds to our borrowers over the life of the loan, which future funding commitments are also subject to the CECL model. The CECL reserve related to future loan fundings is recorded as a component of Other Liabilities on our consolidated balance sheets, and not as an offset to the related loan balance. This CECL reserve will be estimated using the same process outlined above for our outstanding loan balances, and changes in this component of the CECL reserve will similarly impact our consolidated net income. For both the funded and unfunded portions of our loans, we will consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.

Upon adoption of ASU

2016-13

on January 1, 2020, we expect to record an initial CECL reserve, including future loan funding commitments, of approximately $17.6 million, or $0.13 per share, reflecting an aggregate CECL reserve of 0.11% of our aggregate outstanding principal balance of $16.4 billion as of December 31, 2019.

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Revenue Recognition

Interest income from our loans receivable portfolio and debt securities is recognized over the life of each investment using the effective interest method and is recorded on the accrual basis. Recognition of fees, premiums, and discounts associated with these investments is deferred and recorded over the term of the loan or debt security as an adjustment to yield. Income accrual is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion of our Manager, recovery of income and principal becomes doubtful. Income is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. In addition, for loans we originate, the related origination expenses are deferred and recognized as a component of interest income, however expenses related to loans we acquire are included in general and administrative expenses as incurred.

Refer to Note 2 to our consolidated financial statements for the complete listing and description of our significant accounting policies.

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VI. Loan Portfolio Details

The following table provides details of our loan portfolio, on a

loan-by-loan

basis, as of December 31, 2019 ($ in millions):


	Loan Type (1)	Origination Date (2)		Total Loan (3)(4)		Principal Balance (4)		Net Book Value		Cash Coupon (5)			All-in Yield (5)			Maximum Maturity (6)		Location	Property Type		Loan Per SQFT / Unit / Key		LTV (2)			Risk Rating
1	Senior loan		8/14/2019	$	1,330.6	$	1,330.6	$	1,318.2		L + 2.50	%		L + 2.85	%		12/23/2024	Dublin-IE		Office		$459 / sqft		74	%		3
2	Senior loan		3/22/2018		1,008.6		1,008.6		1,004.5		L + 3.15	%		L + 3.37	%		3/15/2023	Diversified-Spain		Mixed-Use		n/a		71	%		3
3	Senior loan		5/11/2017		752.6		711.7		710.3		L + 3.40	%		L + 3.60	%		6/10/2023	Washington DC		Office		$348 / sqft		62	%		3
4	Senior loan		11/25/2019		724.2		586.3		585.1		L + 2.30	%		L + 2.75	%		12/9/2024	New York		Office		$840 / sqft		65	%		3
5	Senior loan (3)		8/6/2015		489.0		489.0		88.4		5.74	%		5.77	%		10/29/2022	Diversified-EUR		Other		n/a		71	%		3
6	Senior loan		4/11/2018		355.0		344.5		344.3		L + 2.85	%		L + 3.02	%		5/1/2023	New York		Office		$437 / sqft		71	%		2
7	Senior loan		8/22/2018		362.5		337.5		335.6		L + 3.15	%		L + 3.49	%		8/9/2023	Maui		Hotel		$444,674 / key		61	%		3
8	Senior loan		10/23/2018		352.4		333.8		332.5		L + 3.40	%		L + 3.72	%		10/23/2021	New York		Mixed-Use		$565 / sqft		65	%		3
9	Senior loan		1/11/2019		318.3		318.3		314.4		L + 4.35	%		L + 4.70	%		1/11/2026	Diversified-UK		Other		$314 / sqft		66	%		3
10	Senior loan		11/30/2018		292.9		278.8		276.9		L + 2.85	%		L + 3.20	%		12/9/2023	New York		Hotel		$228,186 / key		73	%		3
11	Senior loan		11/30/2018		253.9		247.5		245.9		L + 2.80	%		L + 3.17	%		12/9/2023	San Francisco		Hotel		$363,499 / key		73	%		3
12	Senior loan		7/31/2018		284.5		246.2		244.4		L + 3.10	%		L + 3.54	%		8/9/2022	San Francisco		Office		$617 / sqft		50	%		2
13	Senior loan		12/11/2018		310.0		245.3		243.1		L + 2.55	%		L + 2.96	%		12/9/2023	Chicago		Office		$206 / sqft		78	%		3
14	Senior loan		5/9/2018		242.9		232.9		232.1		L + 2.60	%		L + 3.03	%		5/9/2023	New York		Industrial		$66 / sqft		70	%		2
15	Senior loan		9/23/2019		280.3		229.2		226.5		L + 3.00	%		L + 3.22	%		11/15/2024	Diversified-Spain		Hotel		$228,228 / key		62	%		3
16	Senior loan		4/17/2018		225.0		216.4		216.1		L + 3.25	%		L + 3.84	%		5/9/2023	New York		Office		$202 / sqft		45	%		2
17	Senior loan		6/23/2015		211.0		211.0		210.7		L + 3.65	%		L + 3.78	%		5/8/2022	Washington DC		Office		$236 / sqft		72	%		2
18	Senior loan		7/20/2017		250.0		209.4		208.0		L + 4.80	%		L + 5.71	%		8/9/2022	San Francisco		Office		$347 / sqft		58	%		2
19	Senior loan		10/23/2018		278.4		204.3		202.8		L + 2.65	%		L + 2.87	%		11/9/2024	Atlanta		Office		$190 / sqft		64	%		2
20	Senior loan		9/25/2019		195.1		195.1		193.5		L + 4.35	%		L + 4.93	%		9/26/2023	London-UK		Office		$889 / sqft		72	%		3
21	Senior loan		11/23/2018		196.4		191.1		189.0		L + 2.62	%		L + 2.87	%		2/15/2024	Diversified-UK		Office		$1,158 / sqft		50	%		3
22	Senior loan		12/12/2019		260.5		190.1		188.9		L + 2.40	%		L + 2.68	%		12/9/2024	New York		Office		$90 / sqft		42	%		1
23	Senior loan		6/4/2018		190.0		190.0		189.1		L + 3.50	%		L + 3.86	%		6/9/2024	New York		Hotel		$313,015 / key		52	%		3
24	Senior loan		8/31/2017		203.0		190.0		189.2		L + 2.50	%		L + 2.75	%		9/9/2023	Orange County		Office		$221 / sqft		64	%		3
25	Senior loan		12/22/2016		204.5		187.7		187.6		L + 2.90	%		L + 2.98	%		12/9/2022	New York		Office		$264 / sqft		64	%		3
26	Senior loan		5/16/2017		189.2		187.0		186.7		L + 3.90	%		L + 4.35	%		5/16/2021	Chicago		Office		$140 / sqft		59	%		3
27	Senior loan		9/30/2019		305.5		185.8		185.8		L + 3.66	%		L + 3.75	%		9/9/2024	Chicago		Office		$161 / sqft		58	%		3
28	Senior loan		6/27/2019		215.0		185.0		183.1		L + 2.80	%		L + 3.16	%		8/15/2026	Berlin-DEU		Office		$397 / sqft		62	%		3
29	Senior loan		4/9/2018		1,486.5		185.0		173.0		L + 8.50	%		L + 10.64	%		6/9/2025	New York		Office		$525 / sqft		48	%		2
30	Senior loan		10/9/2018		181.2		181.2		180.6		L + 2.75	%		L + 2.97	%		9/9/2023	Orange County		Office		$228 / sqft		57	%		2

continued…

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	Loan Type (1)	Origination Date (2)		Total Loan (3)(4)		Principal Balance (4)		Net Book Value		Cash Coupon (5)			All-in Yield (5)			Maximum Maturity (6)		Location	Property Type		Loan Per SQFT / Unit / Key		LTV (2)			Risk Rating
31	Senior loan		11/5/2019		217.1		180.9		178.7		L + 3.85	%		L + 4.45	%		2/21/2025	Diversified-IT		Industrial		$358 / sqft		66	%		3
32	Senior loan (3)		8/7/2019		745.8		178.2		33.2		L + 3.12	%		L + 3.50	%		9/9/2025	Los Angeles		Office		$223 / sqft		59	%		3
33	Senior loan		4/3/2018		178.6		177.1		176.5		L + 2.75	%		L + 3.08	%		4/9/2024	Dallas		Mixed-Use		$502 / sqft		64	%		3
34	Senior loan		9/14/2018		177.0		177.0		176.0		L + 3.50	%		L + 3.85	%		9/14/2023	Canberra-AU		Mixed-Use		$460 / sqft		68	%		3
35	Senior loan		9/26/2019		175.0		175.0		173.9		L + 3.10	%		L + 3.54	%		1/9/2023	New York		Office		$256 / sqft		65	%		3
36	Senior loan		12/21/2017		197.5		153.9		153.2		L + 2.65	%		L + 3.06	%		1/9/2023	Atlanta		Office		$115 / sqft		51	%		2
37	Senior loan		9/4/2018		172.7		153.0		152.0		L + 3.00	%		L + 3.39	%		9/9/2023	Las Vegas		Hotel		$185,247 / key		70	%		3
38	Senior loan		12/6/2019		159.1		152.5		150.9		L + 2.80	%		L + 3.31	%		12/5/2024	London-UK		Office		$1,010 / sqft		75	%		3
39	Senior loan		8/23/2017		165.0		151.0		150.5		L + 3.25	%		L + 3.58	%		10/9/2022	Los Angeles		Office		$306 / sqft		74	%		2
40	Senior loan		12/20/2019		148.9		148.9		147.5		L + 3.10	%		L + 3.32	%		12/18/2026	London-UK		Office		$741 / sqft		75	%		3
41	Senior loan		11/14/2017		133.0		133.0		132.6		L + 2.75	%		L + 3.00	%		6/9/2023	Los Angeles		Hotel		$532,000 / key		56	%		2
42	Senior loan		5/11/2017		135.9		131.1		130.8		L + 3.40	%		L + 3.91	%		6/10/2023	Washington DC		Office		$301 / sqft		38	%		2
43	Senior loan (3)		11/22/2019		470.0		124.7		24.0		L + 3.70	%		L + 4.10	%		12/9/2025	Los Angeles		Office		$219 / sqft		69	%		3
44	Senior loan		9/20/2018		129.6		124.3		124.1		L + 4.00	%		L + 4.06	%		8/16/2023	Diversified-AU		Other		$853 / sqft		53	%		3
45	Senior loan		9/5/2019		198.5		121.3		119.3		L + 2.75	%		L + 3.17	%		9/9/2024	New York		Office		$757 / sqft		62	%		3
46	Senior loan		11/27/2019		146.3		121.0		119.6		L + 2.75	%		L + 3.13	%		12/9/2024	Minneapolis		Office		$121 / sqft		64	%		3
47	Senior loan		12/14/2018		135.6		120.7		120.1		L + 2.90	%		L + 3.27	%		1/9/2024	Diversified-US		Industrial		$48 / sqft		57	%		3
48	Senior loan		4/30/2018		169.9		120.4		119.1		L + 3.25	%		L + 3.51	%		4/30/2023	London-UK		Office		$542 / sqft		60	%		3
49	Senior loan		6/28/2019		193.5		119.7		117.8		L + 3.70	%		L + 4.33	%		6/27/2024	London-UK		Office		$390 / sqft		71	%		3
50	Senior loan		6/28/2019		125.0		117.2		116.7		L + 2.75	%		L + 2.91	%		2/1/2024	Los Angeles		Office		$591 / sqft		48	%		3
51	Senior loan		10/17/2016		111.9		111.9		111.9		L + 3.95	%		L + 3.96	%		10/21/2021	Diversified-UK		Self-Storage		$154 / sqft		73	%		3
52	Senior loan		7/15/2019		144.6		111.1		110.0		L + 2.90	%		L + 3.25	%		8/9/2024	Houston		Office		$201 / sqft		58	%		3
53	Senior loan		3/21/2018		113.2		106.2		105.6		L + 3.10	%		L + 3.36	%		3/21/2024	Jacksonville		Office		$106 / sqft		72	%		2
54	Senior loan		10/16/2018		113.7		104.4		103.8		L + 3.25	%		L + 3.57	%		11/9/2023	San Francisco		Hotel		$227,427 / key		72	%		3
55	Senior loan		3/13/2018		123.0		103.6		102.9		L + 3.50	%		L + 3.83	%		4/9/2025	Honolulu		Hotel		$160,580 / key		50	%		3
56	Senior loan		12/19/2018		106.7		103.0		102.7		L + 2.60	%		L + 2.94	%		12/9/2022	Chicago		Multi		$556,723 / unit		66	%		2
57	Senior loan		12/21/2018		123.1		102.7		101.8		L + 2.60	%		L + 3.00	%		1/9/2024	Chicago		Office		$201 / key		72	%		2
58	Senior loan		5/16/2014		100.0		100.0		99.9		L + 3.85	%		L + 4.11	%		4/9/2022	Miami		Office		$215 / sqft		67	%		3
59	Senior loan		11/16/2018		211.9		96.3		94.4		L + 4.10	%		L + 4.73	%		12/9/2023	Fort Lauderdale		Mixed-Use		$271 / sqft		59	%		3
60	Senior loan		6/1/2018		133.9		95.9		94.9		L + 3.40	%		L + 3.75	%		5/28/2023	London-UK		Office		$650 / sqft		70	%		1

continued…

Table of Contents


	Loan Type (1)	Origination Date (2)		Total Loan (3)(4)		Principal Balance (4)		Net Book Value		Cash Coupon (5)			All-in Yield (5)			Maximum Maturity (6)		Location	Property Type		Loan Per SQFT / Unit / Key		LTV (2)			Risk Rating
61	Senior loan		12/10/2018		117.7		92.8		91.7		L + 2.95	%		L + 3.34	%		12/3/2024	London-UK		Office		$443 / sqft		72	%		3
62	Senior loan		12/23/2019		109.7		92.7		91.8		L + 2.70	%		L + 3.03	%		1/9/2025	Miami		Multi		$320,851 / unit		68	%		3
63	Senior loan		11/30/2018		151.1		90.4		89.5		L + 2.55	%		L + 2.82	%		12/9/2024	Washington DC		Office		$282 / sqft		60	%		3
64	Senior loan		3/28/2019		98.4		90.1		89.8		L + 3.25	%		L + 3.40	%		1/9/2024	New York		Hotel		$232,783 / key		63	%		3
65	Senior loan		4/12/2018		103.1		90.0		89.6		L + 2.75	%		L + 3.14	%		5/9/2023	San Francisco		Office		$235 / sqft		72	%		2
66	Senior loan		5/22/2014		89.9		89.9		89.8		L + 2.90	%		L + 3.15	%		6/15/2021	Orange County		Office		$187 / sqft		74	%		2
67	Senior loan		2/18/2015		87.7		87.7		87.6		L + 3.75	%		L + 4.21	%		3/9/2020	Diversified-CA		Office		$181 / sqft		71	%		3
68	Senior loan		8/18/2017		87.2		87.2		86.8		L + 4.10	%		L + 4.80	%		8/18/2022	Brussels-BE		Office		$135 / sqft		59	%		2
69	Senior loan		4/25/2019		210.0		85.6		84.6		L + 3.50	%		L + 3.75	%		9/1/2025	Los Angeles		Office		$385 / sqft		73	%		3
70	Senior loan		11/22/2019		85.0		85.0		84.6		L + 2.99	%		L + 3.27	%		12/1/2024	San Jose		Multi		$317,164 / unit		62	%		3
71	Senior loan		6/18/2019		90.0		85.0		84.3		L + 3.15	%		L + 3.52	%		7/9/2024	Napa Valley		Hotel		$890,052 / key		74	%		3
72	Senior loan		3/31/2017		97.2		80.8		80.8		L + 4.30	%		L + 4.70	%		4/9/2022	New York		Office		$396 / sqft		64	%		3
73	Senior loan		6/29/2016		83.4		79.2		79.1		L + 2.80	%		L + 3.28	%		7/9/2021	Miami		Office		$305 / sqft		64	%		2
74	Senior loan		2/20/2019		134.6		77.8		76.5		L + 3.25	%		L + 3.89	%		2/19/2024	London-UK		Office		$382 / sqft		61	%		3
75	Senior loan		10/17/2018		80.4		70.5		70.2		L + 2.60	%		L + 3.16	%		11/9/2023	San Francisco		Office		$439 / sqft		68	%		3
76	Senior loan		7/26/2018		84.1		70.5		70.4		L + 2.75	%		L + 2.85	%		7/1/2024	Columbus		Multi		$66,429 / unit		69	%		3
77	Senior loan		6/27/2019		84.0		70.0		69.5		L + 2.50	%		L + 2.77	%		7/9/2024	West Palm Beach		Office		$481 / sqft		70	%		3
78	Senior loan		4/5/2018		85.3		65.9		65.5		L + 3.10	%		L + 3.51	%		4/9/2023	Diversified-US		Industrial		$24 / sqft		54	%		3
79	Senior loan		8/22/2019		74.3		65.0		64.3		L + 2.55	%		L + 2.93	%		9/9/2024	Los Angeles		Office		$389 / sqft		63	%		3
80	Senior loan		6/29/2017		64.2		63.4		63.1		L + 3.40	%		L + 3.65	%		7/9/2023	New York		Multi		$184,768 / unit		69	%		4
81	Senior loan (3)		9/22/2017		91.0		62.2		15.5		L + 5.28	%		L + 6.13	%		10/9/2022	San Francisco		Multi		$446,078 / unit		46	%		3
82	Senior loan		10/5/2018		60.4		60.4		60.0		L + 5.50	%		L + 5.65	%		10/5/2021	Sydney-AU		Office		$641 / sqft		78	%		3
83	Senior loan		7/13/2017		86.3		60.0		59.8		L + 3.75	%		L + 4.18	%		8/9/2022	Honolulu		Hotel		$192,926 / key		66	%		3
84	Senior loan		11/30/2016		65.2		56.7		56.6		L + 3.10	%		L + 3.32	%		12/9/2021	Chicago		Retail		$1,167 / sqft		54	%		3
85	Senior loan		10/6/2017		55.9		55.8		55.7		L + 2.95	%		L + 3.21	%		10/9/2022	Nashville		Multi		$99,598 / unit		74	%		2
86	Senior loan		6/26/2019		70.6		55.3		54.7		L + 3.35	%		L + 3.66	%		6/20/2024	London-UK		Office		$625 / sqft		61	%		3
87	Senior loan		8/16/2019		54.3		54.3		54.1		L + 2.75	%		L + 2.95	%		9/1/2022	Sarasota		Multi		$238,158 / unit		76	%		3
88	Senior loan		11/23/2016		53.6		53.6		53.5		L + 3.50	%		L + 3.80	%		12/9/2022	New York		Multi		$223,254 / unit		65	%		4
89	Senior loan		3/11/2014		52.8		52.8		52.8		L + 4.50	%		L + 4.76	%		4/9/2021	New York		Multi		$593,109 / unit		65	%		4
90	Senior loan		6/12/2019		55.0		48.3		48.2		L + 3.25	%		L + 3.37	%		7/1/2022	Grand Rapids		Multi		$92,529 / unit		69	%		3

continued…

Table of Contents


	Loan Type (1)	Origination Date (2)		Total Loan (3)(4)		Principal Balance (4)		Net Book Value		Cash Coupon (5)			All-in Yield (5)			Maximum Maturity (6)		Location	Property Type		Loan Per SQFT / Unit / Key		LTV (2)			Risk Rating
91	Senior loan		8/14/2019		70.3		47.6		47.0		L + 2.45	%		L + 2.87	%		9/9/2024	Los Angeles		Office		$512 / sqft		57	%		3
92	Senior loan		5/24/2018		81.3		45.7		45.2		L + 4.10	%		L + 4.59	%		6/9/2023	Boston		Office		$88 / sqft		55	%		3
93	Senior loan		9/25/2018		49.3		45.0		44.8		L + 3.50	%		L + 3.79	%		9/1/2023	Chicago		Multi		$61,202 / unit		70	%		3
94	Senior loan		11/3/2017		45.0		44.0		43.9		L + 3.00	%		L + 3.08	%		11/1/2022	Los Angeles		Office		$205 / sqft		50	%		1
95	Senior loan		8/29/2017		51.2		43.5		43.4		L + 3.10	%		L + 3.52	%		10/9/2022	Southern California		Industrial		$91 / sqft		65	%		3
96	Senior loan		10/31/2018		59.3		42.4		42.2		L + 5.00	%		L + 5.97	%		11/9/2023	New York		Condo		$357 / sqft		64	%		3
97	Senior loan		10/31/2018		63.3		41.4		41.1		L + 5.00	%		L + 5.63	%		11/9/2023	New York		Multi		$215,011 / unit		61	%		3
98	Senior loan		6/26/2015		41.6		40.8		40.7		L + 3.75	%		L + 3.94	%		7/9/2020	San Diego		Office		$186 / sqft		73	%		3
99	Senior loan		2/20/2019		51.6		40.2		39.8		L + 3.50	%		L + 3.91	%		3/9/2024	Calgary-CAN		Office		$111 / sqft		52	%		3
100	Senior loan		12/27/2016		39.5		39.5		39.5		L + 3.10	%		L + 3.45	%		1/9/2022	New York		Multi		$784,286 / unit		64	%		3
101	Senior loan		11/30/2018		40.0		37.2		37.1		L + 2.95	%		L + 3.38	%		12/1/2023	Las Vegas		Multi		$77,548 / unit		70	%		2
102	Senior loan		12/13/2019		81.3		33.0		32.0		L + 3.55	%		L + 4.49	%		6/12/2024	Diversified-FR		Industrial		$23 / sqft		55	%		3
103	Senior loan		10/31/2019		33.9		33.0		32.9		L + 3.25	%		L + 3.34	%		11/1/2024	Raleigh		Multi		$162,360 / unit		52	%		3
104	Senior loan		8/14/2019		31.0		31.0		31.0		L + 4.00	%		L + 4.44	%		8/14/2020	Orangeburg		Other		$150 / sqft		36	%		3
105	Senior loan		10/31/2019		31.5		30.8		30.7		L + 3.25	%		L + 3.33	%		11/1/2024	Atlanta		Multi		$162,104 / unit		60	%		3
106	Senior loan		12/3/2019		30.3		30.3		30.2		L + 2.75	%		L + 3.20	%		3/1/2021	Pensacola		Multi		$117,500 / unit		50	%		2
107	Senior loan		6/26/2019		30.0		30.0		30.0		L + 3.25	%		L + 3.65	%		10/1/2020	Lake Charles		Multi		$111,940 / unit		73	%		3
108	Senior loan		10/31/2019		30.2		29.4		29.3		L + 3.25	%		L + 3.33	%		11/1/2024	Austin		Multi		$155,582 / unit		52	%		3
109	Senior loan		5/31/2019		29.3		29.3		29.3		L + 3.75	%		L + 3.75	%		3/1/2021	Denver		Multi		$195,333 / unit		59	%		2
110	Senior loan		8/30/2018		28.7		27.5		27.4		L + 3.00	%		L + 3.42	%		9/1/2022	Boise		Multi		$108,106 / unit		73	%		3
111	Senior loan		10/31/2019		27.2		26.6		26.5		L + 3.25	%		L + 3.32	%		11/1/2024	Austin		Multi		$132,314 / unit		53	%		3
112	Senior loan		12/15/2017		22.5		22.5		22.5		L + 3.50	%		L + 3.50	%		12/9/2020	Diversified-US		Hotel		$340,809 / key		50	%		1
113	Senior loan		3/8/2017		21.2		21.2		21.2		4.90	% (7)		5.24	% (7)		12/23/2021	Montreal-CAN		Office		$58 / sqft		45	%		2
114	Senior loan		4/26/2019		20.0		20.0		19.9		L + 2.93	%		L + 3.38	%		5/1/2024	Nashville		Multi		$198,020 / unit		73	%		2
115	Senior loan		12/21/2018		22.9		20.0		19.9		L + 3.25	%		L + 3.48	%		1/1/2024	Daytona Beach		Multi		$74,627 / unit		77	%		3
116	Senior loan		12/23/2019		26.2		19.9		19.7		L + 2.70	%		L + 3.06	%		1/9/2025	Miami		Office		$335 / sqft		68	%		3
117	Senior loan		6/15/2018		22.0		19.6		19.7		L + 3.35	%		L + 3.43	%		7/1/2022	Phoenix		Multi		$68,613 / unit		78	%		3
118	Senior loan		3/9/2018		17.8		17.0		17.0		L + 3.75	%		L + 3.77	%		4/1/2023	Los Angeles		Multi		$131,095 / unit		75	%		2
119	Senior loan		3/30/2016		16.6		16.6		16.7		5.15	%		5.27	%		9/4/2020	Diversified-CAN		Self-Storage		$3,607 / unit		56	%		1
120	Senior loan		6/21/2019		14.8		14.5		14.4		L + 3.30	%		L + 3.41	%		7/1/2022	Portland		Multi		$130,180 / unit		66	%		2

continued…

Table of Contents


	Loan Type (1)	Origination Date (2)		Total Loan (3)(4)		Principal Balance (4)		Net Book Value			Cash Coupon (5)			All-in Yield (5)			Maximum Maturity (6)		Location	Property Type		Loan Per SQFT / Unit / Key		LTV (2)			Risk Rating
121	Senior loan		10/20/2017		17.2		14.0		13.9			L + 4.25	%		L + 4.35	%		11/1/2021	Houston		Multi		$110,714 / unit		56	%		3
122	Senior loan		4/30/2019		15.5		13.6		13.5			L + 3.00	%		L + 3.32	%		5/1/2024	Houston		Multi		$43,990 / unit		78	%		3
123	Senior loan		2/28/2019		15.3		13.5		13.4			L + 3.00	%		L + 3.33	%		3/1/2024	San Antonio		Multi		$58,496 / unit		75	%		3
124	Senior loan		6/29/2018		11.6		11.6		11.7			L + 2.95	%		L + 3.32	%		7/1/2020	Washington DC		Multi		$61,053 / unit		60	%		2
125	Senior loan		5/30/2018		10.1		10.1		10.1			L + 3.90	%		L + 3.97	%		6/1/2021	Phoenix		Multi		$112,222 / unit		74	%		3
126	Senior loan		10/31/2018		10.0		10.0		10.0			L + 3.35	%		L + 3.58	%		11/1/2020	Boise		Multi		$156,250 / unit		74	%		2
127	Senior loan		9/1/2016		9.4		9.4		9.5			L + 4.20	%		L + 4.38	%		9/1/2022	Atlanta		Multi		$87,218 / unit		72	%		1
128	Senior loan		10/1/2019		341.7		0.0		(3.4	)		L + 3.75	%		L + 4.21	%		10/9/2025	Atlanta		Mixed-Use		$505 / sqft		70	%		3

				$	21,628.0	$	16,965.9	$	16,164.8			L + 3.25	%		L + 3.59	%		3.8 yrs							65	%		2.8

(1)	Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans and pari passu participations in senior mortgage loans.

(2)	Date loan was originated or acquired by us, and the LTV as of such date. Origination dates are subsequently updated to reflect material loan modifications.

(3)	Total loan amount reflects outstanding principal balance as well as any related unfunded loan commitment.

(4)

In certain instances, we finance our loans through the

non-recourse

sale of a senior loan interest that is not included in our consolidated financial statements. As of December 31, 2019, four loans in our portfolio have been financed with an aggregate $688.5 million of

non-consolidated

senior interest, which are included in the table above. Portfolio excludes our $89.0 million subordinate risk retention interest in the $930.0 million 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for details of the 2018 Single Asset Securitization.

(5)

The weighted-average cash coupon and

all-in

yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.

(6)	Maximum maturity assumes all extension options are exercised, however our loans may be repaid prior to such date.

(7)	Loan consists of one or more floating and fixed rate tranches. Coupon and all-in yield assume applicable floating benchmark rates for weighted-average calculation.

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ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Loan Portfolio Net Interest Income

The following table projects the impact on our interest income and expense, net of incentive fees, for the twelve-month period following December 31, 2019, assuming an immediate increase or decrease of both 25 and 50 basis points in the applicable interest rate benchmark by currency ($ in thousands):


	Assets (Liabilities) Sensitive to Changes				Interest Rate Sensitivity as of December 31, 2019
	Assets (Liabilities) Sensitive to Changes				Increase in Rates						Decrease in Rates
Currency	in Interest Rates (1)(2)				25 Basis Points			50 Basis Points			25 Basis Points			50 Basis Points
USD	$	11,303,106		Income	$	18,186		$	38,315		$	(16,447	)	$	(30,349	)
		(8,656,170	)	Expense		(16,466	)		(32,938	)		16,070			32,126

	$	2,646,936		Net interest	$	1,720		$	5,377		$	(377	)	$	1,777

GBP	$	1,679,557		Income	$	2,829		$	6,188		$	(2,630	)	$	(5,082	)
		(943,766	)	Expense		(1,888	)		(3,775	)		1,888			3,775

	$	735,791		Net interest	$	941		$	2,413		$	(742	)	$	(1,307	)

EUR	$	3,054,515		Income	$	—		$	2,415		$	—		$	—
		(2,383,565	)	Expense		—			(1,876	)		—			—

	$	670,950		Net interest	$	—		$	539		$	—		$	—

AUD	$	361,763		Income	$	221		$	785		$	—		$	—
		(265,602	)	Expense		(531	)		(1,062	)		531			1,062

	$	96,161		Net interest	$	(310	)	$	(277	)	$	531		$	1,062

CAD (3)	$	41,721		Income	$	63		$	146		$	(3	)	$	(6	)
		(46,248	)	Expense		(92	)		(185	)		92			185

	$	(4,527	)	Net interest	$	(29	)	$	(39	)	$	89		$	179

				Total net interest	$	2,322		$	8,013		$	(499	)	$	1,711

(1)

Our floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each case in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. Increases (decreases) in interest income and expense are presented net of incentive fees. Refer to Note 12 to our consolidated financial statements for additional details of our incentive fee calculation. In addition, $6.1 billion of our loans earned interest based on floors that are above the applicable index as of December 31, 2019.

(2)	Includes amounts outstanding under secured debt agreements, non-consolidated senior interests, securitized debt obligations, and secured term loans.

(3)	Liabilities balance includes two interest rate swaps totaling C$17.3 million ($13.3 million as of December 31, 2019) that are used to hedge a portion of our fixed rate debt.

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Loan Portfolio Value

As of December 31, 2019, 3% of our loans by total loan exposure earned a fixed rate of interest and as such, the values of such loans are sensitive to changes in interest rates. We generally hold all of our loans to maturity and so do not expect to realize gains or losses on our fixed rate loan portfolio as a result of movements in market interest rates.

Risk of

Non-Performance

In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates, there is also the risk of

non-performance

on floating rate assets. In the case of a significant increase in interest rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the collateral real estate assets and, potentially, contribute to

non-performance

or, in severe cases, default. This risk is partially mitigated by various facts we consider during our underwriting process, which in certain cases include a requirement for our borrower to purchase an interest rate cap contract.

Credit Risks

Our loans and investments are also 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, our Manager’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 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.

Capital Market Risks

We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our class A common stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under credit facilities or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise.

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.

The nature of our loans and investments also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates. We seek to manage this risk through a comprehensive credit analysis prior to making an investment and active monitoring of the asset portfolios that serve as our collateral.

Currency Risk

Our loans and investments that are denominated in a foreign currency are also subject to risks related to fluctuations in currency rates. We mitigate this exposure by matching the currency of our foreign currency assets

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to the currency of the borrowings that finance those assets. As a result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign currency rates. In certain circumstances, we may also enter into foreign currency derivative contracts to further mitigate this exposure.

The following table outlines our assets and liabilities that are denominated in a foreign currency (£/

€

/C$/A$ in thousands):


	December 31, 2019
Foreign currency assets (1)	£	1,639,881		€	2,736,673		C$	105,273		A$	518,315
Foreign currency liabilities (1)		(1,017,239	)		(2,122,767	)		(77,550	)		(379,968	)
Foreign currency contracts – notional		(527,100	)		(525,600	)		(23,200	)		(135,600	)

Net exposure to exchange rate fluctuations	£	95,542		€	88,307		C$	4,523		A$	2,747

(1)

Balances include

non-consolidated

senior interests of £302.0 million.


	December 31, 2018
Foreign currency assets (1)	£	911,524		€	1,064,476		C$	435,484		A$	449,533
Foreign currency liabilities (1)		(623,013	)		(797,560	)		(354,980	)		(256,796	)
Foreign currency contracts – notional		(192,300	)		(185,000	)		(70,600	)		(187,600	)

Net exposure to exchange rate fluctuations	£	96,211		€	81,916		C$	9,904		A$	5,137

(1)

Balances include

non-consolidated

senior interests of £302.0 million.

We estimate that a 10% appreciation of the United States dollar relative to the British Pound Sterling and the Euro would result in a decline in our net assets in U.S. dollar terms of $82.5 million and $68.8 million, respectively, as of December 31, 2019. Substantially all of our net asset exposure to the Canadian and Australian dollar has been hedged with foreign currency forward contracts.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this item and the reports of the independent accountants thereon required by Item 14(a)(2) appear on pages

F-2

F-

47. See accompanying Index to the Consolidated Financial Statements on page

F-1.

The supplementary financial data required by Item 302 of Regulation

S-K

appears in Note 19 to the consolidated financial statements.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The company maintains disclosure controls and procedures (as that term is defined in Rules

13a-15(e)

and

15d-15(e)

under the Exchange Act) that are designed to ensure that information required to be disclosed in the company’s reports under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period

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covered by this annual report on Form

10-K

was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) that occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management of Blackstone Mortgage Trust, Inc. and subsidiaries, or Blackstone Mortgage Trust, is responsible for establishing and maintaining adequate internal control over financial reporting. Blackstone Mortgage Trust’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”).

Blackstone Mortgage Trust’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the company; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the company’s management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on its financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an assessment of the effectiveness of Blackstone Mortgage Trust’s internal control over financial reporting as of December 31, 2019, based on the framework established in

Internal Control – Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this assessment, management has determined that Blackstone Mortgage Trust’s internal control over financial reporting as of December 31, 2019, was effective.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited Blackstone Mortgage Trust’s financial statements included in this report on Form

10-K

and issued its report on the effectiveness of Blackstone Mortgage Trust’s internal control over financial reporting as of December 31, 2019, which is included herein.

ITEM 9B.

OTHER INFORMATION

None.

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PART III.

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to the company’s definitive proxy statement to be filed not later than April 29, 2020 with the SEC pursuant to Regulation 14A under the Exchange Act.

ITEM 11.

EXECUTIVE COMPENSATION

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table summarizes information, as of December 31, 2019, relating to our equity compensation plans pursuant to which shares of our class A common stock or other equity securities may be granted from time to time:


Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights			(b) Weighted-average exercise price of outstanding options, warrants, and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders (1)		260,066	(2)	$	—		3,243,346
Equity compensation plans not approved by security holders (3)		—			—		—

Total		260,066		$	—		3,243,346

(1)

The number of securities remaining for future issuances consists of an aggregate 3,243,346 shares issuable under our 2018 stock incentive plan and our 2018 manager incentive plan. Awards under the plans may include restricted stock, unrestricted stock, stock options, stock units, stock appreciation rights, performance shares, performance units, deferred share units, or other equity-based awards, as the board of directors may determine.

(2)

Reflects deferred stock units granted to our

non-employee

directors. The deferred stock units are settled upon the

non-employee

director’s separation from service with the company by delivering to the

non-employee

director one share of class A common stock for each deferred stock unit settled. As these awards have no exercise price, the weighted average exercise price in column (b) does not take these awards into account.

(3)

All of our equity compensation plans have been approved by security holders.

The remaining information required by this item is incorporated by reference to the company’s definitive proxy statement to be filed not later than April 29, 2020 with the SEC pursuant to Regulation 14A under the Exchange Act.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

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PART IV.

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES



	(a) (1)			Financial Statements

				See the accompanying Index to Financial Statement Schedule on page F-1.

	(a) (2)			Consolidated Financial Statement Schedules

				See the accompanying Index to Financial Statement Schedule on page F-1.

	(a) (3)			Exhibits

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EXHIBIT INDEX


Exhibit Number			Exhibit Description

	2.1		Purchase and Sale Agreement, dated September 27, 2012, by and between Capital Trust, Inc. and Huskies Acquisition LLC (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on October 3, 2012 and incorporated herein by reference)

	3.1.a		Articles of Amendment and Restatement (filed as Exhibit 3.1.a to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on April 2, 2003 and incorporated herein by reference)

	3.1.b		Certificate of Notice (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on February 27, 2007 and incorporated herein by reference)

	3.1.c		Articles Supplementary for Series A Junior Participating Preferred Stock (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on March 3, 2011 and incorporated herein by reference)

	3.1.d		Articles of Amendment (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on December 21, 2012 and incorporated herein by reference)

	3.1.e		Articles of Amendment (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on May 7, 2013 and incorporated herein by reference)

	3.1.f		Articles Supplementary (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on May 29, 2013 and incorporated herein by reference)

	3.1.g		Articles of Amendment, dated April 13, 2015 (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on April 13, 2015 and incorporated herein by reference)

	3.2		Fifth Amended and Restated Bylaws of Blackstone Mortgage Trust, Inc. (filed as Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 23, 2019 and incorporated herein by reference)

	4.1	*	Description of Securities of Blackstone Mortgage Trust, Inc.

	4.2		Indenture, dated as of November 25, 2013, between Blackstone Mortgage Trust, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on November 25, 2013 and incorporated herein by reference)

	4.3		Second Supplemental Indenture, dated May 5, 2017, between Blackstone Mortgage Trust, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on May 5, 2017 and incorporated herein by reference)

	4.4		Form of 4.375% Convertible Senior Notes due 2022 (included as Exhibit A in Exhibit 4.3)

	4.5		Third Supplemental Indenture, dated March 27, 2018, between Blackstone Mortgage Trust, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-14788) filed on March 27, 2018 and incorporated herein by reference)

	4.6		Form of 4.75% Convertible Senior Notes due 2023 (included as Exhibit A in Exhibit 4.5)

	10.1		Second Amended and Restated Management Agreement, dated as of October 23, 2014, by and between Blackstone Mortgage Trust, Inc. and BXMT Advisors L.L.C. (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 28, 2014 and incorporated herein by reference)

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Exhibit Number			Exhibit Description

	10.2		Amended and Restated Trademark License Agreement, dated as of December 21, 2017, by and between Blackstone Mortgage Trust, Inc. (f/k/a Capital Trust, Inc.) and Blackstone TM L.L.C. (filed as Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K (File No. 1-14788) filed on February 13, 2018 and incorporated herein by reference)

	10.3		Assignment Agreement, dated as of December 19, 2012, by and among Huskies Acquisition LLC, Blackstone Holdings III L.P. and Capital Trust, Inc. (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on December 21, 2012 and incorporated herein by reference)

	10.4	+	Capital Trust, Inc. Amended and Restated 1997 Non-Employee Director Stock Plan (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on January 29, 1999 and incorporated herein by reference)

	10.5	+	Capital Trust, Inc. 2007 Long-Term Incentive Plan (the “2007 Plan”) (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on June 12, 2007 and incorporated herein by reference)

	10.6	+	2007 Amendment to the 2007 Plan (filed as Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K (File No. 1-14788) filed on March 5, 2008 and incorporated herein by reference)

	10.7	+	Capital Trust, Inc. 2011 Long-Term Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on June 28, 2011 and incorporated herein by reference)

	10.8	+	Blackstone Mortgage Trust, Inc. 2013 Stock Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on July 1, 2013 and incorporated herein by reference)

	10.9	+	Form of Restricted Stock Award of Blackstone Mortgage Trust, Inc. 2013 Stock Incentive Plan (filed as Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 29, 2013 and incorporated herein by reference)

	10.10	+	Form of Restricted Stock Award of Blackstone Mortgage Trust, Inc. 2013 Stock Incentive Plan (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 28, 2014 and incorporated herein by reference)

	10.11	+	Blackstone Mortgage Trust, Inc. 2013 Manager Incentive Plan (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on July 1, 2013 and incorporated herein by reference)

	10.12	+	Form of Restricted Stock Award of Blackstone Mortgage Trust, Inc. 2013 Manager Incentive Plan (filed as Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 29, 2013 and incorporated herein by reference)

	10.13	+	Form of Restricted Stock Award of Blackstone Mortgage Trust, Inc. 2013 Manager Incentive Plan (filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 28, 2014 and incorporated herein by reference)

	10.14	+	Blackstone Mortgage Trust, Inc. 2016 Stock Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on June 17, 2016 and incorporated herein by reference)

	10.15	+	Form of Restricted Stock Award of Blackstone Mortgage Trust, Inc. 2016 Stock Incentive Plan (filed as Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K (File No. 1-14788) filed on February 14, 2017 and incorporated herein by reference)

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Exhibit Number			Exhibit Description

	10.16	+	Blackstone Mortgage Trust, Inc. 2016 Manager Incentive Plan (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on June 17, 2016 and incorporated herein by reference)

	10.17	+	Form of Restricted Stock Award of Blackstone Mortgage Trust, Inc. 2016 Manager Incentive Plan (filed as Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K (File No. 1-14788) filed on February 14, 2017 and incorporated herein by reference)

	10.18	+	Blackstone Mortgage Trust, Inc. 2018 Stock Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on June 21, 2018 and incorporated herein by reference)

	10.19	+*	Form of Restricted Stock Award of Blackstone Mortgage Trust, Inc. 2018 Stock Incentive Plan

	10.20	+	Blackstone Mortgage Trust, Inc. 2018 Manager Incentive Plan (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on June 21, 2018 and incorporated herein by reference)

	10.21	+*	Form of Restricted Stock Award of Blackstone Mortgage Trust, Inc. 2018 Manager Incentive Plan

	10.22	+	Form of Indemnification Agreement (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 1-14788) filed on December 21, 2012 and incorporated herein by reference)

	10.23		Master Repurchase Agreement, dated as of May 21, 2013, by and between Bank of America, N.A. and Parlex 1 Finance, LLC (filed as Exhibit 10.25 of the Registrant’s Registration Statement on Form S-11 (No. 333-187541) filed on May 22, 2013 and incorporated herein by reference)

	10.24		Joinder Agreement, dated as of September 23, 2013, by Parlex 1 Finance, LLC, Parlex 3 Finance LLC and Bank of America, N.A. (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 29, 2013 and incorporated herein by reference)

	10.25		Joinder Termination Agreement, dated as of March 25, 2016, among Parlex 1 Finance, LLC, Parlex 3 Finance, LLC and Bank of America, N.A. (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 26, 2016 and incorporated herein by reference)

	10.26		Amendment No. 1 to Master Repurchase Agreement, dated as of September 23, 2013, by and between Bank of America, N.A. and Parlex 1 Finance, LLC (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 29, 2013 and incorporated herein by reference)

	10.27		Amendment No. 2 to Master Repurchase Agreement, dated as of June 30, 2014, by and among Parlex 1 Finance, LLC, Parlex 3 Finance, LLC, and Bank of America, N.A. (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 28, 2015 and incorporated herein by reference)

	10.28		Amendment No. 3 to Master Repurchase Agreement, dated as of March 27, 2015, by and among Parlex 1 Finance, LLC, Parlex 3 Finance, LLC, and Bank of America, N.A. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 28, 2015 and incorporated herein by reference)

	10.29		Amendment No. 4 to Master Repurchase Agreement, dated as of March 25, 2016, by and between Parlex 1 Finance, LLC and Bank of America, N.A. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 26, 2016 and incorporated herein by reference)

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Exhibit Number			Exhibit Description

	10.30		Amendment No. 5 to Master Repurchase Agreement, dated as of December 21, 2017, among Parlex 1 Finance, LLC and Bank of America, N.A. (filed as Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 24, 2018 and incorporated herein by reference)

	10.31		Amendment No. 6 to Master Repurchase Agreement, dated as of March 30, 2018, among Parlex 1 Finance, LLC and Bank of America, N.A. (filed as Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 24, 2018 and incorporated herein by reference)

	10.32	*	Amendment No. 7 to Master Repurchase Agreement, dated as of December 19, 2019, among Parlex 1 Finance, LLC and Bank of America, N.A.

	10.33		Guarantee Agreement, dated as of May 21, 2013, made by Blackstone Mortgage Trust, Inc. in favor of Bank of America, N.A. (filed as Exhibit 10.26 of the Registrant’s Registration Statement on Form S-11 (No. 333-187541) filed on May 22, 2013 and incorporated herein by reference)

	10.34		Amendment No. 1 to Guarantee Agreement, dated as of September 23, 2013, made by Blackstone Mortgage Trust, Inc. in favor of Bank of America, N.A. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 29, 2013 and incorporated herein by reference)

	10.35		Amendment No. 2 to Guarantee Agreement, dated as of February 21, 2014, made by Blackstone Mortgage Trust, Inc. in favor of Bank of America, N.A. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 29, 2014 and incorporated herein by reference)

	10.36	*	Amendment No. 3 to Guarantee Agreement, dated as of November 25, 2019, made by Blackstone Mortgage Trust, Inc. in favor of Bank of America, N.A.

	10.37		Fourth Amended and Restated Master Repurchase Agreement, dated as of February 15, 2019, among Parlex 2 Finance, LLC, Parlex 2A Finco, LLC, Parlex 2 UK Finco, LLC, Parlex 2 Eur Finco, LLC, Parlex 2 AU Finco, LLC, Parlex 2 CAD Finco, LLC and Citibank, N.A. (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 23, 2019 and incorporated herein by reference)

	10.38		First Amendment, dated as of June 7, 2019, to Fourth Amended and Restated Master Repurchase Agreement, dated as of February 15, 2019, among Parlex 2 Finance, LLC, Parlex 2A Finco, LLC, Parlex 2 UK Finco, LLC, Parlex 2 Eur Finco, LLC, Parlex 2 AU Finco, LLC, Parlex 2 CAD Finco, LLC and Citibank, N.A. (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 23, 2019 and incorporated herein by reference)

	10.39		Second Amendment, dated as of July 16, 2019, to Fourth Amended and Restated Master Repurchase Agreement by and among Parlex 2 Finance, LLC, Parlex 2A Finco, LLC, Parlex 2 UK Finco, LLC, Parlex 2 Eur Finco, LLC, Parlex 2 AU Finco, LLC, Parlex 2 CAD Finco, LLC and Citibank, N.A. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 23, 2019 and incorporated herein by reference)

	10.40		Limited Guaranty, dated as of June 12, 2013, made by Blackstone Mortgage Trust, Inc. in favor of Citibank, N.A. (filed as Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 30, 2013 and incorporated herein by reference)

	10.41		First Amendment to Limited Guaranty, dated as of November 20, 2013, made by Blackstone Mortgage Trust, Inc. in favor of Citibank, N.A. (filed as Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K (File No. 1-14788) filed on February 17, 2015 and incorporated herein by reference)

Table of Contents

Exhibit Number		Exhibit Description

	10.42	Second Amendment to Limited Guaranty, dated as of February 24, 2014, made by Blackstone Mortgage Trust, Inc. in favor of Citibank, N.A. (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 29, 2014 and incorporated herein by reference)

	10.43	Third Amendment to Limited Guaranty, dated as of March 31, 2017, made by Blackstone Mortgage Trust, Inc. in favor of Citibank, N.A. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 25, 2017 and incorporated herein by reference)

	10.44	Fourth Amendment to Limited Guaranty, dated as of October 12, 2018, by and between Blackstone Mortgage Trust, Inc. and Citibank, N.A. (filed as Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K (File No. 1-14788) filed on February 12, 2019 and incorporated herein by reference)

	10.45	Fifth Amendment to Limited Guaranty, dated as of February 15, 2019, by and between Blackstone Mortgage Trust, Inc. and Citibank, N.A. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 23, 2019 and incorporated herein by reference)

	10.46	Guarantee Agreement, dated as of March 13, 2014, made by Blackstone Mortgage Trust, Inc. in favor of Wells Fargo Bank, N.A. (filed as Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 29, 2014 and incorporated herein by reference)

	10.47	Amended and Restated Master Repurchase and Securities Contract, dated as of April 4, 2014, between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 28, 2015 and incorporated herein by reference)

	10.48	Amendment No. 1 to Amended and Restated Master Repurchase and Securities Contract, dated as of October 23, 2014, between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 28, 2015 and incorporated herein by reference)

	10.49	Amendment No. 2 to Amended and Restated Master Repurchase and Securities Contract, dated as of March 13, 2015, between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 28, 2015 and incorporated herein by reference)

	10.50	Amendment No. 3 to Amended and Restated Master Repurchase and Securities Contract, dated as of April 14, 2015 between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 28, 2015 and incorporated herein by reference)

	10.51	Amendment No. 4 to Amended and Restated Master Repurchase and Securities Contract, dated as of March 11, 2016, between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 26, 2016 and incorporated herein by reference)

	10.52	Amendment No. 5 to Amended and Restated Master Repurchase and Securities Contract, dated June 30, 2016, by and between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 26, 2016 and incorporated herein by reference)

	10.53	Amendment No. 6 to Amended and Restated Master Repurchase and Securities Contract, dated as of March 13, 2017, by and between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 25, 2017 and incorporated herein by reference)

Table of Contents

Exhibit Number		Exhibit Description

	10.54	Amendment No. 7 to Amended and Restated Master Repurchase and Securities Contract, dated as of March 31, 2017, by and between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 25, 2017 and incorporated herein by reference)

	10.55	Amendment No. 8 to Amended and Restated Master Repurchase and Securities Contract, dated as of March 13, 2018, between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 24, 2018 and incorporated herein by reference)

	10.56	Amendment No. 9 to Amended and Restated Master Repurchase and Securities Contract, dated as of December 21, 2018, between Parlex 5 Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.52 to the Registrant’s Annual Report on Form 10-K (File No. 1-14788) filed on February 12, 2019 and incorporated herein by reference)

	10.57	Fourth Amended and Restated Master Repurchase and Securities Contract, dated as of June 30, 2016, by and among Parlex 5 Ken Finco, LLC, Parlex 5 Ken UK Finco, LLC, Parlex 5 Ken CAD Finco, LLC, Parlex 5 Ken ONT Finco, LLC, Parlex 5 Ken EUR Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 26, 2016 and incorporated herein by reference)

	10.58	Amendment No. 1 to Fourth Amended and Restated Master Repurchase and Securities Contract and Fourth Amended and Restated Fee and Pricing Letter, dated as of May 8, 2017 by and among Parlex 5 Ken Finco, LLC, Parlex 5 Ken UK Finco, LLC, Parlex 5 Ken CAD Finco, LLC, Parlex 5 Ken ONT Finco, LLC Parlex 5 Ken EUR Finco, LLC and Wells Fargo Bank, National Association (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 25, 2017 and incorporated herein by reference)

	10.59	Amended and Restated Guarantee Agreement, dated as of June 30, 2015, made by Blackstone Mortgage Trust, Inc. in favor of Wells Fargo Bank, National Association (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 28, 2015 and incorporated herein by reference)

	10.60	Acknowledgement of Guarantor, dated as of June 30, 2016, made by Blackstone Mortgage Trust, Inc. in favor of Wells Fargo Bank, National Association (filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 26, 2016 and incorporated herein by reference)

	10.61	Master Repurchase Agreement, dated as of June 27, 2014, between Parlex 7 Finco, LLC and Metropolitan Life Insurance Company (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 29, 2014 and incorporated herein by reference)

	10.62	Amendment No. 1 to Master Repurchase Agreement, dated as of February 24, 2015, by and between Parlex 7 Finco, LLC and Metropolitan Life Insurance Company (filed as Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on April 28, 2015 and incorporated herein by reference)

	10.63	Amendment No. 2 to Master Repurchase Agreement, dated as of April 22, 2016, by and between Parlex 7 Finco, LLC and Metropolitan Life Insurance Company (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 26, 2016 and incorporated herein by reference)

	10.64	Amendment No. 3 to Master Repurchase Agreement, dated as of April 21, 2017, by and between Parlex 7 Finco, LLC and Metropolitan Life Insurance Company (filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on July 25, 2017 and incorporated herein by reference)

Table of Contents

Exhibit Number			Exhibit Description

	10.65		Amendment No. 4 to Master Repurchase Agreement, dated as of September 23, 2019, by and between Parlex 7 Finco, LLC and Metropolitan Life Insurance Company (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 23, 2019 and incorporated herein by reference)

	10.66		Guaranty, dated as of June 27, 2014, made by Blackstone Mortgage Trust, Inc., in favor of Metropolitan Life Insurance Company (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on October 28, 2014 and incorporated herein by reference)

	10.67	*	Second Amended and Restated Master Repurchase Agreement, dated as of December 16, 2019, by and among Parlex 15 Finco, LLC and Deutsche Bank AG, Cayman Islands Branch

	10.68	*	Member Guaranty made as of December 16, 2019 by Parlex 15 Holdco, LLC for the benefit of Deutsche Bank AG, Cayman Islands Branch

	10.69		Senior Facilities Agreement, dated March 2, 2018, between Project Quasar Pledgeco S.L.U., Bank of America Merrill Lynch International Limited, Deutsche Bank AG, London Branch, J.P. Morgan Securities PLC, Morgan Stanley Bank, N.A., Morgan Stanley Principal Funding, Inc., Parlex 15 Lux Eur Finco, S.À.R.L., The Royal Bank of Scotland PLC, SOF Investments S.À.R.L. and Situs Asset Management Limited (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (file No. 1-14788) filed on April 24, 2018 and incorporated herein by reference)

	10.70		Amended and Restated Master Repurchase Agreement, dated as of June 19, 2019, by and among Parlex 3A Finco, LLC, Parlex 3A UK Finco, LLC, Parlex 3A Eur Finco, LLC and Barclays Bank plc. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (file No. 1-14788) filed on July 23, 2019 and incorporated herein by reference)

	10.71		Amended and Restated Guaranty, dated as of June 19, 2019 made by Blackstone Mortgage Trust, Inc. for the benefit of Barclays Bank plc (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (file No. 1-14788) filed on July 23, 2019 and incorporated herein by reference)

	10.72		Amended and Restated Registration Rights Agreement, dated May 6, 2013, by and among Blackstone Mortgage Trust, Inc., Blackstone Holdings III L.P. and BREDS/CT Advisors L.L.C. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 1-14788) filed on May 6, 2013 and incorporated herein by reference)

	21.1	*	Subsidiaries of Blackstone Mortgage Trust, Inc.

	23.1	*	Consent of Deloitte & Touche LLP

	31.1	*	Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	*	Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1	*	Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

	32.2	*	Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

	101.INS	++	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.LAB	++	Inline XBRL Taxonomy Extension Label Linkbase Document

Table of Contents

Exhibit Number			Exhibit Description

	101.PRE	++	Inline XBRL Taxonomy Extension Presentation Linkbase Document

	101.DEF	++	Inline XBRL Taxonomy Extension Definition Linkbase Document

	104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

+	This document has been identified as a management contract or compensatory plan or arrangement.

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

ITEM 16.

FORM

10-K

SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) 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.


	BLACKSTONE MORTGAGE TRUST, INC.

February 11, 2020	By:	/s/ Stephen D. Plavin
Date		Stephen D. Plavin Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



February 11, 2020 Date				/s/ Michael B. Nash Michael B. Nash Executive Chairman of the Board of Directors

February 11, 2020 Date				/s/ Stephen D. Plavin Stephen D. Plavin Chief Executive Officer and Director (Principal Executive Officer)

February 11, 2020 Date				/s/ Anthony F. Marone, Jr. Anthony F. Marone, Jr. Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

February 11, 2020 Date				/s/ Leonard W. Cotton Leonard W. Cotton, Director

February 11, 2020 Date				/s/ Thomas E. Dobrowksi Thomas E. Dobrowski, Director

February 11, 2020 Date				/s/ Martin L. Edelman Martin L. Edelman, Director

February 11, 2020 Date				/s/ Henry N. Nassau Henry N. Nassau, Director

February 11, 2020 Date				/s/ Jonathan L. Pollack Jonathan L. Pollack, Director

February 11, 2020 Date				/s/ Lynne B. Sagalyn Lynne B. Sagalyn, Director

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE


Report of Independent Registered Public Accounting Firm			F- 2

Consolidated Balance Sheets as of December 31, 2019 and 2018			F- 5

Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018, and 2017			F- 6

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018, and 2017			F-7

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018, and 2017			F- 8

Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018, and 2017			F- 9

Notes to Consolidated Financial Statements			F- 11

Schedule IV – Mortgage Loans on Real Estate			S- 1

Schedules other than those listed are omitted as they are not applicable or the required or equivalent information has been included in the consolidated financial statements or notes thereto.

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Blackstone Mortgage Trust, Inc.

New York, New York

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Blackstone Mortgage Trust, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and the schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in

Internal Control – Integrated Framework (2013)

issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in

Internal Control – Integrated Framework (2013)

issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

F-2

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accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Loans Receivable – Identification of Impairment Indicators – Refer to Note 2 and Note 3 in the Consolidated Financial Statements

Critical Audit Matter Description

The Company evaluates loans for possible indicators of impairment on a quarterly basis in order to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of loans receivable are no longer recoverable. The loans are typically collateralized by commercial real estate. As a result, the Company regularly evaluates the extent and impact of any deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Possible indicators of impairment may include, but are not limited to, events or changes in circumstances affecting occupancy of an underlying property, market rental rates and physical condition of such property.

The Company’s evaluation involves a certain level of judgment and/or estimation related to whether the financial performance of the collateral or the existing market conditions results in an impairment indicator. Changes in these judgements and/or estimates could have a significant impact on the loans identified for further analysis. For the year ended December 31, 2019, no impairment loss has been recognized on loans receivable.

We identified the determination of impairment indicators for loans receivable as a critical audit matter because of the level of judgment involved in management’s assessment of whether events or changes in circumstances have occurred indicating that the carrying amounts of loans receivable may not be recoverable. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate whether management appropriately identified impairment indicators, including period-over-period review of the borrower’s financial information and business plans, collateral performance and assessment of micro- and macro-economic factors.

F-3

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the factors evaluated by management to evaluate if impairment indicators existed on a loan by loan basis and a determination of whether those factors would indicate a potential impairment, included among others:

•

We tested the design and operating effectiveness of controls over identification of impairment indicators, including but not limited to, not making contractual debt service payments, deterioration in underlying property performance, and negative trends in micro- and macro-economic factors.

•

We evaluated a sample of loans for potential impairment by:

•

Evaluating the accuracy and determining the relevance of the factors utilized during the Company’s evaluation

•

Analyzing period over period changes on items such as rental rates, physical conditions of the property, net operating income, debt service coverage ratio, occupancy, cash flow volatility, leasing and tenant profile, loan structure, exit plan, and project sponsorship, to determine impact on loan performance.

•

Evaluating the financial performance of the collateral associated with each loan

•

Reviewing the changes in budgets and the summaries of third-party reports, where applicable, for construction loans.

•

Evaluating the impact of macroeconomic and microeconomic events on the borrower, sponsor, or asset type.

•

We reviewed the payment history for all loans in the Company’s portfolio to ensure that the borrowers are making contractual payments in accordance with the loan agreements.

/s/ Deloitte & Touche LLP

New York, New York

February 11, 2020

We have served as the Company’s auditor since 2013

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Blackstone Mortgage Trust, Inc.

Consolidated Balance Sheets

(in thousands, except share data)


	December 31, 2019			December 31, 2018
Assets
Cash and cash equivalents	$	150,090		$	105,662
Loans receivable, net		16,164,801			14,191,200
Other assets		236,980			170,513

Total Assets	$	16,551,871		$	14,467,375

Liabilities and Equity
Secured debt agreements, net	$	10,054,930		$	8,974,756
Loan participations sold, net		—			94,418
Securitized debt obligations, net		1,187,084			1,285,471
Secured term loan, net		736,142			—
Convertible notes, net		613,071			609,911
Other liabilities		175,963			128,212

Total Liabilities		12,767,190			11,092,768

Commitments and contingencies		—			—
Equity
Class A common stock, $ 0.01 par value, 200,000,000 shares authorized, 135,003,662 and 123,435,738 shares issued and outstanding as of December 31, 2019 and 2018, respectively		1,350			1,234
Additional paid-in capital		4,370,014			3,966,540
Accumulated other comprehensive loss		(16,233	)		(34,222	)
Accumulated deficit		(592,548	)		(569,428	)

Total Blackstone Mortgage Trust, Inc. stockholders’ equity		3,762,583			3,364,124
Non-controlling interests		22,098			10,483

Total Equity		3,784,681			3,374,607

Total Liabilities and Equity	$	16,551,871		$	14,467,375

Note: The consolidated balance sheets as of December 31, 2019 and December 31, 2018 include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of each respective VIE, and liabilities of consolidated VIEs for which creditors do not have recourse to Blackstone Mortgage Trust, Inc. As of December 31, 2019 and December 31, 2018, assets of the consolidated VIEs totaled

$1.4 billion

and $1.5 billion, respectively, and liabilities of the consolidated VIEs totaled $1.2 billion and

$1.3 billion

, respectively. Refer to Note 16 for additional discussion of the VIEs.

See accompanying notes to consolidated financial statements.

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Blackstone Mortgage Trust, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share data)


	Year Ended December 31,
	2019			2018			2017
Income from loans and other investments
Interest and related income	$	882,679		$	756,109		$	537,915
Less: Interest and related expenses		458,503			359,625			234,870

Income from loans and other investments, net		424,176			396,484			303,045
Other expenses
Management and incentive fees		78,435			74,834			54,841
General and administrative expenses		38,854			35,529			29,922

Total other expenses		117,289			110,363			84,763

Income before income taxes		306,887			286,121			218,282
Income tax (benefit) provision		(506	)		308			314

Net income		307,393			285,813			217,968

Net income attributable to non-controlling interests		(1,826	)		(735	)		(337	)

Net income attributable to Blackstone Mortgage Trust, Inc.	$	305,567		$	285,078		$	217,631

Net income per share of common stock basic and diluted	$	2.35		$	2.50		$	2.27

Weighted-average shares of common stock outstanding, basic and diluted		130,085,398			113,857,238			95,963,616

See accompanying notes to consolidated financial statements.

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Blackstone Mortgage Trust, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)


	Year Ended December 31,
	2019			2018			2017
Net income	$	307,393		$	285,813		$	217,968
Other comprehensive income
Unrealized gain (loss) on foreign currency translation		23,920			(44,317	)		47,124
Realized and unrealized (loss) gain on derivative financial instruments		(5,931	)		39,801			(20,628	)

Other comprehensive income (loss)		17,989			(4,516	)		26,496

Comprehensive income		325,382			281,297			244,464
Comprehensive income attributable to non-controlling interests		(1,826	)		(735	)		(337	)

Comprehensive income attributable to Blackstone Mortgage Trust, Inc.	$	323,556		$	280,562		$	244,127

See accompanying notes to consolidated financial statements.

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Blackstone Mortgage Trust, Inc.

Consolidated Statements of Changes in Equity

(in thousands)


	Blackstone Mortgage Trust, Inc.
	Class A Common Stock		Additional Paid- In Capital			Accumulated Other Comprehensive (Loss) Income			Accumulated Deficit			Stockholders’ Equity			Non-Controlling Interests			Total Equity
Balance at December 31, 2016	$	945		3,089,997			(56,202	)		(541,137	)		2,493,603			—		$	2,493,603
Shares of class A common stock issued, net		134		391,434			—			—			391,568			—			391,568
Restricted class A common stock earned		—		23,584			—			—			23,584			—			23,584
Issuance of convertible notes		—		964			—						964			—			964
Dividends reinvested		—		444			—			(400	)		44			—			44
Deferred directors’ compensation		—		438			—			—			438			—			438
Other comprehensive income		—		—			26,496			—			26,496			—			26,496
Net income		—		—			—			217,631			217,631			337			217,968
Dividends declared on common stock, $ 2.48 per share		—		—			—			(243,262	)		(243,262	)		—			(243,262	)
Contributions from non-controlling interests		—		—			—			—			—			12,165			12,165
Distributions to non-controlling interests		—		—			—			—			—			(6,162	)		(6,162	)

Balance at December 31, 2017	$	1,079	$	3,506,861		$	(29,706	)	$	(567,168	)	$	2,911,066		$	6,340		$	2,917,406

Shares of class A common stock issued, net		155		476,275			—			—			476,430			—			476,430
Restricted class A common stock earned		—		27,644			—			—			27,644			—			27,644
Issuance of convertible notes		—		1,462			—			—			1,462			—			1,462
Conversion of convertible notes		—		(46,720	)		—			—			(46,720	)		—			(46,720	)
Dividends reinvested		—		518			—			(465	)		53			—			53
Deferred directors’ compensation		—		500			—			—			500			—			500
Other comprehensive loss		—		—			(4,516	)		—			(4,516	)		—			(4,516	)
Net income		—		—			—			285,078			285,078			735			285,813
Dividends declared on common stock, $ 2.48 per share		—		—			—			(286,873	)		(286,873	)		—			(286,873	)
Contributions from non-controlling interests		—		—			—			—			—			9,315			9,315
Distributions to non-controlling interests		—		—			—			—			—			(5,907	)		(5,907	)

Balance at December 31, 2018	$	1,234	$	3,966,540		$	(34,222	)	$	(569,428	)	$	3,364,124		$	10,483		$	3,374,607

Shares of class A common stock issued, net		116		372,232			—			—			372,348			—			372,348
Restricted class A common stock earned		—		30,146			—			—			30,146			—			30,146
Dividends reinvested		—		596			—			(554	)		42			—			42
Deferred directors’ compensation		—		500			—			—			500			—			500
Other comprehensive income		—		—			17,989			—			17,989			—			17,989
Net income		—		—			—			305,567			305,567			1,826			307,393
Dividends declared on common stock, $ 2.48 per share		—		—			—			(328,133	)		(328,133	)		—			(328,133	)
Contributions from non-controlling interests		—		—			—			—			—			51,418			51,418
Distributions to non-controlling interests		—		—			—			—			—			(41,629	)		(41,629	)

Balance at December 31, 2019	$	1,350	$	4,370,014		$	(16,233	)	$	(592,548	)	$	3,762,583		$	22,098		$	3,784,681

See accompanying notes to consolidated financial statements.

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Blackstone Mortgage Trust, Inc.

Consolidated Statements of Cash Flows

(in thousands)


	Year Ended December 31,
	2019			2018			2017
Cash flows from operating activities
Net income	$	307,393		$	285,813		$	217,968
Adjustments to reconcile net income to net cash provided by operating activities
Non-cash compensation expense		30,656			28,154			24,031
Amortization of deferred fees on loans and debt securities		(57,926	)		(47,093	)		(38,373	)
Amortization of deferred financing costs and premiums/ discount on debt obligations		32,016			28,097			21,988
Changes in assets and liabilities, net
Other assets		(7,355	)		(23,352	)		(4,632	)
Other liabilities		(747	)		18,383			6,479

Net cash provided by operating activities		304,037			290,002			227,461

Cash flows from investing activities
Origination and fundings of loans receivable		(6,890,249	)		(7,890,051	)		(3,598,166	)
Principal collections and sales proceeds from loans receivable and debt securities		4,940,194			3,084,747			2,780,431
Loan contributed to securitization		—			512,002			—
Investment in debt securities held-to-maturity		—			(95,937	)		—
Origination and exit fees received on loans receivable		66,558			104,408			55,441
Receipts under derivative financial instruments		49,673			47,527			6,453
Payments under derivative financial instruments		(6,524	)		(18,475	)		(20,870	)
Collateral deposited under derivative agreements		(59,720	)		(38,990	)		(20,161	)
Return of collateral deposited under derivative agreements		28,920			43,110			16,120

Net cash used in investing activities		(1,871,148	)		(4,251,659	)		(780,752	)

continued…

See accompanying notes to consolidated financial statements.

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Blackstone Mortgage Trust, Inc.

Consolidated Statements of Cash Flows

(in thousands)


	Year Ended December 31,
	2019			2018			2017
Cash flows from financing activities
Borrowings under secured debt agreements	$	6,569,460		$	9,183,852		$	4,306,301
Repayments under secured debt agreements		(5,526,989	)		(5,413,070	)		(4,778,194	)
Proceeds from issuance of collateralized loan obligations		—			—			817,500
Repayment of collateralized loan obligations		(102,478	)		—			—
Proceeds from sale of loan participations		21,346			99,696			80,706
Repayment of loan participations		(115,874	)		(85,875	)		(381,310	)
Net proceeds from issuance of secured term loan		748,414			—			—
Repayments of secured term loan		(3,122	)		—			—
Payment of deferred financing costs		(39,370	)		(25,006	)		(27,465	)
Contributions from non-controlling interests		51,418			9,315			12,165
Distributions to non-controlling interests		(41,629	)		(5,907	)		(6,162	)
Net proceeds from issuance of convertible notes		—			214,775			394,632
Repayment of convertible notes		—			(219,232	)		—
Net proceeds from issuance of class A common stock		372,337			476,420			391,558
Dividends paid on class A common stock		(320,961	)		(277,260	)		(234,989	)

Net cash provided by financing activities		1,612,552			3,957,708			574,742

Net increase (decrease) in cash, cash equivalents, and restricted cash		45,441			(3,949	)		21,451
Cash, cash equivalents, and restricted cash at beginning of year		105,662			102,518			75,567
Effects of currency translation on cash, cash equivalents, and restricted cash		(1,013	)		7,093			5,500

Cash, cash equivalents, and restricted cash at end of year	$	150,090		$	105,662		$	102,518

Supplemental disclosure of cash flows information
Payments of interest	$	(425,801	)	$	(318,919	)	$	(206,966	)

Receipts (payments) of income taxes	$	109		$	(554	)	$	(296	)

Supplemental disclosure of non-cash investing and financing activities
Dividends declared, not paid	$	(83,702	)	$	(76,530	)	$	(66,888	)

Loan principal payments held by servicer, net	$	49,584		$	4,855		$	15,763

Consolidation of loans receivable of a VIE	$	—		$	—		$	500,000

Consolidation of securitized debt obligations of a VIE	$	—		$	—		$	(474,620	)

See accompanying notes to consolidated financial statements.

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Table of Contents

Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements

1. ORGANIZATION

References herein to “Blackstone Mortgage Trust,” “Company,” “we,” “us” or “our” refer to Blackstone Mortgage Trust, Inc. and its subsidiaries unless the context specifically requires otherwise.

Floor, New York, New York 10154. We were incorporated in Maryland in 1998, when we reorganized from a California common law business trust into a Maryland corporation.

We conduct our operations as a REIT for U.S. federal income tax purposes. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT. We also operate our business in a manner that permits us to maintain an exclusion from registration under the Investment Company Act of 1940, as amended. We are organized as a holding company and conduct our business primarily through our various subsidiaries.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries, majority-owned subsidiaries, and variable interest entities, or VIEs, of which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

The weighted-average cash coupon,

all-in

yield, and

all-in

cost were updated in the prior period presentation of loans receivable and securitized debt obligations in Notes 3 and 7, respectively, to conform to the current period presentation. The classifications of

asset-specific

financings and secured credit facilities were updated in the prior period presentation of secured debt agreements in Note 5 to conform to the current period presentation.

Principles of Consolidation

We consolidate all entities that we control through either majority ownership or voting rights. In addition, we consolidate all VIEs of which we are considered the primary beneficiary. VIEs are defined as entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.

In the third quarter of 2018, we contributed a loan to a single asset securitization vehicle, or the 2018 Single Asset Securitization, which is a VIE, and invested in the related subordinate risk retention position. We are not the primary beneficiary of the VIE because we do not have the power to direct the activities that most

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

significantly affect the VIE’s economic performance and, therefore, do not consolidate the 2018 Single Asset Securitization on our balance sheet. We have classified the subordinate risk retention position as a

held-to-maturity

debt security that is included in other assets on our consolidated balance sheets. Refer to Note 16 for additional discussion of our VIEs.

In April 2017, we entered into a joint venture, or our Multifamily Joint Venture, with Walker & Dunlop Inc. to originate, hold, and finance multifamily bridge loans. Pursuant to the terms of the agreements governing the joint venture, Walker & Dunlop contributed 15% of the venture’s equity capital and we contributed 85%. We consolidate the Multifamily Joint Venture as we have a controlling financial interest. The

non-controlling

interests included on our consolidated balance sheets represent the equity interests in our Multifamily Joint Venture that are owned by Walker & Dunlop. A portion of our Multifamily Joint Venture’s consolidated equity and results of operations are allocated to these

non-controlling

interests based on Walker & Dunlop’s pro rata ownership of our Multifamily Joint Venture.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.

Revenue Recognition

Cash and Cash Equivalents

Cash and cash equivalents represent cash held in banks and liquid investments with original maturities of three months or less. We may have bank balances in excess of federally insured amounts; however, we deposit our cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure. We have not experienced, and do not expect, any losses on our cash or cash equivalents. During the second quarter of 2018, the letter of credit related to our restricted cash balance was cancelled and the cash was transferred out of our segregated bank account. As of both December 31, 2019 and December 31, 2018, we had

restricted cash on our consolidated balance sheets.

Through our subsidiaries, we have oversight of certain servicing accounts held with third-party servicers, or Servicing Accounts, which relate to borrower escrows and other cash balances aggregating $450.8

million and $320.0

million as of December 31, 2019 and December 31, 2018, respectively. This cash is maintained in segregated bank accounts, and these amounts are not included in the assets and liabilities presented in our consolidated balance sheets. Cash in these Servicing Accounts will be transferred by the respective third-party servicer to the borrower or us under the terms of the applicable loan agreement upon occurrence of certain future events. We do not generate any revenue or incur any expenses as a result of these Servicing Accounts.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Loans Receivable and Provision for Loan Losses

loan-to-value

5-point

scale, our loans are rated “1” through “5,” from less risk to greater risk, relative to our loan portfolio in the aggregate, which ratings are defined as follows:

1 –

Very Low Risk

2 –

Low Risk

3 –

Medium Risk

4 –

High Risk/Potential for Loss:

A loan that has a risk of realizing a principal loss.

5 –

Impaired/Loss Likely:

A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss.

Debt Securities

Held-to-Maturity

We classify our debt securities as

held-to-maturity,

as we have the intent and ability to hold these securities until maturity. We include our debt securities in other assets on our consolidated balance sheets at amortized cost.

If, based on current information and events, there is an adverse change in cash flows expected to be collected from the cash flows previously projected for one of our debt securities, an other-than-temporary impairment is deemed to have occurred. A change in expected cash flows is considered adverse if the present value of the revised cash flows (taking into consideration both the timing and amount of cash flows expected to be collected), discounted using the debt security’s current yield, is less than the present value of the previously estimated remaining cash flows. If an other-than-temporary impairment is considered to have occurred, the debt security is written down to fair value. The total other-than-temporary impairment is bifurcated into (i) the amount related to expected credit losses, and (ii) the amount related to fair value adjustments in excess of expected credit losses. The other-than-temporary impairment related to expected credit losses is calculated by comparing the amortized cost basis of the security to the present value of cash flows expected to be collected, discounted at the security’s current yield, and is recognized in earnings in the consolidated statement of operations. The remaining other-than-temporary impairment that is not related to expected credit losses is recognized in other comprehensive income (loss). A portion of other-than-temporary impairments recognized through earnings is accreted back to the amortized cost basis of the security through interest income, while amounts recognized through other comprehensive income (loss) are amortized over the life of the security with no impact on earnings.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Derivative Financial Instruments

We classify all derivative financial instruments as either other assets or other liabilities on our consolidated balance sheets at fair value.

On the date we enter into a derivative contract, we designate each contract as (i) a hedge of a net investment in a foreign operation, or net investment hedge, (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability, or cash flow hedge, (iii) a hedge of a recognized asset or liability, or fair value hedge, or (iv) a derivative instrument not to be designated as a hedging derivative, or

non-designated

hedge. For all derivatives other than those designated as

non-designated

hedges, we formally document our hedge relationships and designation at the contract’s inception. This documentation includes the identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and our evaluation of the effectiveness of its hedged transaction.

On a quarterly basis, we also formally assess whether the derivative we designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in the value or cash flows of the hedged items. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in net income prospectively. Changes in the fair value of our derivative instruments that qualify as hedges are reported as a component of accumulated other comprehensive income (loss) on our consolidated financial statements. Deferred gains and losses are reclassified out of accumulated other comprehensive income (loss) and into net income in the same period or periods during which the hedged transaction affects earnings, and are presented in the same line item as the earnings effect of the hedged item. For cash flow hedges, this is typically when the periodic swap settlements are made, while for net investment hedges, this occurs when the hedged item is sold or substantially liquidated. To the extent a derivative does not qualify for hedge accounting and is deemed a

non-designated

hedge, the changes in its fair value are included in net income concurrently.

Secured Debt Agreements

Where applicable, we record investments financed with secured debt agreements as separate assets and the related borrowings under any secured debt agreements are recorded as separate liabilities on our consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the secured debt agreements are reported separately on our consolidated statements of operations.

Senior Loan Participations

In certain instances, we finance our loans through the

non-recourse

syndication of a senior loan interest to a third-party. Depending on the particular structure of the syndication, the senior loan interest may remain on our GAAP balance sheet or, in other cases, the sale will be recognized and the senior loan interest will no longer be included in our consolidated financial statements. When these sales are not recognized under GAAP we reflect the transaction by recording a loan participations sold liability on our consolidated balance sheet, however this gross presentation does not impact stockholders’ equity or net income. When the sales are recognized, our balance sheet only includes our remaining subordinate loan and not the

non-consolidated

senior interest we sold.

Secured Term Loan

We record our secured term loans as liabilities on our consolidated balance sheets. Where applicable, any issue discount or transaction expenses are deferred and amortized through the maturity date of the secured term loan as additional

non-cash

interest expense.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Convertible Notes

The “Debt with Conversion and Other Options” Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The initial proceeds from the sale of convertible notes are allocated between a liability component and an equity component in a manner that reflects interest expense at the rate of similar nonconvertible debt that could have been issued at such time. The equity component represents the excess initial proceeds received over the fair value of the liability component of the notes as of the date of issuance. We measured the estimated fair value of the debt component of our convertible notes as of the respective issuance dates based on our nonconvertible debt borrowing rate. The equity component of each series of our convertible notes is reflected within additional

paid-in

capital on our consolidated balance sheet, and the resulting issue discount is amortized over the period during which such convertible notes are expected to be outstanding (through the maturity date) as additional

non-cash

interest expense. The additional

non-cash

interest expense attributable to such convertible notes will increase in subsequent periods through the maturity date as the notes accrete to their par value over the same period.

Deferred Financing Costs

The deferred financing costs that are included as a reduction in the net book value of the related liability on our consolidated balance sheets include issuance and other costs related to our debt obligations. These costs are amortized as interest expense using the effective interest method over the life of the related obligations.

Fair Value of Financial Instruments

The “Fair Value Measurements and Disclosures” Topic of the FASB, or ASC 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.

ASC 820 also establishes a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring financial instruments. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument, and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination, as follows:

•

Level 1: Generally includes only unadjusted quoted prices that are available in active markets for identical financial instruments as of the reporting date.

•

Level 2: Pricing inputs include quoted prices in active markets for similar instruments, quoted prices in less active or inactive markets for identical or similar instruments where multiple price quotes can be obtained, and other observable inputs, such as interest rates, yield curves, credit risks, and default rates.

•

Level 3: Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. These inputs require significant judgment or estimation by management of third-parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

The estimated value of each asset reported at fair value using Level 3 inputs is determined by an internal committee composed of members of senior management of our Manager, including our Chief Executive Officer, Chief Financial Officer, and other senior officers.

Certain of our other assets are reported at fair value either (i) on a recurring basis, as of each

quarter-end,

or (ii) on a nonrecurring basis, as a result of impairment or other events. Our assets that are recorded at fair value are discussed further in Note 15. We generally value our assets recorded at fair value by either (i) discounting expected cash flows based on assumptions regarding the collection of principal and interest and estimated market rates, or (ii) obtaining assessments from third-party dealers. For collateral-dependent loans that are identified as impaired, we measure impairment by comparing our Manager’s estimation of the fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations may require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by our Manager.

We are also required by GAAP to disclose fair value information about financial instruments, which are not otherwise reported at fair value in our consolidated balance sheet, to the extent it is practicable to estimate a fair value for those instruments. These disclosure requirements exclude certain financial instruments and all

non-financial

instruments.

The following methods and assumptions are used to estimate the fair value of each class of financial instruments, for which it is practicable to estimate that value:

•

Cash and cash equivalents: The carrying amount of cash and cash equivalents approximates fair value.

•

Loans receivable, net: The fair values of these loans were estimated by our Manager based on a discounted cash flow methodology, taking into consideration various factors including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and indications of market value from other market participants.

•

Debt securities

held-to-maturity:

The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.

•

Derivative financial instruments: The fair value of our foreign currency and interest rate contracts was estimated using advice from a third-party derivative specialist, based on contractual cash flows and observable inputs comprising foreign currency rates and credit spreads.

•

Secured debt agreements, net: The fair value of these instruments was estimated based on the rate at which a similar credit facility would currently be priced.

•

Loan participations sold, net: The fair value of these instruments was estimated based on the value of the related loan receivable asset.

•

Securitized debt obligations, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.

•

Secured term loan, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

•

Convertible notes, net: Each series of the convertible notes is actively traded and their fair values were obtained using quoted market prices.

Income Taxes

Our financial results generally do not reflect provisions for current or deferred income taxes on our REIT taxable income. We believe that we operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, we generally do not expect to pay substantial corporate level taxes other than those payable by our taxable REIT subsidiaries. If we were to fail to meet these requirements, we may be subject to federal, state, and local income tax on current and past income, and penalties. Refer to Note 13 for additional information.

Stock-Based Compensation

Our stock-based compensation consists of awards issued to our Manager and certain individuals employed by an affiliate of our Manager that vest over the life of the awards, as well as deferred stock units issued to certain members of our board of directors. Stock-based compensation expense is recognized for these awards in net income on a variable basis over the applicable vesting period of the awards, based on the value of our class A common stock. Refer to Note 14 for additional information.

Earnings per Share

Basic earnings per share, or Basic EPS, is computed in accordance with the

two-class

method and is based on the net earnings allocable to our class A common stock, including restricted class A common stock and deferred stock units, divided by the weighted-average number of shares of our class A common stock, including restricted class A common stock and deferred stock units outstanding during the period. Our restricted class A common stock is considered a participating security, as defined by GAAP, and has been included in our Basic EPS under the

two-class

method as these restricted shares have the same rights as our other shares of class A common stock, including participating in any gains or losses.

Diluted earnings per share, or Diluted EPS, is determined using the treasury stock method, and is based on the net earnings allocable to our class A common stock, including restricted class A common stock and deferred stock units, divided by the weighted-average number of shares of our class A common stock, including restricted class A common stock and deferred stock units. Refer to Note 11 for additional discussion of earnings per share.

Foreign Currency

In the normal course of business, we enter into transactions not denominated in United States, or U.S., dollars. Foreign exchange gains and losses arising on such transactions are recorded as a gain or loss in our consolidated statements of operations. In addition, we consolidate entities that have a

non-U.S.

dollar functional currency.

Non-U.S.

dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the average exchange rate over the applicable period. Cumulative translation adjustments arising from the translation of

non-U.S.

dollar denominated subsidiaries are recorded in other comprehensive income (loss).

Underwriting Commissions and Offering Costs

Underwriting commissions and offering costs incurred in connection with common stock offerings are reflected as a reduction of additional

paid-in

capital. Costs incurred that are not directly associated with the completion of a common stock offering are expensed when incurred.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Recent Accounting Pronouncements

In April 2019, the FASB issued ASU

2019-04,

“Codification Improvements to Topic 326, Financial Instruments –

Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” or ASU

2019-04.

ASU

2019-04

amends existing guidance originally issued by (i) ASU

2016-13

“Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326),” or ASU

2016-13,

(ii) ASU

2017-12

“Derivatives and Hedging Topic 815: Targeted Improvements to Accounting for Hedging Activities,” or ASU

2017-12,

and (iii) ASU

2016-01

“Financial Instruments – Overall (Subtopic

825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities,” or ASU

2016-01.

The amendments in ASU

2019-04

that relate to ASU

2016-13

clarify specific issues related to the implementation of the current expected credit loss, or CECL, model, which are effective for fiscal years beginning after December 15, 2019 and are to be adopted through a cumulative-effect adjustment to retained earnings as of January 1, 2020. The amendments in ASU

2019-04

that relate to ASU

2017-12

primarily update guidance related to fair value hedges and do not have an impact on our consolidated financial statements. The amendments in ASU

2019-04

that relate to ASU

2016-01

primarily update guidance related to equity securities and do not have an impact on our consolidated financial statements.

In June 2016, the FASB issued ASU

2016-13.

ASU

2016-13

significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU

2016-13

will replace the incurred loss model under existing guidance with a CECL model for instruments measured at amortized cost, and require entities to record allowances for

available-for-sale

2016-13

is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of January 1, 2020.

The CECL reserve required under ASU

2016-13

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

repayments, and (iii) the current credit quality of our portfolio and our expectations of performance and market conditions over the relevant time period. To estimate the historic loan losses relevant to our portfolio, we have augmented our historical loan performance, which includes zero loan losses since the launch of our senior loan origination business in 2013, with market loan loss data licensed from Trepp LLC. This database includes commercial mortgage-backed securities, or CMBS, issued since January 1, 1999 through December 31, 2019

. Within this database, we focused

our historical loss reference calculations on the most relevant subset of available CMBS data. We believe this CMBS data, which includes month-over-month loan and property performance, is the most relevant, available, and comparable dataset to our portfolio.

CECL reserve will be estimated using the same process outlined above for our outstanding loan balances, and changes in this

component of the

CECL reserve will similarly impact our consolidated net income. For both the funded and unfunded portions of our loans, we will consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.

Upon adoption of ASU

2016-13

on January 1, 2020, we expect to record an initial CECL reserve, including future loan funding commitments, of approximately $

17.6

million, or $

0.13

per share, reflecting an aggregate CECL reserve of

0.11

% of our aggregate outstanding principal balance of $

16.4

billion as of December 31, 2019.

3. LOANS RECEIVABLE, NET

The following table details overall statistics for our loans receivable portfolio ($ in thousands):


	December 31, 2019			December 31, 2018
Number of loans		128			125
Principal balance	$	16,277,343		$	14,293,970
Net book value	$	16,164,801		$	14,191,200
Unfunded loan commitments (1)	$	3,911,868		$	3,405,945
Weighted-average cash coupon (2)		L + 3.20	%		L + 3.40	%
Weighted-average all-in yield (2)		L + 3.55	%		L + 3.73	%
Weighted-average maximum maturity (years) (3)		3.8			3.9

(1)

	(2)	The weighted-average cash coupon and all-in yield are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR, GBP LIBOR, EURIBOR, BBSY, and CDOR, as applicable to each loan. As of December 31, 2019, 99 % of our loans by principal balance earned a floating rate of interest, primarily indexed to USD LIBOR, and $ 6.1 billion of such loans earned interest based on floors that are above the applicable index. The other 1% of our loans earned a fixed rate of interest . W e reflect our fixed rate loans as a spread over the relevant floating benchmark rates , as of December 31, 2019 and December 31, 2018 , respectively, for purposes of the weighted-averages. As of December 31, 2018, 98 % of our loans by total loan exposure earned a floating rate of interest, primarily indexed to USD LIBOR, and $ 1.2 billion of such loans earned interest based on floors that are above the applicable index. In addition to cash coupon, all-in yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.
	(3)	Maximum maturity assumes all extension options are exercised by the borrower, however our loans may be repaid prior to such date. As of December 31, 2019, 61% of our loans by principal balance were subject to yield maintenance or other prepayment restrictions and 39% were open to repayment by the borrower without penalty. As of December 31, 2018, 75% of our loans by principal balance were subject to yield maintenance or other prepayment restrictions and 25% were open to repayment by the borrower without penalty.

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Notes to Consolidated Financial Statements (continued)

Activity relating to our loans receivable portfolio was as follows ($ in thousands):


	Principal Balance			Deferred Fees / Other Items (1)			Net Book Value
December 31, 2017	$	10,108,226		$	(51,494	)	$	10,056,732
Loan fundings		7,890,051			—			7,890,051
Loan repayments		(3,035,383	)		—			(3,035,383	)
Loan contributed to securitization		(517,500	)		5,498			(512,002	)
Unrealized (loss) gain on foreign currency translation		(151,424	)		770			(150,654	)
Deferred fees and other items		—			(104,408	)		(104,408	)
Amortization of fees and other items		—			46,864			46,864

December 31, 2018	$	14,293,970		$	(102,770	)	$	14,191,200

Loan fundings		6,890,249			—			6,890,249
Loan repayments and sales proceeds		(4,974,881	)		—			(4,974,881	)
Unrealized gain (loss) on foreign currency translation		68,005			(629	)		67,376
Deferred fees and other items		—			(66,558	)		(66,558	)
Amortization of fees and other items		—			57,415			57,415

December 31, 2019	$	16,277,343		$	(112,542	)	$	16,164,801

(1)	Other items primarily consist of purchase discounts or premiums, exit fees, and deferred origination expenses.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

The tables below detail the property type and geographic distribution of the properties securing the loans in our portfolio ($ in thousands):


December 31, 2019
Property Type	Number of Loans		Net Book Value		Total Loan Exposure (1)(2)		Percentage of Portfolio
Office		63	$	9,946,055	$	10,266,567		61	%
Hotel		14		2,199,220		2,281,718		13
Multifamily		36		1,596,333		1,642,664		10
Industrial		5		603,917		607,423		4
Retail		3		373,045		381,040		2
Self-Storage		2		291,994		292,496		2
Condominium		1		232,778		234,260		1
Other		4		921,459		1,259,696		7

		128	$	16,164,801	$	16,965,864		100	%


Geographic Location	Number of Loans		Net Book Value		Total Loan Exposure (1)(2)		Percentage of Portfolio
United States
Northeast		25	$	3,789,477	$	3,815,580		22	%
West		30		3,143,323		3,451,914		20
Southeast		23		2,321,444		2,334,852		14
Midwest		10		1,174,581		1,180,240		7
Southwest		11		464,989		467,532		3
Northwest		3		52,891		52,989		—

Subtotal		102		10,946,705		11,303,107		66
International
United Kingdom		13		1,738,536		2,102,501		12
Ireland		1		1,318,196		1,330,647		8
Spain		2		1,231,061		1,237,809		7
Australia		3		360,047		361,763		2
Germany		1		195,081		251,020		1
Italy		1		178,740		180,897		1
Belgium		1		86,807		87,201		1
Canada		3		77,656		77,953		1
France		1		31,972		32,966		1

Subtotal		26		5,218,096		5,662,757		34

Total		128	$	16,164,801	$	16,965,864		100	%

(1)

In certain instances, we finance our loans through the

non-recourse

sale of a senior loan interest that is not included in our consolidated financial statements. See Note 2 for further discussion. Total loan exposure encompasses the entire loan we originated and financed, including $

688.5

million of such

non-consolidated

senior interests as of December 31, 2019.

(2)

Excludes investment exposure to the $

930.0

million 2018 Single Asset Securitization. See Note 4 for details of the subordinated risk retention interest we own in the 2018 Single Asset Securitization.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)


December 31, 2018
Property Type	Number of Loans		Net Book Value		Total Loan Exposure (1)(2)		Percentage of Portfolio
Office		55	$	7,104,842	$	7,164,466		49	%
Hotel		18		2,591,565		2,673,763		18
Multifamily		34		2,193,699		2,206,740		15
Industrial		5		680,808		685,776		5
Retail		4		451,099		452,900		3
Condominium		4		304,545		368,104		2
Self-Storage		2		278,473		280,043		2
Other		3		586,169		909,052		6

		125	$	14,191,200	$	14,740,844		100	%


Geographic Location	Number of Loans		Net Book Value		Total Loan Exposure (1)(2)		Percentage of Portfolio
United States
Northeast		32	$	4,322,114	$	4,359,938		31	%
West		29		3,137,072		3,222,706		22
Southeast		19		2,258,033		2,271,664		15
Midwest		9		1,161,637		1,170,619		8
Southwest		13		478,665		481,745		3
Northwest		4		238,844		239,872		2

Subtotal		106		11,596,365		11,746,544		81
International
Spain		1		1,124,174		1,131,334		8
United Kingdom		7		754,299		1,094,663		7
Canada		5		316,268		313,229		2
Australia		3		310,372		312,893		2
Belgium		1		70,621		71,007		—
Germany		1		11,585		63,637		—
Netherlands		1		7,516		7,537		—

Subtotal		19		2,594,835		2,994,300		19

Total		125	$	14,191,200	$	14,740,844		100	%

(1)

In certain instances, we finance our loans through the

non-recourse

446.9

million of such

non-consolidated

senior interests as of December 31, 2018.

(2)

Excludes investment exposure to the $

1.0

billion 2018 Single Asset Securitization. See Note 4 for details of the subordinated risk retention interest we own in the 2018 Single Asset Securitization.

Loan Risk Ratings

As further described in Note 2, our Manager evaluates our loan portfolio on a quarterly basis. In conjunction with our quarterly loan portfolio review, our Manager assesses the risk factors of each loan, and assigns a risk rating based on several factors. Factors considered in the assessment include, but are not limited to, risk of loss, current LTV, debt yield, collateral performance, structure, exit plan, and sponsorship. Loans are rated “1” (less risk) through “5” (greater risk), which ratings are defined in Note 2.

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Notes to Consolidated Financial Statements (continued)

The following table allocates the principal balance and net book value of our loans receivable based on our internal risk ratings ($ in thousands):

	December 31, 2019						December 31, 2018
Risk Rating	Number of Loans		Net Book Value		Total Loan Exposure (1)(2)		Number of Loans		Net Book Value		Total Loan Exposure (1)(2)
1		6	$	376,379	$	378,427		2	$	181,366	$	182,740
2		30		3,481,123		3,504,972		38		3,860,432		3,950,025
3		89		12,137,963		12,912,722		85		10,149,402		10,608,079
4		3		169,336		169,743		—		—		—
5		—		—		—		—		—		—

		128	$	16,164,801	$	16,965,864		125	$	14,191,200	$	14,740,844

(1)

In certain instances, we finance our loans through the

non-recourse

688.5

million and $

446.9

million of such

non-consolidated

senior interests as of December 31, 2019 and December 31, 2018, respectively.

(2)	Excludes investment exposure to the $ 930.0 million and $1.0 billion 2018 Single Asset Securitization as of December 31, 2019 and December 31, 2018, respectively. See Note 4 for details of the subordinated risk retention interest we own in the 2018 Single Asset Securitization.

The weighted-average risk rating of our total loan exposure was 2.8

and 2.7

as of December 31, 2019 and 2018

, respectively. The increase was driven primarily by new loans originated during 2019, the majority of which were rated 3 at origination

We did

t have any impaired loans, nonaccrual loans, or loans in maturity default as of December 31, 2019 or 2018.

The following table allocates the net book value of our loans receivable based on our internal risk ratings, separated by year of origination ($ in thousands):


		Net Book Value of Loans Receivable by Year of Origination (1)
		December 31, 2019
Risk Rating		2019		2018		2017		2016		2015		Prior		Total
	1	$	188,881	$	94,863	$	66,448	$	26,187	$	—	$	—	$	376,379
	2		111,464		2,068,804		937,272		79,100		210,739		73,744		3,481,123
	3		5,444,546		4,681,832		1,299,525		395,482		216,645		99,933		12,137,963
	4		—		—		63,133		53,452		—		52,751		169,336
	5		—		—		—		—		—		—		—
		$	5,744,891	$	6,845,499	$	2,366,378	$	554,221	$	427,384	$	226,428	$	16,164,801

(1)	Date loan was originated or acquired by us. Origination dates are subsequently updated to reflect material loan modifications.

Multifamily Joint Venture

As discussed in Note 2, we entered into a Multifamily Joint Venture in April 2017. As of December 31, 2019 and December 31, 2018, our Multifamily Joint Venture held $670.5 million and $334.6 million of loans, respectively, which are included in the loan disclosures above. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.

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Notes to Consolidated Financial Statements (continued)

4. OTHER ASSETS AND LIABILITIES

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


	December 31, 2019		December 31, 2018
Debt securities held-to-maturity (1)	$	86,638	$	96,167
Accrued interest receivable		66,649		56,679
Loan portfolio payments held by servicer (2)		49,584		6,133
Collateral deposited under derivative agreements		30,800		—
Derivative assets		1,079		9,916
Prepaid expenses		739		647
Prepaid taxes		376		6
Other		1,115		965

Total	$	236,980	$	170,513

(1)

Represents the subordinate risk retention interest in the 2018 Single Asset Securitization

, which held aggregate loan assets of $930.0 million and $1.0 billion

as of December 31, 2019 and December 31, 2018, respectively, with a yield to full maturity of L+

10.0

% and a maximum maturity date of

June 9, 2025

, assuming all extension options are exercised by the borrower. Refer to Note 16 for additional discussion.

(2)

Represents loan principal and interest payments held by our third-party loan servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle.

The following table details the components of our other liabilities ($ in thousands):


	December 31, 2019		December 31, 2018
Accrued dividends payable	$	83,702	$	76,530
Derivative liabilities		42,263		2,925
Accrued interest payable		24,831		25,588
Accrued management and incentive fees payable		20,159		18,586
Accounts payable and other liabilities		5,008		4,583

Total	$	175,963	$	128,212

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

5. SECURED DEBT AGREEMENTS, NET

Our secured debt agreements include secured credit facilities, asset-specific financings, and a revolving credit agreement. The following table details our secured debt agreements ($ in thousands):


	Secured Debt Agreements Borrowings Outstanding
	December 31, 2019			December 31, 2018
Secured credit facilities	$	9,753,059		$	8,870,897
Asset-specific financings		330,879			81,739
Revolving credit agreement		—			43,845

Total secured debt agreements	$	10,083,938		$	8,996,481

Deferred financing costs (1)		(29,008	)		(21,725	)

Net book value of secured debt	$	10,054,930		$	8,974,756

(1)

Costs incurred in connection with our secured debt agreements are recorded on our consolidated balance sheet when incurred and recognized as a component of interest expense over the life of each related agreement.

Secured Credit Facilities

$577.0 million of credit capacity

The following tables detail our secured credit facilities ($ in thousands):


	December 31, 2019
	Credit Facility Borrowings						Collateral Assets (2)
Lender	Potential (1)		Outstanding		Available (1)		Collateral Assets (2)
Wells Fargo	$	2,056,769	$	2,018,057	$	38,712	$	2,621,806
Deutsche Bank		2,037,795		1,971,860		65,935		2,573,447
Barclays		1,629,551		1,442,083		187,468		2,044,654
Citibank		1,159,888		1,109,837		50,051		1,473,745
Bank of America		603,660		513,660		90,000		775,678
Morgan Stanley		524,162		468,048		56,114		706,080
Goldman Sachs		474,338		450,000		24,338		632,013
MetLife		417,677		417,677		—		536,553
Société Générale		333,473		333,473		—		437,130
US Bank - Multi. JV (3)		279,838		279,552		286		350,034
JP Morgan		303,288		259,062		44,226		386,545
Santander		239,332		239,332		—		299,597
Goldman Sachs - Multi. JV (3)		203,846		203,846		—		261,461
Bank of America - Multi. JV (3)		46,572		46,572		—		58,957
	$	10,310,189	$	9,753,059	$	557,130	$	13,157,700

(1)	Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are immediately available to us at our sole discretion under the terms of each credit facility.

(2)	Represents the principal balance of the collateral assets.

(3)	These facilities finance the loan investments of our consolidated Multifamily Joint Venture. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.

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Notes to Consolidated Financial Statements (continued)

The weighted-average outstanding balance of our secured credit facilities was $8.8 billion for the year ended December 31, 2019. As of December 31, 2019, we had aggregate borrowings of $9.8 billion outstanding under our secured credit facilities, with a weighted-average cash coupon of LIBOR plus 1.60% per annum, a weighted-average

all-in

cost of credit, including associated fees and expenses, of LIBOR plus 1.79% per annum, and a weighted-average advance rate of 79.4%. As of December 31, 2019, outstanding borrowings under these facilities had a weighted-average maturity, including extension options, of 3.6 years.


	December 31, 2018
	Credit Facility Borrowings						Collateral Assets (2)
Lender	Potential (1)		Outstanding		Available (1)		Collateral Assets (2)
Deutsche Bank	$	1,839,698	$	1,839,698	$	—	$	2,325,047
Wells Fargo		1,908,509		1,822,154		86,355		2,514,513
JP Morgan		1,010,628		1,010,628		—		1,266,259
Barclays		890,620		890,620		—		1,113,275
Citibank		852,470		663,917		188,553		1,076,085
Bank of America		873,446		873,446		—		1,090,117
MetLife		675,329		675,329		—		852,733
Morgan Stanley		341,241		276,721		64,520		457,496
Société Générale		321,182		321,182		—		404,048
Goldman Sachs		230,140		230,140		—		295,368
Goldman Sachs - Multi. JV (3)		170,060		170,060		—		212,983
Bank of America - Multi. JV (3)		97,002		97,002		—		121,636

	$	9,210,325	$	8,870,897	$	339,428	$	11,729,560

(1)	Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are immediately available to us at our sole discretion under the terms of each credit facility.

(2)	Represents the principal balance of the collateral assets.

(3)	These facilities finance the loan investments of our consolidated Multifamily Joint Venture. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.

The weighted-average outstanding balance of our secured credit facilities was $6.5 billion for the year ended December 31, 2018. As of December 31, 2018, we had aggregate borrowings of $8.9 billion outstanding under our secured credit facilities, with a weighted-average cash coupon of LIBOR plus 1.72% per annum, a weighted-average

all-in

cost of credit, including associated fees and expenses, of LIBOR plus 1.90% per annum, and a weighted-average advance rate of 79.5%. As of December 31, 2018, outstanding borrowings under these facilities had a weighted-average maturity, including extension options, of 3.5 years.

Borrowings under each facility are subject to the initial approval of eligible collateral loans by the lender and the maximum advance rate and pricing rate of individual advances are determined with reference to the attributes of the respective collateral loan.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

The following tables outline the key terms of our credit facilities as of December 31, 2019:

Lender

Currency

Guarantee

(1)

Margin Call

(2)

Term/Maturity

Morgan Stanley

$ / £ /

€

Collateral marks only

March 1, 2022

Goldman Sachs - Multi. JV

(3)

Collateral marks only

July 12, 2022

(6)

Bank of America - Multi. JV

(3)

Collateral marks only

July 19, 2023

(7)

Goldman Sachs

Collateral marks only

October 22, 2023

(8)

JP Morgan

$ / £

Collateral marks only

January 7, 2024

(9)

Bank of America

Collateral marks only

May 21, 2024

(10)

Barclays

$ / £ /

€

Collateral marks only

June 18, 2024

(11)

MetLife

Collateral marks only

September 23, 2025

(12)

Deutsche Bank

$ /

€

(4)

Collateral marks only

Term matched

(13)

Citibank

$ / £ /

€

/ A$ / C$

Collateral marks only

Term matched

(13)

Société Générale

$ / £ /

€

Collateral marks only

Term matched

(13)

Santander

€

Collateral marks only

Term matched

(13)

Wells Fargo

$ / C$

(5)

Collateral marks only

Term matched

(13)

US Bank - Multi. JV

(3)

Collateral marks only

Term matched

(13)

(1)	Other than amounts guaranteed based on specific collateral asset types, borrowings under our credit facilities are non-recourse to us.

(2)	Margin call provisions under our credit facilities do not permit valuation adjustments based on capital markets events, and are limited to collateral-specific credit marks.

(3)	These facilities finance the loan investments of our consolidated Multifamily Joint Venture. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.

(4)	Specific borrowings outstanding of $951.6 million are 100% guaranteed . The remainder of the credit facility borrowings are 25% guaranteed.

(5)	In addition to the 25% guarantee across all borrowings, there is an incremental guarantee of $148.3 million related to $197.7 million of specific borrowings outstanding.

(6)	Includes a one-year extension option which may be exercised at our sole discretion.

(7)	Includes two one-year extension options which may be exercised at our sole discretion.

(8)	Includes two one-year extension option s which may be exercised at our sole discretion.

(9)	Includes two one-year extension options which may be exercised at our sole discretion.

(10)	Includes two one-year extension options which may be exercised at our sole discretion.

(11)	Includes four one-year extension options which may be exercised at our sole discretion.

(12)	Includes five one-year extension options which may be exercised at our sole discretion.

(13)	These secured credit facilities have various availability periods during which new advances can be made and which are generally subject to each lender’s discretion. Maturity dates for advances outstanding are tied to the term of each respective collateral asset.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)


Currency		Potential Borrowings (1)		Outstanding Borrowings		Floating Rate Index (2)		Spread		Advance Rate (3)
	$	$	6,710,218	$	6,186,958		USD LIBOR		L + 1.60%		79.6%
	€	€	2,155,130	€	2,125,716		EURIBOR		E + 1.41%		80.0%
	£	£	712,583	£	711,900		GBP LIBOR		L + 1.99%		77.4%
	A$	A$	255,270	A$	255,270		BBSY		BBSY + 1.90%		78.0%
	C$	C$	77,329	C$	77,349		CDOR		CDOR + 1.80%		78.4%

		$	10,310,189	$	9,753,059				INDEX + 1.60%		79.4%

(1)	Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are immediately available to us at our sole discretion under the terms of each credit facility.

(2)	Floating rate indices are generally matched to the payment timing under the terms of each secured credit facility and its respective collateral assets.

(3)	Represents weighted-average advance rate based on the approved outstanding principal balance of the collateral assets pledged.

Asset-Specific Financings

The following tables detail our asset-specific financings ($ in thousands):



	December 31, 2019
Asset-Specific Financings	Count		Principal Balance		Book Value		Wtd. Avg. Yield/Cost (1)			Guarantee (2)		Wtd. Avg. Term (3)
Collateral assets		4	$	429,983	$	417,820		L+4.90	%		n/a		Mar. 2023
Financing provided		4	$	330,879	$	323,504		L+3.42	%	$	97,930		Mar. 2023


	December 31, 2018
Asset-Specific Financings	Count		Principal Balance		Book Value		Wtd. Avg. Yield/Cost (1)			Guarantee (2)		Wtd. Avg. Term (3)
Collateral assets		1	$	106,739	$	104,807		L+6.08	%		n/a		Aug. 2022
Financing provided		1	$	81,739	$	80,938		L+4.07	%	$	—		Aug. 2022

(1)

(2)	Other than amounts guaranteed on an asset-by-asset basis, borrowings under our asset-specific financings are non-recourse to us.

(3)	The weighted-average term is determined based on the maximum maturity of the corresponding loans, assuming all extension options are exercised by the borrower. Each of our asset-specific financings is term-matched to the corresponding collateral loans.

The weighted-average outstanding balance of our asset-specific financings was $185.0

million and

$52.8 million

for the years ended December 31, 2019 and 2018, respectively.

Revolving Credit Agreement

annum pricing

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

rate equal to the sum of (i) an applicable base rate or Eurodollar rate and (ii) an applicable margin, in each case, dependent on the applicable type of loan collateral. The maturity date of the facility is April 4, 2020.

During the year ended December 31, 2019, the weighted-average outstanding borrowings under the revolving credit agreement was $14.3 million and we recorded interest expense of $2.6 million, including $1.0

million

of amortization of deferred fees and expenses. As of December 31, 2019, we had no outstanding borrowings under the agreement.

During the year ended December 31, 2018, the weighted-average outstanding borrowings under the revolving credit agreement was $44.3 million and we recorded interest expense of $3.8 million, including $1.1 million of amortization of deferred fees and expenses. As of December 31, 2018, we had $43.8 million of borrowings outstanding under the agreement.

Debt Covenants

The guarantees related to our secured debt agreements contain the following financial covenants: (i) our ratio of earnings before interest, taxes, depreciation, and amortization, or EBITDA, to fixed charges, as defined in the agreements, shall be not less than 1.4 to 1.0; (ii) our tangible net worth, as defined in the agreements, shall not be less than $2.8 billion as of each measurement date plus 75% of the net cash proceeds of future equity issuances subsequent to December 31, 2019; (iii) cash liquidity shall not be less than the greater of (x) $10.0 million or (y) no more than 5% of our recourse indebtedness; and (iv) our indebtedness shall not exceed 83.33% of our total assets. As of December 31, 2019 and December 31, 2018, we were in compliance with these covenants. Refer to Note 8 for information regarding financial covenants contained in the agreements governing our senior secured term loan facility.

6. LOAN PARTICIPATIONS SOLD, NET

The financing of a loan by the

non-recourse

sale of a senior interest in the loan through a participation agreement generally does not qualify as a sale under GAAP. Therefore, in the instance of such sales, we present the whole loan as an asset and the loan participation sold as a liability on our consolidated balance sheet until the loan is repaid. The obligation to pay principal and interest on these liabilities is generally based on the performance of the related loan obligation. The gross presentation of loan participations sold does not impact stockholders’ equity or net income.

We did not have any loan participations sold as of December 31, 2019. During the year ended December 31, 2019, we recorded $3.2 million of interest expense related to our loan participations sold. During

the

year ended December 31, 2018, we recorded $16.6 million of interest expense related to our loan participations sold. The following table details our loan participations sold as of December 31, 2018 ($ in thousands):


	December 31, 2018
Loan Participations Sold	Count		Principal Balance		Book Value		Yield/Cost (1)			Guarantee (2)		Term
Total loan		1	$	123,745	$	122,669		L+5.92	%		n/a		Feb. 2022
Senior participation (3)		1		94,528		94,418		L+4.07	%	$	—		Feb. 2022

(1)

Our floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each arrangement in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred fees / financing costs.

(2)	As of December 31, 2018, our loan participations sold were non-recourse to us.

(3)	The difference between principal balance and book value of loan participations sold is due to deferred financing costs of $110,000 as of December 31, 2018.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

7. SECURITIZED DEBT OBLIGATIONS, NET

We have financed a pool of our loans through a collateralized loan obligation, or the CLO, and have also financed one of our loans through a single asset securitization vehicle, or the 2017 Single Asset Securitization. The CLO and the 2017 Single Asset Securitization have issued securitized debt obligations that are

non-recourse

to us. Both the CLO and the 2017 Single Asset Securitization are consolidated in our financial statements. Refer to Note 16 for further discussion of our CLO and 2017 Single Asset Securitization.

The following tables detail our securitized debt obligations ($ in thousands):


	December 31, 2019
Securitized Debt Obligations	Count		Principal Balance		Book Value		Wtd. Avg. Yield/Cost (1)			Term (2)
Collateralized Loan Obligation
Collateral assets		18	$	897,522	$	897,522		L+3.43	%		September 2022
Financing provided		1		715,022		712,517		L+1.98	%		June 2035
2017 Single Asset Securitization
Collateral assets (3)		1		711,738		710,260		L+3.60	%		June 2023
Financing provided		1		474,620		474,567		L+1.64	%		June 2033
Total
Collateral assets		19	$	1,609,260	$	1,607,782		L+3.51	%

Financing provided (4)		2	$	1,189,642	$	1,187,084		L+1.84	%


	December 31, 2018
Securitized Debt Obligations	Count		Principal Balance		Book Value		Wtd. Avg. Yield/Cost (1)			Term (2)
Collateralized Loan Obligation
Collateral assets		26	$	1,000,000	$	1,000,000		L + 3.65	%		April 2022
Financing provided		1		817,500		811,023		L+1.74	%		June 2035
2017 Single Asset Securitization
Collateral assets (3)		1		682,297		678,770		L+3.60	%		June 2023
Financing provided		1		474,620		474,448		L+1.65	%		June 2033
Total
Collateral assets		27	$	1,682,297	$	1,678,770		L + 3.63	%

Financing provided (4)		2	$	1,292,120	$	1,285,471		L+1.71	%

(1)

As of December 31, 2019, all of our loans financed by securitized debt obligations earned a floating rate of interest. As of December 31, 2018, 98% of our loans financed by securitized debt obligations earned a floating rate of interest.

The other 2% of our loans earned a fixed rate of interest, which we reflect as a spread over USD LIBOR for purposes of the weighted-averages.

In addition to cash coupon,

all-in

yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees.

All-in

yield for the total portfolio assume applicable floating benchmark rates for weighted-average calculation.

(2)

(3)	The collateral assets for the 2017 Single Asset Securitization include the total loan amount, of which we securitized $500.0 million.

(4)	During the years ended December 31, 2019 and 2018, we recorded $47.2 million and $48.8 million, respectively, of interest expense related to our securitized debt obligations.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

8. SECURED TERM LOAN, NET

In April 2019 we entered into a $500.0 million senior Secured Term Loan, which bears interest at a rate of LIBOR plus 2.50% per annum. In November 2019 we increased the aggregate principal amount of the Secured Term Loan to $748.8 million and decreased the interest rate to LIBOR plus 2.25%. As of December 31, 2019, the following Secured Term Loan was outstanding ($ in thousands):

Term Loan Issuance

Face Value

Interest

Rate

All-in

Cost

(1)

Maturity

Term Loan B

746,878

L+2.25

L+2.52

April 23, 2026

(1)	Includes issue discount and transaction expenses that are amortized through interest expense over the life of the Secured Term Loan.

The Secured Term Loan is partially amortizing, with an amount equal to 1.0% per annum of the aggregate principal balance due in quarterly installments. The issue discount and transaction expenses on the Secured Term Loan were $1.6 million and $10.1 million, respectively, which will be amortized into interest expense over the life of the Secured Term Loan. The guarantee under our Secured Term Loan contains the financial covenant that our indebtedness shall not exceed 83.33% of our total assets. As of December 31, 2019, we were in compliance with this covenant. Refer to Note 2 for additional discussion of our accounting policies for the Secured Term Loan.

9. CONVERTIBLE NOTES, NET

As of December 31, 2019, the following convertible senior notes, or Convertible Notes, were outstanding ($ in thousands):


Convertible Notes Issuance	Face Value		Coupon Rate			All-in Cost (1)			Conversion Rate (2)		Maturity
May 2017	$	402,500		4.38	%		4.85	%		28.0324		May 5, 2022
March 2018	$	220,000		4.75	%		5.33	%		27.6052		March 15, 2023

(1)	Includes issuance costs that are amortized through interest expense over the life of the Convertible Notes using the effective interest method.

(2)

Represents the shares of class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of $35.67 and $36.23 per share of class A common stock, respectively, for the May 2017 and March 2018 convertible notes. The cumulative dividend threshold as defined in the respective May 2017 and March 2018 convertible notes supplemental indentures have not been exceeded as of December 31, 2019.

The Convertible Notes are convertible at the holders’ option into shares of our class A common stock, only under specific circumstances, prior to the close of business on January 31, 2022 and December 14, 2022 for the May 2017 and March 2018 convertible notes, respectively, at the applicable conversion rate in effect on the conversion date. Thereafter, the Convertible Notes are convertible at the option of the holder at any time until the

second scheduled trading day immediately preceding the maturity date. We may not redeem the Convertible Notes prior to maturity. The last reported sale price of our class A common stock of $

37.22

on December 31, 2019 was greater than the per share conversion price of the May 2017 and March 2018 convertible notes. We have the intent and ability to settle each series of the Convertible Notes in cash and, as a result, the potential conversion of the Convertible Notes did not have any impact on our diluted earnings per share.

Upon our issuance of the May 2017 convertible notes, we recorded a $979,000 discount based on the implied value of the conversion option and an assumed effective interest rate of 4.57%, as well as $8.4 million of

issue

discount and issuance costs. Including the amortization of the discount and issuance costs, our total cost of the May 2017 convertible notes issuance is 4.91% per annum.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Upon our issuance of the March 2018 convertible notes, we recorded a $1.5 million discount based on the implied value of the conversion option and an assumed effective interest rate of 5.25%, as well as $5.2 million of

issue

discount and issuance costs. Including the amortization of the discount and issuance costs, our total cost of the March 2018 convertible notes issuance is 5.49% per annum.

The following table details the net book value of our Convertible Notes on our consolidated balance sheets ($ in thousands):


	December 31, 2019			December 31, 2018
Face value	$	622,500		$	622,500
Unamortized discount		(8,801	)		(11,740	)
Deferred financing costs		(628	)		(849	)

Net book value	$	613,071		$	609,911

The following table details our interest expense related to the Convertible Notes ($ in thousands):


	Year Ended December 31,
	2019		2018		2017
Cash coupon	$	28,059	$	33,859	$	19,259
Discount and issuance cost amortization		3,159		5,531		4,040

Total interest expense	$	31,218	$	39,390	$	23,299

Accrued interest payable for the Convertible Notes was $6.0 million as of

both

December 31, 2019 and December 31, 2018. Refer to Note 2 for additional discussion of our accounting policies for the Convertible Notes.

10. DERIVATIVE FINANCIAL INSTRUMENTS

The sole objective of our use of derivative financial instruments is to minimize the risks and/or costs associated with our investments and/or financing transactions. These derivatives may or may not qualify as net investment, cash flow, or fair value hedges under the hedge accounting requirements of ASC 815 – “Derivatives and Hedging.” Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks. Refer to Note 2 for additional discussion of the accounting for designated and

non-designated

hedges.

The use of derivative financial instruments involves certain risks, including the risk that the counterparties to these contractual arrangements do not perform as agreed. To mitigate this risk, we only enter into derivative financial instruments with counterparties that have appropriate credit ratings and are major financial institutions with which we and our affiliates may also have other financial relationships.

Net Investment Hedges of Foreign Currency Risk

Certain of our international investments expose us to fluctuations in foreign interest rates and currency exchange rates. These fluctuations may impact the value of our cash receipts and payments in terms of our functional currency, the U.S. dollar. We use foreign currency forward contracts to protect the value or fix the amount of certain investments or cash flows in terms of the U.S. dollar.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

The following table details our outstanding foreign exchange derivatives that were designated as net investment hedges of foreign currency risk (notional amount in thousands):


December 31, 2019				December 31, 2018
Foreign Currency Derivatives	Number of Instruments	Notional Amount		Foreign Currency Derivatives		Number of Instruments		Notional Amount
Sell GBP Forward	4	£	527,100		Sell GBP Forward		3	£	192,300
Sell EUR Forward	5	€	525,600		Sell AUD Forward		2	A$	187,600
Sell AUD Forward	3	A$	135,600		Sell EUR Forward		1	€	185,000
Sell CAD Forward	1	C$	23,200		Sell CAD Forward		1	C$	70,600

Cash Flow Hedges of Interest Rate Risk

Certain of our transactions expose us to interest rate risks, which include a fixed versus floating rate mismatch between our assets and liabilities. We use derivative financial instruments, which include interest rate caps and swaps, and may also include interest rate options, floors, and other interest rate derivative contracts, to hedge interest rate risk.

The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (notional amount in thousands):


December 31, 2019
Interest Rate Derivatives	Number of Instruments		Notional Amount		Strike			Index		Wtd.-Avg. Maturity (Years)
Interest Rate Swaps		2	C$	17,273		1.0	%		CDOR		0.7
Interest Rate Caps		1	C$	21,387		3.0	%		CDOR		1.0

December 31, 2018
Interest Rate Derivatives	Number of Instruments		Notional Amount		Strike			Index		Wtd.-Avg. Maturity (Years)
Interest Rate Swap		3	C$	90,472		1.0	%		CDOR		0.5
Interest Rate Caps		9	$	204,248		2.4	%		USD LIBOR		0.5
Interest Rate Caps		2	C$	39,998		2.5	%		CDOR		0.6

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on our floating rate debt. During the twelve months following December 31, 2019, we estimate that an additional $91,000 will be reclassified from accumulated other comprehensive income (loss) as an increase to interest income.

Non-designated

Hedges

During the years ended December 31, 2019 and 2018, we recorded gains of

1.1

million

and $

23,000

respectively, related to

non-designated

hedges that were reported as a component of interest expense in our consolidated financial statements. During the year ended December 31, 2017, we recorded losses of $449,000 related to such

non-designated

hedges.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

The following tables summarize our

non-designated

hedges (notional amount in thousands):


December 31, 2019
Non-designated Hedges	Number of Instruments		Notional Amount
Buy CAD / Sell USD Forward		1	C$	15,900
Buy USD / Sell CAD Forward		1	C$	15,900
Buy GBP / Sell EUR Forward		1	€	12,857
Buy AUD / Sell USD Forward		1	A$	10,000
Buy USD / Sell AUD Forward		1	A$	10,000

December 31, 2018
Non-designated Hedges	Number of Instruments		Notional Amount
Buy AUD / Sell USD Forward		1	A$	55,000
Buy USD / Sell AUD Forward		1	A$	55,000
Buy GBP / Sell USD Forward		1	£	23,200
Buy USD / Sell GBP Forward		1	£	23,200
Buy GBP / Sell EUR Forward		1	€	12,857

Valuation of Derivative Instruments

The following table summarizes the fair value of our derivative financial instruments ($ in thousands):



	Fair Value of Derivatives in an Asset Position (1) as of				Fair Value of Derivatives in a Liability Position (2) as of
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	—	$	8,210	$	41,728	$	1,307
Interest rate derivatives		96		590		—		—

Total	$	96	$	8,800	$	41,728	$	1,307

Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	983	$	1,116	$	535	$	1,618
Interest rate derivatives		—		—		—		—

Total	$	983	$	1,116	$	535	$	1,618

Total Derivatives	$	1,079	$	9,916	$	42,263	$	2,925

(1)

Included in other assets in our consolidated balance sheets.

(2)

Included in other liabilities in our consolidated balance sheets.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

The following table presents the effect of our derivative financial instruments on our consolidated statements of operations ($ in thousands):


Derivatives in Hedging Relationships	Amount of (Loss) Gain Recognized in OCI on Derivatives									Location of Gain (Loss) Reclassified from			Amount of Loss Reclassified from Accumulated OCI into Income
	Year Ended December 31,									Accumulated			Year Ended December 31,
	2019			2018			2017			OCI into Income			2019		2018		2017
Net Investment Hedges
Foreign exchange contracts (1)	$	(5,592	)	$	40,372		$	(22,216	)		Interest Expense		$	—	$	—	$	—
Cash Flow Hedges
Interest rate derivatives		(144	)		(8	)		757			Interest Expense	(2)		195		563		(831	)

Total	$	(5,736	)	$	40,364		$	(21,459	)				$	195	$	563	$	(831	)

(1)

During the

years

ended December 31, 2019

d December 31, 2018

we received net cash settlements of $43.1 million

and $29.1 million, respectively,

on our foreign currency forward contracts. During the year ended December 31, 2017, we paid net cash settlements of $14.2 million on our foreign currency forward contracts. Those amounts are included as a component of accumulated other comprehensive loss on our consolidated balance sheets.

(2)

During the year

ended December 31, 2019

and December 31, 2018,

we recorded total interest and related expenses of $458.5 million

and $359.6 million, respectively

, which

were

reduced by $195,000

and

$563,000

respectiv

ely,

related to income generated by our cash flow hedges. During the year ended December 31,

2017, we recorded total interest and related expenses of

234.9 million, which included interest expense

of $831,000 related to our cash flow hedges.

Credit-Risk Related Contingent Features

We have entered into agreements with certain of our derivative counterparties that contain provisions where if we were to default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, we may also be declared in default on our derivative obligations. In addition, certain of our agreements with our derivative counterparties require that we post collateral to secure net liability positions. As of December 31, 2019, we were in a net liability position with each such derivative counterparty and posted collateral of $30.8 million under these derivative contracts. As of December 31, 2018, we were in a net asset position with each such derivative counterparty and did not have any collateral posted under these derivative contracts.

11. EQUITY

Stock and Stock Equivalents

Authorized Capital

As of December 31, 2019, we had the authority to issue up to 300,000,000 shares of stock, consisting of 200,000,000 shares of class A common stock and 100,000,000 shares of preferred stock. Subject to applicable NYSE listing requirements, our board of directors is authorized to cause us to issue additional shares of authorized stock without stockholder approval. In addition, to the extent not issued, currently authorized stock may be reclassified between class A common stock and preferred stock. We did

t have any shares of preferred stock issued and outstanding as of December 31, 2019.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Class A Common Stock and Deferred Stock Units

Holders of shares of our class A common stock are entitled to vote on all matters submitted to a vote of stockholders and are entitled to receive such dividends as may be authorized by our board of directors and declared by us, in all cases subject to the rights of the holders of shares of outstanding preferred stock, if any.

The following table details our issuance of class A common stock during the years ended December 31, 2019, 2018, and 2017 ($ in thousands, except share and per share data):


	Class A Common Stock Offerings
	2019 (1)		2018 (2)		2017
Shares issued		10,534,628		14,566,743		12,420,000
Gross share issue price (3)	$	35.75	$	33.16	$	31.90
Net share issue price (4)	$	35.38	$	32.76	$	31.57
Net proceeds (5)	$	372,341	$	476,420	$	391,558

(1)

Issuance includes 1.9 million shares issued under our

at-the-market

program, with a weighted

average

gross share

issue price of $34.63.

(2)

Issuance includes 7.7 million shares issued under our

at-the-market

program, with a weighted

average

gross s

hare

issue price of $33.66.

(3)

Represents

the weighted-average

gross price per share paid by the underwriters or sales agents, as applicable.

(4)

Represents

the weighted-average

net proceeds per share after underwriting or sales discounts and commissions.

(5)

Net proceeds represents proceeds received from the underwriters less applicable transaction costs.

We also issue restricted class A common stock under our stock-based incentive plans. Refer to Note 14 for additional discussion of these long-term incentive plans. In addition to our class A common stock, we also issue deferred stock units to certain members of our board of directors in lieu of cash compensation for services rendered. These deferred stock units are

non-voting,

but carry the right to receive dividends in the form of additional deferred stock units in an amount equivalent to the cash dividends paid to holders of shares of class A common stock.

The following table details the movement in our outstanding shares of class A common stock, including restricted class A common stock and deferred stock units:


	Year Ended December 31,
Common Stock Outstanding (1)	2019		2018		2017
Beginning balance		123,664,577		108,081,077		94,709,290
Issuance of class A common stock (2)		10,535,842		14,568,431		12,421,401
Issuance of restricted class A common stock, net		1,032,082		983,447		922,196
Issuance of deferred stock units		31,227		31,622		28,190

Ending balance		135,263,728		123,664,577		108,081,077

(1)

Includes deferred stock units held by members of our board of directors of 260,066, 228,839, and 197,217 as of December 31, 2019, 2018, and 2017, respectively.

(2)

Includes 1,214, 1,688, and 1,401 shares issued under our dividend reinvestment program during the years ended December 31, 2019, 2018, and 2017, respectively.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Dividend Reinvestment and Direct Stock Purchase Plan

March 25, 2014

, we adopted a dividend reinvestment and direct stock purchase plan, under which we registered and reserved for issuance, in the aggregate, 10,000,000 shares of class A common stock. Under the dividend reinvestment component of this plan, our class A common stockholders can designate all or a portion of their cash dividends to be reinvested in additional shares of class A common stock. The direct stock purchase component allows stockholders and new investors, subject to our approval, to purchase shares of class A common stock directly from us. During the years ended December 31, 2019, 2018, and 2017 we issued 1,214 shares, 1,688 shares, and

1,401

shares, respectively, of class A common stock under the dividend reinvestment component of the plan. As of December 31, 2019, a total of 9,994,024 shares of class A common stock remained available for issuance under the dividend reinvestment and direct stock purchase plan.

At the Market Stock Offering Program

On November 14, 2018, we entered into six equity distribution agreements, or ATM Agreements, pursuant to which we may sell, from time to time, up to an aggregate sales price of $500.0 million of our class A common stock. On July 26, 2019, we amended our existing ATM Agreements and entered into one additional ATM Agreement. Sales of class A common stock made pursuant to our ATM Agreements may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. Actual sales depend on a variety of factors including market conditions, the trading price of our class A common stock, our capital needs, and our determination of the appropriate sources of funding to meet such needs. During the year ended December 31, 2019, we issued and sold 1,909,628 shares of class A common stock under ATM Agreements, generating net proceeds totaling $65.4 million. During the year ended December 31, 2018, we issued and sold 7,666,743 shares of class A common stock under ATM Agreements,

generating

net proceeds totaling $254.1 million. We did not sell any shares of our class A common stock under ATM Agreements during the year ended December 31, 2017. As of December 31, 2019, sales of our class A common stock with an aggregate sales price of $363.8 million remained available for issuance under our ATM Agreements.

Dividends

We generally intend to distribute substantially all of our taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to our stockholders each year to comply with the REIT provisions of the Internal Revenue Code. Our

dividend policy remains subject to revision at the discretion of our board of directors. All distributions will be made at the discretion of our board of directors and will depend upon our taxable income, our financial condition, our maintenance of REIT status, applicable law, and other factors as our board of directors deems relevant.

On December 16, 2019, we declared a dividend of $0.62 per share, or $83.7 million in aggregate, that was paid on January 15, 2020, to stockholders of record as of December 31, 2019.

The following table details our dividend activity ($ in thousands, except per share data):


	Year Ended December 31,
	2019			2018			2017
Dividends declared per share of common stock	$	2.48		$	2.48		$	2.48
Percent taxable as ordinary dividends		100.00	%		99.70	%		97.20	%
Percent taxable as capital gain dividends		—	%		0.30	%		2.80	%

		100.0	%		100.0	%		100.0	%

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Earnings Per Share

We calculate our basic and diluted earnings per share using the

two-class

method for all periods presented as the unvested shares of our restricted class A common stock qualify as participating securities, as defined by GAAP. These restricted shares have the same rights as our other shares of class A common stock, including participating in any dividends, and therefore have been included in our basic and diluted net income per share calculation. Our Convertible Notes are excluded from dilutive earnings per share as we have the intent and ability to settle these instruments in cash.

The following table sets forth the calculation of basic and diluted net income per share of class A common stock based on the weighted-average of both restricted and unrestricted class A common stock outstanding ($ in thousands, except per share data):


	Year Ended December 31,
	2019		2018		2017
Net income (1)	$	305,567	$	285,078	$	217,631
Weighted-average shares outstanding, basic and diluted		130,085,398		113,857,238		95,963,616

Per share amount, basic and diluted	$	2.35	$	2.50	$	2.27

(1)	Represents net income attributable to Blackstone Mortgage Trust.

Other Balance Sheet Items

Accumulated Other Comprehensive Loss

As of December 31, 2019, total accumulated other comprehensive loss was $16.2 million, primarily representing $80.7 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies, offset by $64.5 million of net realized and unrealized gains related to changes in the fair value of derivative instruments. As of December 31, 2018, total accumulated other comprehensive loss was $34.2 million, primarily representing $104.6 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies, offset by $70.4 million of net realized and unrealized gains related to changes in the fair value of derivative instruments.

Non-Controlling

Interests

The

non-controlling

interests included on our consolidated balance sheets represent the equity interests in our Multifamily Joint Venture that are not owned by us. A portion of our Multifamily Joint Venture’s consolidated equity and results of operations are allocated to these

non-controlling

interests based on their pro rata ownership of our Multifamily Joint Venture. As of December 31, 2019, our Multifamily Joint Venture’s total equity was $147.3 million, of which $125.2 million was owned by us, and $22.1 million was allocated to

non-controlling

interests. As of December 31, 2018, our Multifamily Joint Venture’s total equity was $69.9 million, of which $59.4 million was owned by us, and $10.5 million was allocated to

non-controlling

interests.

12. OTHER EXPENSES

Our other expenses consist of the management and incentive fees we pay to our Manager and our general and administrative expenses.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Management and Incentive Fees

Pursuant to our Management Agreement, our Manager earns a base management fee in an amount equal to 1.50% per annum multiplied by our outstanding equity balance, as defined in the Management Agreement. In

addition, our

Manager is entitled to an incentive fee in an amount equal to the product of (i)

% and (ii) the excess of (a) our Core Earnings (as defined in our Management Agreement) for the previous 12-month period over (b) an amount equal to

7.00

% per annum multiplied by our outstanding Equity, provided that our Core Earnings over the prior three-year period is greater than zero. Core Earnings, as defined in our Management Agreement, is generally equal to our net income (loss) prepared in accordance with GAAP, excluding (i) certain non-cash items

(ii) the net income (loss) related to our legacy portfolio

and (iii) incentive management fees.

During the years ended December 31, 2019, 2018, and 2017, we incurred $55.3 million, $47.0 million, and $

38.6

million, respectively

, of management fees payable to

our Manager

. In addition, during the years ended December 31, 2019, 2018, and 2017, we incurred $23.2 million, $27.9 million, and $

16.2

million, respectively

, of

incentive fees payable to our Manager

As of December 31, 2019 and 2018 we had accrued management and incentive fees payable to our Manager of $20.2 million and $18.6 million, respectively.

General and Administrative Expenses

General and administrative expenses consisted of the following ($ in thousands):


	Year Ended December 31,
	2019		2018		2017
Professional services (1)	$	5,163	$	4,437	$	3,812
Operating and other costs (1)		3,035		2,938		1,903

Subtotal		8,198		7,375		5,715
Non-cash compensation expenses
Restricted class A common stock earned		30,156		27,654		23,593
Director stock-based compensation		500		500		438

Subtotal		30,656		28,154		24,031

Total BXMT expenses		38,854		35,529		29,746
Other expenses		—		—		176

Total general and administrative expenses	$	38,854	$	35,529	$	29,922

(1)

During the years ended December 31, 2019, 2018,

and 2017, respectiv

ely,

we recognized an aggregate $

865,000

427,000

, and $232,000,

respectively, of expenses related to our Multifamily Joint Venture.

Such amounts are included

in our consolidated general and administrative exp

enses.

13. INCOME TAXES

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

certain

restrictions

with regard to the nature of our assets and the sources of our income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state, and local income tax on our taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of December 31, 2019 and 2018, we were in compliance with all REIT requirements.

Securitization transactions could result in the creation of taxable mortgage pools for federal income tax purposes. As a REIT, so long as we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. Certain categories of stockholders, however, such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain

tax-exempt

stockholders that are subject to unrelated business income tax, or UBTI, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. We currently own no UBTI producing assets and we do not intend to purchase or generate assets that produce UBTI distributions in the future.

During the year ended December 31, 2019, we recorded a current income tax benefit of $506,000, primarily due to an expected $747,000 tax credit refund. During the years ended December 31, 2018 and 2017, we recorded a current income tax provision of $308,000, and $314,000, respectively, primarily related to activities of our taxable REIT subsidiaries and various state and local taxes. We did not have any deferred tax assets or liabilities as of December 31, 2019 or 2018.

Effective January 1, 2018, under legislation from the Tax Cuts and Jobs Act of 2017, the maximum U.S. federal corporate income tax rate was reduced from 35% to 21%. Accordingly, to the extent that the activities of our taxable REIT subsidiaries generate taxable income in future periods, they may be subject to lower U.S. federal income tax rates.

We have net operating losses, or NOLs, generated by our predecessor business that may be carried forward and utilized in current or future periods. As a result of our issuance of 25,875,000 shares of class A common stock in May 2013,

the availability of our NOLs is generally limited to $

2.0

million per annum

by change of control provisions promulgated by the Internal Revenue Service with respect to the ownership of Blackstone Mortgage Trust. As of December 31, 2019, we had estimated NOLs of $159.0 million that will expire in 2029, unless they are utilized by us prior to expiration.

As of December 31, 2019, tax years

201

through 2019 remain subject to examination by taxing authorities.

14. STOCK-BASED INCENTIVE PLANS

We are externally managed by our Manager and do not currently have any employees. However, as of December 31, 2019, our Manager, certain individuals employed by an affiliate of our Manager, and certain members of our board of directors were compensated, in part, through

our

issuance of stock-based instruments.

We had stock-based incentive awards outstanding under

nine

benefit plans as of December 31, 2019. Seven of such benefit plans have expired and no new awards may be issued under them. Under our two current benefit plans, a maximum of 5,000,000 shares of our class A common stock may be issued to our Manager, our directors and officers, and certain employees of affiliates of our Manager. As of December 31, 2019, there were 3,243,346 shares available under

our current benefit plans

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

The following table details the movement in our outstanding shares of restricted class A common stock and the weighted-average grant date fair value per share:


	Restricted Class A Common Stock			Weighted-Average Grant Date Fair Value Per Share
Balance as of December 31, 2017		1,484,175		$	30.61
Granted		1,001,267			33.93
Vested		(852,715	)		30.10
Forfeited		(17,820	)		30.44

Balance as of December 31, 2018		1,614,907		$	32.94

Granted		1,049,647			34.69
Vested		(948,407	)		32.08
Forfeited		(17,565	)		31.55

Balance as of December 31, 2019		1,698,582		$	34.52

These shares generally vest in installments over a

three-year

period, pursuant to the terms of the respective award agreements and the terms of

our current benefit

plans

. The 1,698,582 shares of restricted class A common stock outstanding as of December 31, 2019 will vest as follows: 887,293 shares will vest in 2020; 573,040 shares will vest in 2021; and 238,249 shares will vest in 2022. As of December 31, 2019, total unrecognized compensation cost relating to

vested share-based compensation arrangements was $55.8 million based on the grant date fair value of shares granted subsequent to

July 1

2018.

The compensation cost of our share-based compensation arrangements for awards granted before

July 1

2018

is based on the closing price of our class A common stock of $31.43 on June 29, 2018, the last trading day prior to

July 1

2018.

This cost is expected to be recognized over a weighted

average period of 1.2 years from December 31, 2019.

15. FAIR VALUES

Assets and Liabilities Measured at Fair Value

The following table summarizes our assets and liabilities measured at fair value on a recurring basis ($ in thousands):


	December 31, 2019								December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Derivatives	$	—	$	1,079	$	—	$	1,079	$	—	$	9,916	$	—	$	9,916
Liabilities
Derivatives	$	—	$	42,263	$	—	$	42,263	$	—	$	2,925	$	—	$	2,925

Refer to Note 2 for further discussion regarding fair value measurement.

Fair Value of Financial Instruments

As discussed in Note 2, GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial position, for which it is practicable to estimate that value.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

The following table details the book value, face amount, and fair value of the financial instruments described in Note 2 ($ in thousands):


	December 31, 2019						December 31, 2018
	Book Value		Face Amount		Fair Value		Book Value		Face Amount		Fair Value
Financial assets
Cash and cash equivalents	$	150,090	$	150,090	$	150,090	$	105,662	$	105,662	$	105,662
Loans receivable, net		16,164,801		16,277,343		16,279,904		14,191,200		14,293,970		14,294,836
Debt securities held-to-maturity (1)		86,638		88,958		88,305		96,167		99,000		96,600

Financial liabilities
Secured debt agreements, net		10,054,930		10,083,938		10,083,938		8,974,756		8,996,481		8,996,481
Loan participations sold, net		—		—		—		94,418		94,528		94,528
Securitized debt obligations, net		1,187,084		1,189,642		1,189,368		1,285,471		1,292,120		1,283,086
Secured term loan, net		736,142		746,878		750,769		—		—		—
Convertible notes, net		613,071		622,500		665,900		609,911		622,500		605,348

(1)	Included in other assets on our consolidated balance sheets.

Estimates of fair value for cash and cash equivalents and convertible notes are measured using observable, quoted market prices, or Level 1 inputs. Estimates of fair value for debt securities

held-to-maturity,

securitized debt obligations, and the secured term loan are measured using observable, quoted market prices, in inactive markets, or Level 2 inputs. All other fair value significant estimates are measured using unobservable inputs, or Level 3 inputs. See Note 2 for further discussion regarding fair value measurement of certain of our assets and liabilities.

16. VARIABLE INTEREST ENTITIES

Consolidated Variable Interest Entities

We have financed a portion of our loans through the CLO and the 2017 Single Asset Securitization, both of which are VIEs. We are the primary beneficiary of, and therefore consolidate, the CLO and the 2017 Single Asset Securitization on our balance sheet as we (i) control the relevant interests of the CLO and the 2017 Single Asset Securitization that give us power to direct the activities that most significantly affect the CLO and the 2017 Single Asset Securitization, and (ii) have the right to receive benefits and obligation to absorb losses of the CLO and the 2017 Single Asset Securitization through the subordinate interests we own.

The following table details the assets and liabilities of our consolidated CLO and 2017 Single Asset Securitization VIEs ($ in thousands):


	December 31, 2019		December 31, 2018
Assets:
Loans receivable, net	$	1,349,903	$	1,500,000
Other assets		51,788		5,440

Total assets	$	1,401,691	$	1,505,440


Liabilities:
Securitized debt obligations, net	$	1,187,084	$	1,285,471
Other liabilities		1,648		2,155

Total liabilities	$	1,188,732	$	1,287,626

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Assets held by these VIEs are restricted and can be used only to settle obligations of the VIEs, including the subordinate interests owned by us. The liabilities of these VIEs are

non-recourse

to us and can only be satisfied from the assets of the VIEs. The consolidation of these VIEs results in an increase in our gross assets, liabilities, interest income and interest expense, however it does not affect our stockholders’ equity or net income.

Non-Consolidated

Variable Interest Entities

In the third quarter of 2018, we contributed a $517.5 million loan to the $1.0 billion 2018 Single Asset Securitization, which is a VIE, and invested in the related $99.0 million subordinate risk retention position. We are not the primary beneficiary of the VIE because we do not have the power to direct the activities that most significantly affect the VIE’s economic performance and, therefore, do not consolidate the 2018 Single Asset Securitization on our balance sheet. We have classified the subordinate risk retention position as a

held-to-maturity

debt security that is included in other assets on our consolidated balance sheets.

Our maximum exposure to loss from the 2018 Single Asset Securitization is limited to our book value of

86.6

million as of December 31, 2019. Refer to Note 17 for further details of this transaction.

We are not obligated to provide, have not provided, and do not intend to provide financial support to these consolidated and

non-consolidated

VIEs.

17. TRANSACTIONS WITH RELATED PARTIES

We are managed by our Manager pursuant to the Management Agreement, the current term of which expires on

December 19, 2020

, and will be automatically renewed for a

one-year

term upon such date and each anniversary thereafter unless earlier terminated.

As of December 31, 2019 and 2018, our consolidated balance sheet included $20.2 million and $18.6 million of accrued management and incentive fees payable to our Manager, respectively. During the years ended December 31, 2019, 2018, and 2017, we paid

aggregate

management and incentive fees of $76.9 million, $70.5 million and $53.4 million, respectively, to our Manager. In addition, during the years ended December 31, 2019, 2018, and 2017, we reimbursed our Manager for expenses incurred on our behalf of $

1.1

million, $836,000, and $621,000, respectively.

As of December 31, 2019, our Manager held 1,017,141 shares of unvested restricted class A common stock, which had an aggregate grant date fair value of $34.6 million, and vest in installments over three years from the

date of issuance. During the years ended December 31, 2019, 2018, and 2017, we recorded

non-cash

expenses related to shares held by our Manager of $15.1 million, $13.5 million, and $11.7 million, respectively. Refer to Note 14 for further details on our restricted class A common stock.

An affiliate of our Manager is the special servicer of the CLO. This affiliate did not earn any special servicing fees related to the CLO during the years ended December 31, 2019, 2018 or 2017.

During the years ended December 31, 2019, 2018, and 2017, we originated four loans, nine loans, and six loans respectively, whereby each respective borrower engaged an affiliate of our Manager to act as title insurance agent in connection with each transaction. We did not incur any expenses or receive any revenues as a result of these transactions.

During the years ended December 31, 2019, 2018, and 2017, we incurred expenses for various administrative, compliance, and capital market data services to third-party service providers that are affiliates of our Manager of $440,000, $450,000, and $411,000, respectively.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

In the fourth quarter of 2019, we acquired

€

193.6 million of a total

€

388.0 million senior loan to a borrower that is wholly owned by a Blackstone-advised investment vehicle. We will forgo all

non-economic

rights under the loan, including voting rights, so long as the Blackstone-advised investment vehicle controls the borrower. The senior loan terms were negotiated by a third party without our involvement and our 49% interest in the senior loan was made on such market terms

In the second and fourth quarter of 2019, certain Blackstone-advised investment vehicles acquired an aggregate $60.0 million participation, or 8%, of the total Secured Term Loan as a part of a broad syndication lead-arranged by JP Morgan. Blackstone Advisory Partners L.P., an affiliate of our Manager, was engaged as a book-runner for the transactions and received aggregate fees of $750,000 in such capacity. Both of these transactions were on terms equivalent to those of unaffiliated parties.

In the third and fourth quarter of 2019, we acquired an aggregate

€

250.0 million of a total

€

1.6 billion senior loan to a borrower that is partially owned by a Blackstone-advised investment vehicle. We will forgo all

non-economic

rights under the loan, including voting rights, so long as the Blackstone-advised investment vehicle controls the borrower. The senior loan terms were negotiated by third parties without our involvement and our 16% interest in the senior loan was made on such market terms.

In the third quarter of 2019, we originated $214.3 million of a total $437.4 million senior loan to an unaffiliated

third-party,

which was part of a total financing that included a mezzanine loan originated by a

Blackstone-advised

investment vehicle. We will forgo all

non-economic

rights under our loan, including voting rights, so long as any

Blackstone-advised

investment vehicle controls the mezzanine loan. The senior loan terms, with respect to the mezzanine lender, were negotiated by a third party without our involvement and our 49% interest in the senior loan was made on such market terms.

In the second quarter of 2019, we originated

€

191.8 million of a total

€

391.3 million senior loan to a borrower that is wholly owned by a Blackstone-advised investment vehicle. We will forgo all

non-economic

In the first quarter of 2019, we originated £240.1 million of a total £490.0 million senior loan to a borrower that is wholly owned by a Blackstone-advised investment vehicle. We will forgo all

non-economic

rights under the

loan, including voting rights, so long as the Blackstone-advised investment vehicle controls the borrower. The senior loan terms were negotiated by a third party without our involvement and our

% interest in the senior loan was made on such market terms.

In the fourth quarter of 2018, we originated £

148.7

million of a total £

303.5

million senior loan to a borrower that is partially owned by Blackstone-advised investment vehicles. We will forgo all

non-economic

rights under the loan, including voting rights, so long as Blackstone-advised investment vehicles control the borrower. The senior loan terms were negotiated by a third-party without our involvement and our

% interest in the senior loan was made on such market terms.

In the third quarter of 2018, in a fully subscribed offering totaling $1.0 billion, certain Blackstone-advised investment vehicles purchased, in the aggregate, $116.1 million of securitized debt obligations issued by the

2018 Single Asset Securitization. In the second quarter of 2017, in a fully subscribed offering totaling $

474.6

million, certain Blackstone-advised investment vehicles purchased, in the aggregate, $

72.9

million of securitized debt obligations issued by the 2017 Single Asset Securitization. These investments by the Blackstone-advised investment vehicles represented minority participations in any individual tranche and were purchased by

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

the Blackstone-advised investment vehicles from third-party investment banks on market terms negotiated by the majority third-party investors.

In the second quarter of 2018, we acquired from an unaffiliated third-party a 50% interest in a $1.0 billion senior loan to a borrower that is partially owned by a Blackstone-advised investment vehicle. In the third quarter of 2018, we contributed this loan to the 2018 Single Asset Securitization and invested in the related subordinate risk retention position. We will forgo all

non-economic

rights under the loan, including voting rights, so long as Blackstone-advised investment vehicles own the borrower above a certain threshold. Refer to Note 16 for further details on this transaction.

In the first quarter of 2018, we originated

€

1.0 billion of a total

€

7.3 billion senior term facility, or the Senior Term Facility, for the acquisition of a portfolio of Spanish real estate assets and a Spanish real estate management and loan servicing company by a joint venture between Banco Santander S.A. and certain Blackstone-advised investment vehicles. These investment vehicles own 51% of the joint venture, and we will forgo all

non-economic

rights under the Senior Term Facility, including voting rights, so long as Blackstone-advised investment vehicles control the joint venture. The Senior Term Facility was negotiated by the joint venture with third-party investment banks without our involvement, and our 14% interest in the Senior Term Facility was made on such market terms.

In the first quarter of 2018, we originated a $330.0 million senior loan, the proceeds of which were used by the borrower to repay an existing loan owned by a Blackstone-advised investment vehicle.

18. COMMITMENTS AND CONTINGENCIES

Unfunded Commitments Under Loans Receivable

As of December 31, 2019, we had unfunded commitments of $3.9 billion related to 93 loans receivable, which amounts will generally be funded to finance our borrowers’ construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures. These commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

Principal Debt Repayments

Our contractual principal debt repayments as of December 31, 2019 were as follows ($ in thousands):


			Payment Timing
	Total Obligation		Less Than 1 Year		1 to 3 Years		3 to 5 Years		More Than 5 Years
Principal repayments under secured debt agreements (1)	$	10,083,938	$	142,648	$	2,878,421	$	6,770,155	$	292,714
Principal repayments of secured term loans (2)		746,878		7,488		14,975		14,975		709,440
Principal repayments of convertible notes (3)		622,500		—		402,500		220,000		—

Total (4)	$	11,453,316	$	150,136	$	3,295,896	$	7,005,130	$	1,002,154

(1)	The allocation of repayments under our secured debt agreements is based on the earlier of (i) the maturity date of each facility, or (ii) the maximum maturity date of the collateral loans, assuming all extension options are exercised by the borrower.

(2)	The Secured Term Loan is partially amortizing, with an amount equal to 1.0 % per annum of the principal balance due in quarterly installments. Refer to Note 8 for further details on our secured term loan.

(3)	Reflects the outstanding principal balance of Convertible Notes, excluding any potential conversion premium. Refer to Note 9 for further details on our Convertible Notes.

(4)	Does not include $688.5 million of non-consolidated senior interests and $1.2 billion of securitized debt obligations, as the satisfaction of these liabilities will not require cash outlays from us.

Board of Directors’ Compensation

As of December 31, 2019, of the eight members of our board of directors, our

five

independent directors are entitled to annual compensation of $175,000 each, $75,000 of which will be paid in the form of cash and $100,000 in the form of deferred stock units. The other three board members, including our chairman and our chief executive officer, are not compensated by us for their service as directors. In addition, (i) the chair of our audit committee receives additional annual cash compensation of $20,000, (ii) the other members of our audit committee receive additional annual cash compensation of $10,000, and (iii) the chairs of each of our compensation and corporate governance committees receive additional annual cash compensation of $10,000.

Litigation

From time to time, we may be involved in various claims and legal

ctions arising in the ordinary course of business. As of December 31, 2019, we were not involved in any material legal proceedings.

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

19. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2019 and 2018 ($ in thousands except per share data):


	March 31		June 30		September 30		December 31
2019
Income from loans and other investments, net	$	106,071	$	106,478	$	101,916	$	109,711
Net income	$	76,867	$	75,551	$	75,394	$	79,581
Net income attributable to
Blackstone Mortgage Trust, Inc.	$	76,565	$	75,174	$	74,897	$	78,931
Net income per share of class A common stock:
Basic and diluted	$	0.62	$	0.59	$	0.56	$	0.59
2018
Income from loans and other investments, net	$	85,436	$	103,746	$	105,152	$	102,150
Net income	$	61,116	$	72,507	$	78,293	$	73,896
Net income attributable to
Blackstone Mortgage Trust, Inc.	$	60,958	$	72,312	$	78,165	$	73,643
Net income per share of class A common stock:
Basic and diluted	$	0.56	$	0.66	$	0.67	$	0.61

Quarterly basic and diluted earnings per share are computed based on the weighted-average shares of common stock and stock units outstanding for each period. Accordingly, the sum of the quarterly earnings per share amounts may not agree to the total for the year.

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Blackstone Mortgage Trust, Inc.

Schedule IV – Mortgage Loans on Real Estate

As of December 31, 2019

(in thousands)


Type of Loan/Borrower	Description / Location		Interest Payment Rates (2)		Maximum Maturity Date (3)		Periodic Payment Terms (4)		Prior Liens (5)		Face Amount of Loans		Carrying Amount of Loans (6)
Senior Mortgage Loans (1)

Senior loans in excess of 3% of the carrying amount of total loans
Borrower A		Office / Ireland		L+2.50%		2024		I/O	$	—	$	1,330,647	$	1,318,196
Borrower B		Mixed-Use / Spain		L+3.15%		2023		P/I		—		1,008,605		1,004,542
Borrower C		Office / Southeast		L+3.40%		2023		I/O		—		711,738		710,260
Borrower D		Office / Northeast		L+2.30%		2024		I/O		—		586,341		585,086
Senior loans less than 3% of the carrying amount of total loans
Senior mortgage loans		Office / Diversified		L+2.40% – 8.50%		2020 – 2026		I/O & P/I		—		7,024,891		6,970,837
				Fixed 4.46%
Senior mortgage loans		Hotel / Diversified		L+2.75% – 3.75%		2020 – 2025		I/O		—		2,034,662		2,021,629
Senior mortgage loans		Multifamily / Diversified		L+2.60% – 5.00%		2020 – 2025		I/O & P/I		—		1,252,517		1,248,641
Senior mortgage loans		Mixed-Use / Diversified		L+2.75% – 4.10%		2021 – 2024		I/O		—		784,219		775,922
Senior mortgage loans		Industrial / Diversified		L+2.60% – 3.85%		2022 – 2025		I/O		—		676,938		671,844
Senior mortgage loans		Other / Diversified		L+3.10% – 5.00%		2020 – 2026		I/O & P/I		—		701,173		696,779
				Fixed 5.15 %

										—		12,474,400		12,385,652

Total senior mortgage loans									$	—	$	16,111,731	$	16,003,736

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continued…

Table of Contents

Blackstone Mortgage Trust, Inc.

Schedule IV – Mortgage Loans on Real Estate

As of December 31, 2019

(in thousands)


Type of Loan/Borrower	Description / Location		Interest Payment Rates (2)		Maximum Maturity Date (3)		Periodic Payment Terms (4)		Prior Liens (5)		Face Amount of Loans		Carrying Amount of Loans (6)
Subordinate Loans (7)

Subordinate loans less than 3% of the carrying amount of total loans
Subordinate loans		Various / Diversified		L+3.12% – 5.28%		2022 – 2025		I/O & P/I		688,521		165,612		161,065
				Fixed 5.74%

Total subordinate loans										688,521		165,612		161,065

Total loans									$	688,521	$	16,277,343	$	16,164,801

(1)	Includes senior mortgages and similar credit quality loans, including related contiguous subordinate loans, and pari passu participations in senior mortgage loans.

(2)	The interest payment rates are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR, GBP LIBOR, EURIBOR, BBSY, and CDOR, as applicable to each loan.

(3)	Maximum maturity date assumes all extension options are exercised.

(4)	I/O = interest only, P/I = principal and interest.

(5)	Represents only third party liens.

(6)	The tax basis of the loans included above is $ 16.2 billion as of December 31, 2019.

(7)	Includes subordinate interests in mortgages and mezzanine loans.

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Table of Contents

Blackstone Mortgage Trust, Inc.

Notes to Schedule IV

As of December 31, 2019

(in thousands)

1.	Reconciliation of Mortgage Loans on Real Estate:

The following table reconciles mortgage loans on real estate for the years ended:


	2019			2018			2017
Balance at January 1,	$	14,191,200		$	10,056,732		$	8,692,978
Additions during period:
Loan fundings		6,890,249			7,890,051			4,072,786
Amortization of fees and other items		57,415			46,864			38,373
Deductions during period:
Loan repayments and sales proceeds		(4,974,881	)		(3,035,383	)		(2,828,610	)
Loan contributed to securitization		—			(512,002	)		—
Unrealized gain (loss) on foreign currency translation		67,376			(150,654	)		136,646
Deferred fees and other items		(66,558	)		(104,408	)		(55,441	)
Loans sold		—			—			—

Balance at December 31,	$	16,164,801		$	14,191,200		$	10,056,732

S-3

Exhibit 4.1

DESCRIPTION OF REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF

THE SECURITIES EXCHANGE ACT OF 1934

The following is a brief description of the securities of Blackstone Mortgage Trust, Inc. (the “company” “we,” “us,” “our” and “Blackstone Mortgage Trust”), registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”. This description of the terms of our stock does not purport to be complete and is subject to and qualified in its entirety by reference to the applicable provisions of Maryland General Corporation Law, and the full text of our charter and bylaws.

General

Our charter provides that we may issue up to 300,000,000 shares of stock comprised of the following:

•

200,000,000 shares of class A common stock, $0.01 par value per share; and

•

100,000,000 shares of preferred stock, $0.01 par value per share.

Under Maryland law, our stockholders generally are not liable for our debts or obligations. The class A common stock is listed on the NYSE under the symbol “BXMT”.

Our charter authorizes our board of directors, without stockholder approval, to:

•

classify and reclassify any unissued shares of our class A common stock and preferred stock into other classes or series of stock; and

•

amend our charter to increase or decrease the aggregate number of shares of stock of any class or series that may be issued.

We believe that the power to (i) issue additional shares of our class A common stock or preferred stock, (ii) increase the aggregate number of shares of stock of any class or series that we have the authority to issue and (iii) classify or reclassify unissued shares of our class A common or preferred stock and thereafter to issue the classified or reclassified shares of stock, provides us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. In addition, under Maryland law, our board of directors may authorize the amendment of our charter to effect a reverse stock split that results in a combination of shares of stock at a ratio of not more than ten shares of stock into one share of stock in any 12-month period. These actions may be taken without stockholder approval, unless stockholder approval is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded.

Prior to the issuance of shares of each class or series, our board of directors is required by Maryland law and by our charter to set, subject to our charter restrictions on ownership and transfers of our stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, our board of directors could authorize the issuance of shares of common stock or preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control of Blackstone Mortgage Trust that might involve a premium price for holders of our class A common stock or otherwise be in their best interests.

Class A Common Stock

Holders of our class A common stock are entitled to receive dividends when, as and if authorized by our board of directors and declared by us out of assets legally available for the payment of dividends. They are also entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up, after payment of, or adequate provision for, all of our known debts and liabilities. These rights are subject to the preferential rights of any other class or series of our stock. All shares of class A common stock have equal dividend and liquidation rights.

Subject to law, the rights of any other class or series of our stock and our charter restrictions on ownership and transfer of our stock, each outstanding share of class A common stock is entitled to one vote on all matters submitted to a vote of the stockholders. There is no cumulative voting in the election of our directors and our directors are elected by a plurality of the votes cast, so the holders of a simple majority of the outstanding class A common stock, voting at a stockholders meeting at which a quorum is present, will have the power to elect all of the directors nominated for election at the meeting. Holders of our class A common stock generally have no exchange, sinking fund, redemption or appraisal rights, except the right to receive fair value in connection with certain control share acquisitions, and have no preemptive rights to subscribe for any of our securities. Because holders of our class A common stock do not have preemptive rights, we may issue additional shares of stock that may reduce each stockholder’s proportionate voting and financial interest in Blackstone Mortgage Trust. Rights to receive dividends on our class A common stock may be restricted by the terms of any future classified and issued shares of our stock.

Under Maryland law, a Maryland corporation generally cannot dissolve, amend its charter, convert to another form of entity, merge, sell all or substantially all of its assets, engage in a statutory share exchange or engage in similar transactions outside the ordinary course of business unless approved by the affirmative vote of stockholders holding at least two-thirds of the shares entitled to vote on the matter. However, a Maryland corporation may provide in its charter for approval of these matters by a lesser percentage, but not less than a majority of all of the votes entitled to be cast on the matter. Our charter provides for approval of these matters by a majority of all of the votes entitled to be cast on the matter.

Preferred Stock

Our board of directors has the authority, without further action by the stockholders, to authorize us to issue shares of preferred stock in one or more class or series and to fix the number of shares, dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking funds, and any other rights, preferences, privileges and restrictions applicable to each such series of preferred stock. The issuance of preferred stock could have the effect of making an attempt to gain control of us more difficult by means of a merger, tender offer, proxy contest or otherwise. The preferred stock, if issued, could have a preference on dividend payments that could affect our ability to make dividend distributions to the common stockholders.

Transfer Agent and Registrar

Our transfer agent and registrar is American Stock Transfer & Trust Company, LLC located in Brooklyn, New York.

Certain Provisions of Our Charter and Bylaws and of Maryland Law

REIT Qualification Restrictions on Ownership and Transfer

Our charter contains restrictions on the number of shares of our stock that a person may own. No individual (including certain entities treated as individuals for this purpose) may acquire or hold, directly or indirectly through application of constructive ownership rules, in excess of 9.9% in value or number, whichever is more restrictive, of our outstanding stock or our outstanding class A common stock unless they receive an exemption from our board of directors.

Subject to certain limitations, our board of directors, in its sole discretion, may exempt a person from, or modify, these limits, subject to such terms, conditions, representations and undertakings as it may determine. Our charter provides for, and our board of directors has granted, limited exemptions to certain persons who directly or indirectly own our stock, including directors, officers and stockholders controlled by them or trusts for the benefit of their families.

Our charter further prohibits any person from beneficially or constructively owning shares of our stock that would result in our being “closely held” under Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of the taxable year) or otherwise cause us to fail to qualify as a real estate investment trust, or “REIT,” for United States federal income tax purposes and any person from transferring shares of our stock if the transfer would result in our stock being owned by fewer than 100 persons. Any person who acquires or attempts or intends to acquire shares of our stock that may violate any of these restrictions, or who is the intended transferee of shares of our stock which are transferred to the trust, as described below, is required to give us immediate written notice, or in the case of a proposed or attempted transaction, give at least 15 days prior written notice, and provide us, at our principal executive office, with such information as we may request in order to determine the effect, if any, of the transfer on our status as a REIT. The above restrictions will not apply if our board of directors determines that it is no longer in our best interests to continue to qualify as a REIT or that compliance with such restrictions is no longer required for us to qualify as a REIT.

Any attempted transfer of our stock which, if effective, would result in violation of the above limitations, except for a transfer which results in shares being owned by fewer than 100 persons, in which case such transfer will be void and of no force and effect and the intended transferee shall acquire no rights in such shares, will cause the number of shares causing the violation, rounded to the nearest whole share, to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries designated by us and the proposed transferee will not acquire any rights in the shares. The automatic transfer will be deemed to be effective as of the close of business on the business day, as defined in our charter, prior to the date of the transfer. Shares of our stock held in the trust will be issued and outstanding shares. The proposed transferee will not benefit economically from ownership of any shares of stock held in the trust, will have no rights to dividends and no rights to vote or other rights attributable to the shares of stock held in the trust. The trustee of the trust will have all voting rights and rights to dividends or other distributions with respect to shares held in the trust. These rights will be exercised for the exclusive benefit of the charitable beneficiaries. Any dividend or other distribution paid prior to our discovery that shares of stock have been transferred to the trust will be paid by the recipient to the trustee upon demand. Any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or distribution paid to the trustee will be held in trust for the charitable beneficiaries. Subject to Maryland law, effective as of the date that the shares have been transferred to the trustee, the trustee will have the authority to rescind as void any vote cast by the proposed transferee prior to our discovery that the shares have been transferred to the trust and to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiaries. However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast the vote.

Within 20 days of receiving notice from us that shares of our stock have been transferred to the trust, the trustee will sell the shares to a person designated by the trustee, whose ownership of the shares will not violate the above ownership limitations. Upon the sale, the interest of the charitable beneficiaries in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the proposed transferee and to the charitable beneficiaries as follows. The proposed transferee will receive the lesser of (i) the price paid by the proposed transferee for the shares or, if the proposed transferee did not give value for the shares in connection with the event causing the shares to be held in the trust, such as a gift, devise or other similar transaction, the market price, as defined in our charter, of the shares on the day of the event causing the shares to be held in the trust and (ii) the price per share received by the trustee from the sale or other disposition of the shares. Any net sale proceeds in excess of the amount payable per share to the proposed transferee will be paid immediately to the charitable beneficiaries. If, prior to our discovery that shares of our stock have been transferred to the trust, the shares are sold by the proposed transferee, then the shares shall be deemed to have been sold on behalf of the trust and, to the extent that the proposed transferee received an amount for the shares that exceeds the amount he or she was entitled to receive pursuant to the above, the excess shall be paid to the trustee upon demand.

In addition, shares of our stock held in the trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust, or, in the case of a devise or gift or similar transaction, the market price at the time of the devise or gift or similar transaction and (ii) the market price on the date we, or our designee, accept the offer. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiaries in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the proposed transferee.

If the transfer to the trust as described above is not automatically effective for any reason to prevent violation of the above limitations or our failing to qualify as a REIT, then the transfer of the number of shares that otherwise cause any person to violate the above limitations will be void and the intended transferee shall acquire no rights in such shares.

All certificates, if any, representing shares of our stock issued in the future will bear a legend referring to the restrictions described above.

Every owner of more than such percentage as may from time to time be established by our board of directors, or such lower percentage as required by the Internal Revenue Code or the treasury regulations promulgated thereunder, of our outstanding stock, within 30 days after the end of each taxable year, is required to give us written notice, stating his or her name and address, the number of shares of each class and series of our stock which he or she beneficially owns and a description of the manner in which the shares are held. Each such owner shall provide us with such additional information as we may request in order to determine the effect, if any, of its beneficial ownership on our status as a REIT and to ensure compliance with the aggregate stock ownership limit. In addition, each stockholder shall, upon demand, be required to provide us with such information as we may request in good faith in order to determine our status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance.

These restrictions on ownership and transfer could delay, defer or prevent a transaction or a change in control that might involve a receipt of a premium price for the class A common stock or otherwise be in the best interest of the stockholders.

Business Combinations

Under Maryland law, certain “business combinations” between a Maryland corporation and an interested stockholder or any affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder became an interested stockholder. These business combinations include a merger, consolidation, statutory share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

•

any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or

•

an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation.

A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which such person otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder or any affiliate of an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

•

80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

•

two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or the shares held by any affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that an interested stockholder becomes an interested stockholder. Our board of directors has exempted any business combination involving a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell and his family. Our board of directors also approved in advance the transaction by which W.R. Berkley Corporation would have otherwise become an interested stockholder. In addition, our board of directors has exempted any business combination involving Huskies Acquisition LLC, or “Huskies Acquisition,” or its present affiliates or The Blackstone Group Inc., a Delaware corporation, and its subsidiaries, or “Blackstone,” and its present and future affiliates; provided, however, that Huskies Acquisition or any of its present affiliates and Blackstone and any of its present or future affiliates, may not enter into any “business combination” with Blackstone Mortgage Trust without the prior approval of at least a majority of the directors of our board of directors who are not affiliates or associates of Huskies Acquisition or Blackstone. As a result of the foregoing exemptions, these persons may enter into business combinations with us without compliance with the five-year prohibition, the super-majority vote requirements or the other provisions of the statute.

Control Share Acquisitions

Maryland law provides that a holder of “control shares” of a Maryland corporation acquired in a “control share acquisition” has no voting rights with respect to such shares except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. A control share acquisition means the acquisition of control shares, subject to certain exceptions. Shares owned by the acquiror or by officers or directors of the corporation who are also employees are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power, except solely by virtue of a revocable proxy, would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power:

•

one-tenth or more but less than one-third;

•

one-third or more but less than a majority; or

•

a majority or more of all voting power.

Control shares do not include shares the acquiror is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation.

A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting and delivering an “acquiring person statement” as described in the Maryland General Corporation Law. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an “acquiring person statement” as required by the statute, then the corporation may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to redeem control shares is subject to certain conditions and limitations. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or, if a meeting of stockholders at which the voting rights of the shares are considered and not approved, as of the date of the meeting. If voting rights for control shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights, unless the charter or bylaws provide otherwise. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.

The control share acquisition statute does not apply to shares acquired in a merger, consolidation or statutory share exchange if the corporation is a party to the transaction, or to acquisitions approved or exempted by the charter or bylaws of the corporation. Our bylaws contain a provision exempting the following persons from this statute: (i) a limited liability company indirectly controlled by a trust for the benefit of Samuel Zell and his family; (ii) W.R. Berkley Corporation and any of its controlled affiliates; and (iii) Huskies Acquisition, or any person or entity that was an affiliate of Huskies Acquisition as of September 27, 2012 or by Blackstone or any of its affiliates.

Maryland Unsolicited Takeovers Act

The Maryland Unsolicited Takeovers Act applies to any Maryland corporation that has a class of equity securities registered under the Exchange Act and at least three independent directors. Pursuant to such act, the board of directors of any Maryland corporation satisfying such requirements, without obtaining stockholder approval and notwithstanding a contrary provision in its charter or bylaws, may elect to:

•

classify the board;

•

require a two-thirds vote for removing a director;

•

require that a stockholder requested special meeting need be called only upon the written request of the stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting;

•

require that the number of directors may be fixed only by a vote of the board of directors; and

•

require that each vacancy on the board of directors, including a vacancy resulting from the removal of a director by the stockholders, may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum and any director elected to fill a vacancy will hold office for the full remainder of the term.

The Maryland Unsolicited Takeovers Act does not limit the power of a corporation to confer on the holders of any class or series of preferred stock the right to elect one or more directors. We currently have more than three independent directors and have a class of equity securities registered under the Exchange Act and therefore our board of directors may elect to provide for any of the foregoing provisions. As of the date hereof, our board of directors has not made any such election. However, through provisions of our charter and bylaws unrelated to the Maryland Unsolicited Takeovers Act, we (a) vest in our board the exclusive power to fix the number of directors and (b) require for a stockholder requested meeting, the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast.

Advance Notice of Director Nominations and New Business

Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to the board of directors and the proposal of business to be considered by stockholders may be made only:

•

pursuant to our notice of the meeting;

•

by or at the direction of the board of directors; or

•

by a stockholder who was a stockholder of record at the record date set by our board of directors for purposes of determining stockholders entitled to vote up to the meeting, at the time of giving of notice and at the time of the annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with the advance notice procedures of the bylaws.

With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of individuals for election to the board of directors at a special meeting may only be made:

•

by or at the direction of the board of directors;

•

by a stockholder that has requested that a special meeting be called for the purpose of electing directors in compliance with our bylaws and that has supplied the information required by our bylaws about each individual whom the stockholder proposes to nominate for election as a director; or

•

provided that the meeting has been called in accordance with our bylaws for the purpose of electing directors, by a stockholder who is a stockholder of record at the record date set by our board of directors for purposes of determining stockholders entitled to vote up to the meeting, at the time of giving of notice and at the time of the special meeting and who is entitled to vote at the meeting in the election of each individual so nominated and has complied with the advance notice provisions of the bylaws.

Limitation of Liability and Indemnification of Directors and Officers

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (i) actual receipt of an improper benefit or profit in money, property or services or (ii) active and deliberate dishonesty which is established by a final judgment and which is material to the cause of action. Our charter contains such a provision which eliminates directors’ and officers’ liability to the maximum extent permitted by Maryland law.

Our charter authorizes us, to the maximum extent permitted by Maryland law, to obligate us to indemnify any present or former director or officer or any individual who, while a director or officer of our company and at our request, serves or has served another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner or trustee, from and against any claim or liability to which that individual may become subject or which that individual may incur by reason of his or her service in such capacity and to pay or reimburse his or her reasonable expenses in advance of final disposition of a proceeding. Our bylaws obligate us, to the maximum extent permitted by Maryland law, to indemnify any present or former director or officer or any individual who, while a director or officer of our company and at our request, serves or has served another corporation,

real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise as a director, officer, trustee, member, manager or partner and who is made or are threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity from and against any claim or liability to which that individual may become subject or which that individual may incur by reason of his or her service in such capacity and to pay or reimburse his or her reasonable expenses in advance of final disposition of a proceeding. The rights to indemnification and advancement of expenses provided by our charter and our bylaws shall vest immediately upon an individual’s election as a director or officer. Our charter and bylaws also permit us to indemnify and advance expenses to any individual who served a predecessor of the company in any of the capacities described above and any employee or agent of the company or a predecessor of the company.

Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless its established that (i) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (ii) the director or officer actually received an improper personal benefit in money, property or services or (iii) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of (i) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (ii) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

We have entered into indemnification agreements, or the “Indemnification Agreements,” with each of our directors and officers, each, an “Indemnitee.” The Indemnification Agreements provide that we will, subject to certain limitations and exceptions, indemnify, to the fullest extent permitted under Maryland law, and advance expenses to, each Indemnitee, in connection with (among other things) the Indemnitee’s capacity as a director, officer, employee or agent of Blackstone Mortgage Trust. This obligation includes, subject to certain terms and conditions, indemnification for any expenses (including reasonable attorneys’ fees), judgments, fines, penalties and settlement amounts actually and reasonably incurred by the Indemnitee in connection with any threatened or pending action, suit or proceeding. In certain instances, we may be required to advance such expenses, in which case the Indemnitee will be obligated to reimburse us for the amounts advanced if it is later determined that the Indemnitee is not entitled to indemnification for such expenses. The indemnification provided under the Indemnification Agreements is not exclusive of any other indemnity rights.

Corporate Opportunities

Our charter includes a provision that, among other things, subject to certain exceptions, none of Blackstone or its affiliates, our directors or any person that any of our directors control shall have any duty to refrain from engaging, directly or indirectly, in any business opportunities, including any business opportunities in the same or similar business activities or lines of business in which we or any of our affiliates may from time to time be engaged or propose to engage, or from competing with us.

Exhibit 10.19

RESTRICTED STOCK AWARD AGREEMENT

(2018 Stock Incentive Plan)

THIS RESTRICTED STOCK AGREEMENT (the “Agreement”), is made effective as of the date set forth on the signature page (the “Signature Page”) attached hereto (the “Date of Grant”), between Blackstone Mortgage Trust, Inc., a Maryland corporation (the “Company”) and the participant identified on the Signature Page attached hereto (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Blackstone Mortgage Trust, Inc. 2018 Stock Incentive Plan (the “Plan”), the terms of which Plan are incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

WHEREAS, the Company has determined that it would be in the best interests of the Company and its stockholders to grant the restricted stock award provided for herein to the Participant pursuant to the Plan and the terms set forth herein;

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Grant of Restricted Stock. Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Participant the number of shares of Restricted Stock appearing on the signature page attached hereto (the “Award”).

2. Vesting of Restricted Stock.

(a) Vesting Schedule. The Award shall initially be unvested. Provided that the Participant has not undergone a Termination and a Manager Termination Event has not occurred, if the Participant is a Manager Employee, the Award shall vest (i) with respect to one-sixth (1/6) of the Award on the date that is six months and one day following the Date of Grant (the “Initial Vesting Date”) and (ii) with respect to the rest of the Award, in substantially equal quarterly installments over the ten (10) quarters immediately following the Initial Vesting Date; provided that the exact amounts and dates of each installment vesting shall be determined by the Company.

(b) Termination. Upon any Manager Termination Event, Qualifying Manager Termination or if the Participant undergoes a Termination, this Award shall be treated in accordance with the Plan.

3. Book Entry; Certificates. The Company shall recognize the Participant’s ownership through uncertificated book entry. If elected by the Company, certificates evidencing the Common Stock granted hereunder may be issued by the Company and any such certificates shall be registered in the Participant’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all

times prior to the later of (x) the vesting of the Award pursuant to this Agreement and (y) the expiration of any transfer restrictions set forth in this Agreement or otherwise applicable to the Common Stock subject to the Award. As soon as practicable following such time, any certificates for the Common Stock subject to the Award shall be issued to the Participant or to the Participant’s legal guardian or representative along with the stock powers relating thereto. No certificates shall be issued for fractional shares. To the extent required by the Company, the Participant shall deliver to the Company a stock power, duly endorsed in blank, relating to any portion of the Award that has not previously vested. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates (if any) to the Participant, any loss by the Participant of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

4. Rights as a Stockholder. The Participant shall be the record owner of the shares of Restricted Stock until or unless such shares are forfeited pursuant to the terms of this Agreement, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, participating in gains and losses of the Company, voting rights and rights to dividends with respect to shares of Restricted Stock; provided that shares of Restricted Stock shall be subject to the limitations on transfer and encumbrance set forth in Section 7.

5. Restrictions. Any Common Stock issued to the Participant pursuant to the Award shall be subject to such stop transfer orders and other restrictions as the Committee (or its designee) may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Common Stock are listed and any applicable U.S. or non-U.S. federal, state or local laws, and the Committee (or its designee) may cause a notation or notations to be entered into the books and records of the Company to make appropriate reference to such restrictions.

6. No Right to Continued Employment or Service. Neither the Plan nor this Agreement nor the granting of the Award hereunder shall impose any obligation on the Company or any Affiliate of the Company to continue the employment or engagement of the Participant. Further, the Company or any Affiliate of the Company (as applicable) may at any time terminate the Participant, free from any liability or claim under the Plan or this Agreement, except as otherwise expressly provided herein.

7. Transferability.

(a) Shares of Restricted Stock may not, at any time prior to becoming vested pursuant to the terms of this Agreement, be Transferred and any such purported Transfer shall be void and unenforceable against the Company or any Affiliate of the Company; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(b) “Transfer” shall mean (in either the noun or the verb form, including with respect to the verb form, all conjugations thereof within their correlative meanings) with respect to any security, the gift, sale, assignment, transfer, pledge, hypothecation or other disposition (whether for or without consideration, whether directly or indirectly, and whether voluntary, involuntary or by operation of law) of such security or any interest therein.

8. Securities Laws; Cooperation. Upon the vesting of the Award (or any portion thereof), the Participant will make or enter into such written representations, warranties and agreements as the Company may request in order to comply with applicable securities laws, the Plan or with this Agreement.

9. Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address appearing in the personnel records of the Company or its Affiliates for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

10. Choice of Law.This Grant shall be governed by and construed in accordance with the laws of the state of Maryland without regard to conflicts of laws.

11. Restricted Stock Subject to Plan. By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. Shares of Restricted Stock granted hereunder are subject to the Plan. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

12. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Signatures on next page.]

IN WITNESS WHEREOF, the parties have caused this Agreement to be effective as of the date set forth on the Company’s signature page.

Participant

Name:

Blackstone Mortgage Trust, Inc.

Name:

Title:

Dated:


Number of Shares of Restricted Stock		[●]
Date of Grant		[●]

Exhibit 10.21

RESTRICTED STOCK AWARD AGREEMENT

(2018 Manager Incentive Plan)

R E C I T A L S:

WHEREAS, the Company has adopted the Blackstone Mortgage Trust, Inc. 2018 Manager Incentive Plan (the “Plan”), the terms of which Plan are incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

2. Vesting of Restricted Stock.

(a) Vesting Schedule. The Award shall initially be unvested. Provided that a Termination has not occurred, the Award shall vest (i) with respect to one-sixth (1/6) of the Award on the date that is six months and one day following the Date of Grant (the “Initial Vesting Date”) and (ii) with respect to the rest of the Award, in substantially equal quarterly installments over the ten (10) quarters immediately following the Initial Vesting Date; provided that the exact amounts and dates of each installment vesting shall be determined by the Company.

(b) Termination. Upon a Termination or Qualifying Termination this Award shall be treated in accordance with the Plan.

3. Book Entry; Certificates. The Company shall recognize the Participant’s ownership through uncertificated book entry. If elected by the Company, certificates evidencing the Common Stock granted hereunder may be issued by the Company and any such certificates shall be registered in the Participant’s name on the stock transfer books of the Company promptly after the date hereof. No certificates shall be issued for fractional shares.

6. No Right to Continued Service. Neither the Plan nor this Agreement nor the granting of the Award hereunder shall impose any obligation on the Company or any Affiliate of the Company to continue the engagement of the Participant.

7. Transferability.

9. Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address as set forth on the Signature Page or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

10. Choice of Law.This Grant shall be governed by and construed in accordance with the laws of the state of Maryland without regard to conflicts of laws.

11. Restricted Stock Subject to Plan. By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan.

Shares of Restricted Stock granted hereunder are subject to the Plan. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

[Signatures on next page.]

IN WITNESS WHEREOF, the parties have caused this Agreement to be effective as of the date set forth on the Company’s signature page.

Participant

BXMT Advisors L.L.C.

By:

Name:

Title:

Blackstone Mortgage Trust, Inc.

Name:

Title:

Dated:

Participant Address:


Number of Shares of Restricted Stock		[●]
Date of Grant		[●]

Exhibit 10.32

AMENDMENT NO. 7 TO MASTER REPURCHASE AGREEMENT

AMENDMENT NO. 7 TO MASTER REPURCHASE AGREEMENT, dated as of December 19, 2019 (this “Amendment”), among PARLEX 1 FINANCE, LLC (“Seller”) and BANK OF AMERICA, N.A., a national banking association (“Buyer”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Repurchase Agreement (as defined below).

RECITALS

WHEREAS, Seller and Buyer are parties to that certain Master Repurchase Agreement, dated as of May 21, 2013, as amended by that certain Amendment No. 1 to Master Repurchase Agreement, dated as of September 23, 2013, as further amended by that certain Joinder Agreement, also dated as of September 23, 2013, as further amended by that certain Amendment No. 2 to Master Repurchase Agreement, dated as of June 30, 2014, as further amended by that certain Amendment No. 3 to Master Repurchase Agreement, dated as of March 27, 2015, as further amended by that certain Joinder Termination Agreement dated as of March 25, 2016, as further amended by that certain Amendment No. 4 to Master Repurchase Agreement, also dated as of March 25, 2016, as further amended by that certain Amendment No. 5 to Master Repurchase Agreement, dated as of December 21, 2017, as further amended by that certain Amendment No. 6 to Master Repurchase Agreement, dated as of March 30, 2018 (as amended hereby and as may be further amended, restated, supplemented, or otherwise modified and in effect from time to time, the “Repurchase Agreement”); and

WHEREAS, Seller and Buyer have agreed to amend certain provisions of the Repurchase Agreement in the manner set forth herein, and Blackstone Mortgage Trust Inc. (“Guarantor”) has agreed to make the acknowledgements set forth herein.

Therefore, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer each hereby agree as follows:

SECTION 1. Amendments to Repurchase Agreement. The terms, “Facility Termination Date” and “Initial Facility Termination Date”, as set forth in Section 2 of the Repurchase Agreement, are each hereby amended and restated in their entirety to read as follows:

“Facility Termination Date” shall mean the Initial Facility Termination Date, as the same may be extended to May 21, 2023, in accordance with the exercise of the First Extension Option and, as same may be further extended to May 21, 2024, in accordance with the exercise of the Second Extension Option.

“Initial Facility Termination Date” shall mean May 21, 2022.

SECTION 2. Effectiveness. This Amendment shall become effective on the date first set forth above (the “Amendment Effective Date”), which is the date on which this Amendment is executed and delivered by a duly authorized officer of each of Seller and Buyer and acknowledged and agreed by Guarantor, along with delivery to Buyer of such other documents as Buyer reasonably requested prior to the Amendment Effective Date.

SECTION 3. Compliance with Transaction Documents. On and as of the date first above written, Seller hereby represents and warrants to Buyer that (a) it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, (b) after giving effect to this Amendment, no Default or Event of Default under the Repurchase Agreement has occurred and is continuing, and (c) after giving effect to this Amendment, the representations and warranties contained in Section 10 of the Repurchase Agreement are true and correct in all material respects as though made on such date (except for any such representation or warranty that by its terms refers to a specific date other than the date first above written, in which case it shall be true and correct in all material respects as of such other date).

SECTION 4. Acknowledgements of Seller. Seller hereby acknowledges that, as of the date hereof, Buyer is in compliance with its undertakings and obligations under the Repurchase Agreement and the other Transaction Documents.

SECTION 5. Acknowledgments of Guarantor. Guarantor hereby acknowledges (a) the execution and delivery of this Amendment, and agrees that it continues to be bound by the Guaranty to the extent of the Obligations (as defined therein), notwithstanding the execution and delivery of this Amendment and the impact of the changes set forth herein, and (b) that Buyer is in compliance with its undertakings and obligations under the Repurchase Agreement, the Guaranty and each of the other Transaction Documents.

SECTION 6. Limited Effect. Except as expressly amended and modified by this Amendment, the Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms; provided, however, that upon the Amendment Effective Date, all references in the Repurchase Agreement to the “Agreement” and the “Transaction Documents” shall be deemed to include, in any event, this Amendment. Each reference to the Repurchase Agreement in any of the Transaction Documents shall be deemed to be a reference to the Repurchase Agreement as amended by this Amendment.

SECTION 7. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment in Portable Document Format (PDF) or by facsimile transmission shall be effective as delivery of a manually executed original counterpart thereof.

SECTION 8. Expenses. Seller agrees to pay and reimburse Buyer for all actual out-of-pocket costs and expenses reasonably incurred by Buyer in connection with the preparation, execution and delivery of this Amendment in accordance with Section 20(b) of the Repurchase Agreement.

SECTION 9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT.

SECTION 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

[Remainder of page intentionally left blank; Signatures follow on next page.]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.


BUYER:

BANK OF AMERICA, N.A., a national banking association

By:		/s/ Leland F. Bunch, III
		Name: Leland F. Bunch, III
		Title: Managing Director

SELLER:

PARLEX 1 FINANCE, LLC, a Delaware limited liability company

By:		/s/ Douglas Armer
		Name: Douglas Armer Title: Executive Vice President, Capital Markets, and Treasurer

Acknowledged and Agreed:


BLACKSTONE MORTGAGE TRUST, INC., a Maryland corporation, in its capacity as Guarantor, and solely for purposes of acknowledging and agreeing to the terms of this Amendment:

By:		/s/ Douglas Armer
		Name: Douglas Armer Title: Executive Vice President, Capital Markets and Treasurer

Exhibit 10.36

EXECUTION VERSION

AMENDMENT NO. 3 TO GUARANTEE AGREEMENT

AMENDMENT NO. 3 TO GUARANTEE AGREEMENT, dated as of November 25, 2019 (this “Amendment”), made by BLACKSTONE MORTGAGE TRUST, INC., a Maryland corporation (“Guarantor”), in favor of BANK OF AMERICA, N.A., a national banking association (“Buyer”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Guarantee Agreement (as defined below).

RECITALS

WHEREAS, Guarantor is party to that certain Guarantee Agreement, dated as of May 21, 2013, as amended by that certain Amendment No. 1 to Guarantee Agreement, dated as of September 23, 2013, as amended by that certain Amendment No. 2 to Guarantee Agreement, dated as of February 21, 2014, as amended hereby (as may be further amended, restated, supplemented, or otherwise modified and in effect from time to time, the “Guarantee Agreement”);

WHEREAS, Parlex 1 Finance, LLC (“Seller”) and Buyer are parties to that certain Master Repurchase Agreement, dated as of May 21, 2013, as amended by that certain Amendment No. 1 to Master Repurchase Agreement, dated as of September 23, 2013, as further amended by that certain Joinder Agreement, also dated as of September 23, 2013, as further amended by that certain Amendment No. 2 to Master Repurchase Agreement, dated as of June 30, 2014, as further amended by that certain Amendment No. 3 to Master Repurchase Agreement, dated as of March 27, 2015, as further amended by that certain Joinder Termination Agreement dated as of March 25, 2016, as further amended by that certain Amendment No. 4 to Master Repurchase Agreement, also dated as of March 25, 2016, as further amended by that certain Amendment No. 5 to Master Repurchase Agreement, dated as of December 21, 2017, as further amended by that certain Amendment No. 6 to Master Repurchase Agreement, dated as of March 30, 2018 (and as may be further amended, restated, supplemented, or otherwise modified and in effect from time to time, the “Repurchase Agreement”);

WHEREAS, Guarantor and Buyer have agreed to amend certain provisions of the Guarantee Agreement in the manner set forth herein.

Therefore, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer each hereby agree as follows:

Amendment to Guarantee Agreement. Section 2(b) of Guarantee Agreement is hereby amended as follows:

(a) sub-clause (i) of Section 2(b) is hereby amended in its entirety by deleting the existing text of such sub-clause and replacing it with the following:

25% of the then-currently unpaid aggregate Repurchase Price of all Senior Loans and Senior Interests; and

(b) sub-clause (ii) of Section 2(b) is hereby amended in its entirety by deleting the existing text of such sub-clause and replacing it with the following:

100% of the then-currently unpaid aggregate Repurchase Price of all other Purchased Loans not referenced in clause (i) above.

SECTION 1. Effectiveness. This Amendment and its provisions shall become effective when this Amendment is executed by Guarantor (the “Amendment Effective Date”).

SECTION 2. Compliance with Transaction Documents. Guarantor hereby represents and warrants to Buyer, as of the Amendment Effective Date, that Guarantor is in compliance with all of the terms and provisions set forth in the Guarantee.

SECTION 3. Acknowledgement. Guarantor hereby acknowledges that, as of the date hereof, Buyer is in compliance with its undertakings and obligations under the Guarantee Agreement.

SECTION 4. Limited Effect. Except as expressly amended and modified by this Amendment, the Guarantee Agreement and each of the other Transaction Documents (as such term is defined in the Repurchase Agreement) shall continue to be, and shall remain, in full force and effect in accordance with their respective terms; provided, however, that upon the Amendment Effective Date, (x) each reference therein and herein to the “Transaction Documents” shall be deemed to include, in any event, this Amendment, (y) each reference to the “Guarantee Agreement” in any of the Transaction Documents shall be deemed to be a reference to the Guarantee Agreement as amended hereby, and (z) each reference in the Guarantee Agreement to “this Agreement”, this “Guarantee Agreement”, “hereof”, “herein” or words of similar effect in referring to the Guarantee Agreement shall be deemed to be references to the Guarantee Agreement as amended by this Amendment.

SECTION 5. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment in Portable Document Format (PDF) or by facsimile transmission shall be effective as delivery of a manually executed original counterpart thereof.

SECTION 6. Expenses. Seller agrees to pay and reimburse Buyer for all actual out-of-pocket costs and expenses reasonably incurred by Buyer in connection with the preparation, execution and delivery of this Amendment in accordance with Section 20(b) of the Repurchase Agreement.

SECTION 7. GOVERNING LAW.

THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

[Remainder of page intentionally left blank; Signatures follow on next page.]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.


BLACKSTONE MORTGAGE TRUST, INC., a Maryland corporation

By:		/s/ Douglas N. Armer
		Name: Douglas N. Armer
		Title: Executive Vice President, Capital Markets and Treasurer

Acknowledged and agreed:

BANK OF AMERICA, N.A., a national banking association

By:		/s/ Steven Wasser
		Name: Steven Wasser Title: Managing Director

Amendment No. 3 to Guarantee Agreement – Signature Page

Exhibit 10.67

EXECUTION VERSION

SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

Dated as of December 16, 2019

by and among

PARLEX 15 FINCO, LLC,

as Master Seller,

and

DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH,

as Buyer

TABLE OF CONTENTS


		Page
1.	APPLICABILITY		2
2.	DEFINITIONS		2
3.	INITIATION; CONFIRMATION; TERMINATION; FEES; EXTENSION		37
4.	MARGIN MAINTENANCE		48
5.	INCOME PAYMENTS AND PRINCIPAL PAYMENTS		49
6.	SECURITY INTEREST		54
7.	PAYMENT, TRANSFER AND CUSTODY		55
8.	SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS		60
9.	REPRESENTATIONS		61
10.	NEGATIVE COVENANTS OF SELLER		66
11.	AFFIRMATIVE COVENANTS OF SELLER		69
12.	SINGLE-PURPOSE ENTITY		74
13.	EVENTS OF DEFAULT; REMEDIES		77
14.	LIMITATIONS ON RECOURSE AGAINST SERIES SELLERS		85
15.	RECORDING OF COMMUNICATIONS		85
16.	NOTICES AND OTHER COMMUNICATIONS		86
17.	ENTIRE AGREEMENT; SEVERABILITY		86
18.	ASSIGNABILITY		86

-i-


19.	GOVERNING LAW	88
20.	NO WAIVERS, ETC.	88
21.	USE OF EMPLOYEE PLAN ASSETS	88
22.	INTENT	89
23.	DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS	91
24.	CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL	91
25.	NO RELIANCE	92
26.	INDEMNITY	94
27.	DUE DILIGENCE	96
28.	SERVICING	96
29.	TAXES	98
30.	MISCELLANEOUS	101

-ii-

ANNEXES, EXHIBITS AND SCHEDULES


ANNEX I		Names and Addresses for Communications between Parties

EXHIBIT I		Form of Confirmation

EXHIBIT II		Authorized Representatives of Seller

EXHIBIT III		Form of Re-direction Letter

EXHIBIT IV		Form of Custodial Delivery

EXHIBIT V		Form of Power of Attorney

EXHIBIT VI		Representations and Warranties Regarding Individual Purchased Loans

EXHIBIT VII		Organizational Chart

EXHIBIT VIII		Transaction Procedures

EXHIBIT IX		Form of Servicer Notice and Agreement

EXHIBIT X		[Reserved.]

EXHIBIT XI		Form of Joinder Agreement

EXHIBIT XII		Form of Bailee Agreement

EXHIBIT XIII		Form of Certificate of Authorized Representative

THIS SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT (this “Agreement”) is dated as of December 16, 2019, by and among PARLEX 15 FINCO, LLC, a Delaware limited liability company organized in series (“Master Seller”), and DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH, a branch of a foreign banking institution (“Buyer”).

WHEREAS, the limited liability company agreement of the Master Seller provides for the establishment of one or more designated series of limited liability company interests and assets of the Master Seller (each, a “Series”, and each such Series that executes and delivers a Joinder Agreement (as hereinafter defined) pursuant to Section 3(n), a “Series Seller”) which may have separate rights, powers or duties with respect to specified property, including rights to profits and losses associated with such specified property and obligations under this Agreement with respect to such specified property, with the assets and obligations of each such Series Seller accounted for separately in the records of Master Seller and such Series Seller from the other assets of the Master Seller and the assets of each other Series Seller; and the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to each Series Seller shall be enforceable solely against the assets of such Series Seller except to the extent expressly provided for hereunder. Upon its execution of a Joinder Agreement pursuant to Section 3(n), each such Series Seller shall be bound by all provisions herein with respect to the assets of such Series Seller and its related obligations in respect of any Transactions. As used herein, the term “Seller” shall mean the Master Seller and/or each Series Seller, individually or collectively, as the context may require.

WHEREAS, Seller and Buyer entered into that certain Master Repurchase Agreement, dated as of August 2, 2016 (the “Original Repurchase Agreement”).

WHEREAS, Seller and Buyer amended and restated the Original Repurchase Agreement pursuant to that certain Amended and Restated Master Repurchase Agreement, dated as of February 9, 2017 (as amended by Amendment No. 1 to Amended and Restated Master Repurchase Agreement and Guaranty, dated as of March 24, 2017, as further amended by Amendment No. 2 to Amended and Restated Master Repurchase Agreement and Omnibus Amendment to Confirmations, dated as of October 17, 2017, as further amended by Amendment No. 3 to Amended and Restated Master Repurchase Agreement, dated as of October 30, 2018, as further amended by Amendment No. 4 to Amended and Restated Master Repurchase Agreement, dated as of November 20, 2018, and as further amended by Amendment No. 5 to Amended and Restated Master Repurchase Agreement, dated as of February 22, 2019, the “Existing Repurchase Agreement”).

WHEREAS, Seller and Buyer desire to amend and restate the Existing Repurchase Agreement on the Second Amendment and Restatement Date (as defined below) on the terms set forth herein.

NOW THEREFORE, Seller and Buyer hereby agree that the Existing Repurchase Agreement is hereby amended and restated in its entirety to read as follows:

1. APPLICABILITY

After the Closing Date the parties hereto entered into a transaction in which Seller transferred to Buyer the Watchtower A-Note Eligible Loan (as hereinafter defined) on a servicing released basis against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Watchtower A-Note Eligible Loan at a date certain or on demand, against the transfer of funds by Seller. From time to time the parties hereto may enter into transactions in which Seller agrees to transfer to Buyer certain Eligible Loans (as hereinafter defined) against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Eligible Loans at a date certain or on demand, against the transfer of funds by Seller. Master Seller shall designate a Series Seller for each such transaction in accordance with Section 3(n) of this Agreement. Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any exhibits identified herein as applicable hereunder.

2. DEFINITIONS

(a) As used in this Agreement, the following terms shall have the following meanings:

“1934 Act” shall have the meaning specified in Section 23(a).

“A-Note” shall mean a Mortgage Note evidencing a senior position (or pari passu senior position) in a Mortgage Loan. Payments with respect to an A-Note shall not be junior to any other Mortgage Note.

“Accelerated Repurchase Date” shall have the meaning specified in Section 13(b)(i) of this Agreement.

“Accelerated Transaction Repurchase Date” shall have the meaning specified in Section 13(c)(i) of this Agreement.

“Accepted Servicing Practices” shall mean with respect to any Purchased Loan, those customary and usual standards of mortgage servicing practices of prudent institutional mortgage loan servicers which service mortgage loans and/or participations in mortgage loans of the same type as such Purchased Loan in the jurisdiction where the related Mortgaged Property is located and, to the extent consistent with the foregoing requirements, with the same skill, care and diligence and in the same manner that the related servicer services and administers mortgage loans and/or participations in interests in mortgage loans for its own account or for other third-party entities of mortgage loans and/or participations of the same type as the Purchased Loans in the jurisdiction where the related Mortgaged Property is located or, if applicable, as otherwise defined in the applicable Servicing Agreement.

-2-

“Act of Insolvency” shall mean with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any Bankruptcy Law, or such party seeking the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, (ii) the commencement of any such case or proceeding against such party, seeking such an appointment or election, or the filing against such party of an application for a protective decree under the provisions of SIPA, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment or election, the issuance of such a protective decree or the entry of an order having a similar effect against such party, or (C) is not dismissed within sixty (60) days, (iii) the making by such party of a general assignment for the benefit of its creditors, or (iv) the admission in writing by such party of such party’s inability to pay such party’s debts as they become due.

“Actual Original Purchase Percentage” shall mean, with respect to any Transaction, a percentage equal to the lesser of (x) the Maximum Original Purchase Percentage for such Transaction and (y) a percentage designated by Seller in its sole and absolute discretion, and set forth in the Confirmation for such Transaction.

“Additional Amounts” shall have the meaning specified in Section 29(b) of this Agreement.

“Affiliate” shall mean, when used with respect to any specified Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with, such Person.

“Agreement” shall mean this Second Amended and Restated Master Repurchase Agreement, dated as of December 16, 2019 by and among Seller and Deutsche Bank AG, Cayman Islands Branch, as same may be amended, modified and/or restated from time to time.

“Allocable Percentage” shall mean, with respect to any Principal Payment on any Purchased Loan, a fraction (expressed as a percentage) the numerator of which is the Repurchase Price with respect to such Purchased Loan as in effect immediately prior to such Principal Payment (net of any accrued Price Differential and, unless a Facility Event of Default or a Transaction Event of Default related to such Purchased Loan has occurred and is continuing, excluding any other amounts then owing to Buyer), and the denominator of which is the outstanding principal balance of such Purchased Loan immediately prior to such Principal Payment.

“Alternate Index” shall mean a published floating rate index that Buyer determines in its sole but good faith discretion (and in connection therewith, may take into consideration the recommendations of the Alternative Reference Rates Committee convened by the Federal Reserve Board and the Federal Reserve Bank of New York) that is then generally used by Buyer in its commercial real estate repurchase facilities similar to the subject Agreement and/or floating rate commercial real estate loans as an alternative to LIBOR, as determined by Buyer in its sole but good faith discretion.

“Alternate Index Rate” shall mean, with respect to each Pricing Rate Period, the per annum rate of interest of the Alternate Index, determined as of the Pricing Rate Determination Date immediately preceding the commencement of such Pricing Rate Period; provided that in no event will the Alternate Index Rate be less than zero.

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“Alternate Pricing Rate” shall mean, with respect to each Pricing Rate Period, the per annum rate of interest equal to the greater of (i) the sum of (A) the Alternate Index Rate plus (B) the Alternate Rate Spread, and (ii) the sum of (A) the LIBOR Floor plus (B) the LIBOR Rate Spread.

“Alternate Rate Spread” shall mean, in connection with any conversion of any Transaction in accordance with the terms hereof to an Alternate Rate Transaction, prior to the occurrence and continuance of an Event of Default, (i) the sum (expressed as the number of basis points and determined at the time of such conversion) of (a) the LIBOR Rate Spread and (b) the Alternate Rate Spread Adjustment; provided that in no event will the Alternate Rate Spread be less than zero, and (ii) after the occurrence and during the continuance of an Event of Default, the per annum rate of interest for such Transaction set forth in clause (i) of this definition plus 400 basis points (4.00%).

“Alternate Rate Spread Adjustment” shall mean, in connection with any conversion of a Transaction in accordance with the terms hereof to an Alternate Rate Transaction, a spread adjustment as determined by Buyer in its sole but good faith determination at the time of conversion, (which may be positive, negative or zero) equal to (1) (x) if the Transaction is being converted from a LIBOR Transaction to an Alternate Rate Transaction, the daily average of LIBOR (with a floor of zero percent) or (y) if the Transaction is being converted from a Prime Rate Transaction to an Alternate Rate Transaction, the daily average of the Prime Index Rate (with a floor of zero percent), in either case of (x) or (y), as applicable, over the one hundred eighty (180) day period (excluding days within such 180 day period that are not Business Days) ending two (2) Business Days prior to the date of conversion (excluding from such average the five (5) highest days and the five (5) lowest days during such one hundred eighty (180) day period), minus (2) the daily average of the Alternate Index (with a floor of zero percent) over the one hundred eighty (180) day period (or such shorter period to the extent such historical rates are not available, and excluding days within such one hundred eighty (180) day or shorter period that are not Business Days), ending two (2) Business Days prior to the date of conversion (excluding from such average, if such period of averaging exceeds thirty (30) days, the five (5) highest days and the five (5) lowest days during such one hundred eighty (180) day period). Notwithstanding the foregoing, Buyer may elect, in its sole but good faith discretion, to apply its or any then customary alternate rate index and/or spread adjustment methodology, applied at the time of conversion of a Transaction to an Alternate Rate Transaction, then commonly used by Buyer for commercial real repurchase facilities similar in size and character to this Agreement and the transactions included therein in lieu of the actual calculation as provided above.

“Alternate Rate Transaction” shall mean a Transaction at such time as interest thereon accrues at a per annum rate of interest based on the Alternate Pricing Rate.

“Amortization Period” shall mean the period from and after the Revolving Period Expiration Date to and including the Facility Termination Date.

“Anti-Corruption Laws” shall mean the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder, the UK Bribery Act of 2010, as amended, and any other applicable anti-corruption law.

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“Amendment and Restatement Date” shall mean February 9, 2017.

“Applicable Servicer Account” shall mean a deposit account established with the applicable Servicer, Depository or with a bank for which the applicable Servicer is the bank’s customer and that is acceptable to Buyer in its sole discretion, which deposit account is in the name of the applicable Servicer, and which may be for the benefit of Seller, and which shall, in any case, indicate in the name of such deposit account the security interest of Buyer therein.

“Applicable Spread” shall mean, with respect to any Transaction, if the related Transaction is a LIBOR Transaction, the LIBOR Rate Spread, (b) if the Transaction is a Prime Rate Transaction, the Prime Rate Spread, and (c) if the Transaction is an Alternate Rate Transaction, the Alternate Rate Spread.

“Appraisal” shall mean an appraisal of the related underlying Mortgaged Property from an Independent Appraiser, complying with the requirements of Title XI of the Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended from time to time, and conducted in accordance with the standards of the American Appraisal Institute.

“Approved Future Funding Amounts” shall have the meaning specified in Section 3(o) of this Agreement.

“Assignment of Leases” shall mean, with respect to any Purchased Loan, an assignment of leases thereunder, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the Mortgaged Property is located to reflect the assignment of leases.

“Assignment of Mortgage” shall mean, with respect to any Purchased Loan, an assignment or notice of transfer (or equivalent instrument) of the applicable Mortgage in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the assignment and pledge of the Mortgage, subject to the terms, covenants and provisions of this Agreement.

“Available Income” shall mean, all Income other than (a) the Underlying Purchased Loan Reserves, including without limitation Underlying Purchased Loan Reserves consisting of insurance proceeds and condemnation awards from any Mortgaged Property that are not applied to amounts due under the applicable Purchased Loan pursuant to the express terms of the applicable Purchased Loan Documents (in each case, unless and until such amounts are available under the related Purchased Loan Documents to be released to or on behalf of the lender thereunder or to reduce the principal balance of such Purchased Loan), (b) Qualified Servicing Expenses, (c) insurance proceeds and condemnation awards from any Mortgaged Property that are not permitted to be applied to amounts due under the applicable Purchased Loan pursuant to the applicable Purchased Loan Documents (in each case, unless and until such amounts are available, under the related Purchased Loan Documents, to be applied to amounts due under the applicable Purchased Loan or otherwise available to be released to Seller), (d) origination fees paid by Mortgagors in connection with the origination and closing of the applicable Purchased Loan, and (e) any reimbursement for third party out-of-pocket costs and expenses payable by a Mortgagor to Seller in connection with origination and loan administration (including amendments or modifications to, and requests for consent and approvals under, the applicable Purchased Loan).

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“Bailee” shall mean Ropes & Gray LLP or any other law firm reasonably acceptable to Buyer that has delivered a Bailee Letter with respect to a Purchased Loan.

“Bailee Letter” shall mean a letter from Seller and acknowledged by Bailee and Buyer substantially in the form attached hereto as Exhibit XII.

“Bankruptcy Code” shall mean the United States Bankruptcy Code (11 U.S.C. § 101 et seq.), as amended from time to time or any successor statute or rule promulgated thereto.

“Bankruptcy Laws” shall mean the Bankruptcy Code or any other United States bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or any similar statute, law, rules, regulations or similar legal requirements of any other applicable jurisdiction, in each case, as amended from time to time.

“Beneficial Ownership Certification” shall mean a current certification regarding beneficial ownership required by 31 C.F.R. § 1010.230.

“Blocked by Operation of Law” shall mean, with respect to OFAC’s SDN List, any Person that is in the aggregate owned, directly or indirectly, fifty percent (50%) or greater by a Person or Persons that are either identified on the SDN List or themselves blocked Persons.

“Business Day” shall mean a day other than (i) a Saturday or Sunday, or (ii) a day in which the New York Stock Exchange or banks in the State of New York, Kansas, Pennsylvania or Minnesota are authorized or obligated by law or executive order to be closed. When used with respect to a Pricing Rate Determination Date, “Business Day” shall mean any day other than a Saturday, a Sunday or in connection with the determination of LIBOR in a LIBOR Transaction, a day on which banks in London, England are closed for interbank or foreign exchange transactions.

“Business Plan” shall mean, with respect to any Construction Loan, the construction budget and/or business plan for construction, rehabilitation and/or renovation of the related Mortgaged Property (as the same may be amended, supplemented or otherwise modified from time to time in accordance with this Agreement) prepared by the related Mortgagor, submitted by Seller and approved in writing by Buyer in its sole discretion as of the related Purchase Date as evidenced by a Confirmation.

“Buyer” shall mean Deutsche Bank AG, Cayman Islands Branch, or any successor or assignee thereof.

“Capital Lease Obligations” shall mean with respect to 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 obligation shall be the capitalized amount thereof, determined in accordance with GAAP.

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“Cash Flow Deficiency” shall mean, for any Remittance Date, the amount (if any) by which (i) the total of all amounts due to Buyer, its Affiliates and Custodian under Sections 5(c)(i)-(iv), 5(d)(i)-(vi) or 5(e)(i)-(iv), as applicable, as of such Remittance Date exceed (ii) the aggregate amount of Available Income (including Principal Payments) received by Buyer or Depository in respect of all of the Purchased Loans during such Collection Period.

“Cash Management Account” shall mean a segregated interest bearing account, entitled “Parlex 15 Finco, LLC, as Master Seller, for the benefit of Deutsche Bank AG, Cayman Islands Branch, as Buyer”, established at the Depository, bearing account number 1029151413.

“Cause” means, with respect to an Independent Manager, (i) acts or omissions by such Independent Manager that constitute willful disregard of or bad faith or gross negligence with respect to, such Independent Manager’s duties, (ii) such Independent Manager has engaged in or has been indicted or convicted for any crime or crimes of moral turpitude, fraud, or dishonesty or for any violation of any Requirement of Law, (iii) such Independent Manager no longer satisfies the requirements set forth in the definition of “Independent Manager”, (iv) the fees charged for the services of such Independent Manager are materially in excess of the fees charged by the other providers of Independent Managers listed in the definition of “Independent Manager”, (v) such Independent Manager is unable to perform his or her duties due to death, disability or incapacity or (vi) any other reason for which the prior written consent of Buyer shall have been obtained.

“Change of Control” shall mean (a) any consummation of a merger, amalgamation, or consolidation of Sponsor with or into another entity or any other reorganization occurs and more than fifty percent (50%) of the combined voting power of the continuing or surviving entity’s stock or other ownership interest in such entity outstanding immediately after such merger, amalgamation, consolidation or such other reorganization is not owned directly or indirectly by Persons who were stockholders or holders of such other ownership interests in Sponsor immediately prior to such merger, amalgamation, consolidation or other reorganization; (b) any “person” or “group” (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) 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 Securities Exchange Act of 1934, as amended), directly or indirectly, of a percentage of the total voting power of all stock or other ownership interests in Sponsor entitled to vote generally in the election of directors, members or partners of twenty percent (20%) or more other than wholly-owned Affiliates of Sponsor and related funds of The Blackstone Group L.P., or to the extent such interests are obtained through a public market offering or secondary market trading; (c) Sponsor shall cease to own and Control, of record and beneficially, directly or indirectly, one hundred percent (100%) of each class of outstanding ownership interests in 42-16 Partners, LLC; (d) 42-16 Partners, LLC shall cease to own and Control, of record and beneficially, directly or indirectly, one hundred percent (100%) of each class of outstanding ownership interests in Member; (e) Member shall cease to own and Control, of record and beneficially, directly, one hundred percent (100%) of each class of outstanding ownership interests in Seller; or (f) any transfer of all or substantially all of

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Sponsor’s assets (other than any securitization transaction or any repurchase or other similar transactions in the ordinary course of Sponsor’s business). Notwithstanding the foregoing, neither Buyer nor any other Person shall be deemed to approve or to have approved any internalization of management as a result of this definition or any other provision herein.

“Closing Date” shall mean August 2, 2016.

“Code” shall mean the Internal Revenue Code of 1986, as amended. “Collateral” shall have the meaning specified in Section 6 of this Agreement. “Collection Period” shall mean with respect to the Remittance Date in any month, the period beginning on but excluding the Cut-off Date in the month preceding the month in which such Remittance Date occurs and continuing to and including the Cut-off Date immediately preceding such Remittance Date.

“Confirmation” shall have the meaning specified in Section 3(b) of this Agreement.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and “Controlling,” “Controlled” and “under common Control” shall have meanings correlative thereto. For purposes of this definition, debt securities that are convertible into common stock will be treated as voting securities only when converted.

“Controlling Interest” shall mean (a) any whole mortgage loan and (b) any A-Note or participation interest under a co-lender agreement or participation agreement, as applicable, with respect to which, in each case, the holder thereof is entitled to exercise control and direction rights in respect of the underlying Mortgage Loan (including, but not limited to, the right to direct the servicer and custodian thereunder and to grant any consents and approvals in respect thereof) (provided that the granting or possession of major or fundamental decision rights or similar consent rights in favor of any holder of a companion A-Note or companion participation interest shall not cause “control and direction rights” to be deemed absent for the purposes of this definition).

“Construction Loan” means a senior Mortgage Loan secured by land which is undeveloped, partially developed, or under significant property-wide rehabilitation, and part or all of the proceeds of such senior Mortgage Loan are required to be applied by Mortgagor towards the construction or rehabilitation of commercial real estate.

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“Controlled Account Agreement” shall mean that certain Deposit Account Control Agreement, dated as of August 2, 2016, among Buyer, Master Seller (on behalf of itself and each Series Seller), Servicer and the Depository, relating to the Cash Management Account, as the same may be amended, modified and/or restated from time to time.

“Custodial Agreement” shall mean the Custodial Agreement, dated as of August 2, 2016, by and among the Custodian, Master Seller (on behalf of itself and each Series Seller) and Buyer, as the same may be amended, modified and/or restated from time to time.

“Custodial Delivery” shall mean the form executed by Seller in order to deliver the Purchased Loan Schedule and the Purchased Loan File with respect to any Purchased Loan to Buyer or its designee (including the Bailee or the Custodian, as applicable) pursuant to Section 7, a form of which is attached hereto as Exhibit IV.

“Custodian” shall mean U.S. Bank National Association, or any successor Custodian appointed by Buyer with, prior to the occurrence or continuance of a Default or an Event of Default, the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed).

“Cut-off Date” shall mean the second Business Day preceding each Remittance Date.

“Default” shall mean a Facility Default or a Transaction Default.

“Depository” shall mean PNC Bank, National Association, a national banking association, or any successor Depository appointed by Buyer with, prior to the occurrence or continuance of a Default or an Event of Default, the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed).

“Diligence Materials” shall mean, collectively, (i) the Preliminary Due Diligence Package furnished by Seller to Buyer, and (ii) any other diligence materials delivered by Seller to Buyer in connection with Buyer’s review of any New Collateral, whether pursuant to a Supplemental Due Diligence List or otherwise.

“Division/Series Transaction” shall mean, with respect to any Person that is a limited liability company organized under the laws of the State of Delaware, any event or transaction where such Person (a) divides into two or more Persons (whether or not the original Person or Subsidiary thereof survives such division) or (b) creates, or reorganizes into, one or more series, in each case, as contemplated under the laws of the State of Delaware, including without limitation Section 18-217 of the Delaware LLC Act.

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

“Eligibility Requirements” shall mean, with respect to any Person, that such Person has at least $100,000,000 in capital/statutory surplus or shareholders’ equity (except with respect to a pension advisory firm or similar fiduciary) and at least $500,000,000 in total assets (in name or under management), and is regularly engaged in the business of making or owning commercial real estate loans (or interests therein), mezzanine loans (or interests therein) or commercial loans (or interests therein) similar to the applicable Purchased Loan.

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“Eligible Assignee”: Any of the following Persons designated by Buyer for purposes of the second sentence of Section 18(b): (i) a bank, financial institution, pension fund, insurance company or similar Person regularly engaged in the business of originating, lending against, or owning commercial real estate loans similar to the Purchased Loans, or any Affiliate of any of the foregoing that, in each case, has total shareholders’ equity and/or capital surplus of $400,000,000 or more and (ii) and any Affiliate of Buyer.

“Eligible Loan” shall mean a whole mortgage loan or Senior Interest (including the Watchtower A-Note Eligible Loan) in a whole mortgage loan secured by a first mortgage lien or liens on one or more commercial or multifamily properties (including, without limitation, a leasehold interest therein), as to which each of the Purchased Loan Representations are true and correct as of the Purchase Date (except for any exceptions disclosed in an Exceptions Report) and which mortgage loan or Senior Interest is approved by Buyer as of the Purchase Date, in its sole and absolute discretion, based upon all facts and circumstances considered relevant by Buyer. Except as otherwise disclosed to Buyer in an Exceptions Report on or prior to the Purchase Date, no asset shall be an Eligible Loan unless it is a Controlling Interest. An “Eligible Loan” that is a Purchased Loan hereunder may, in Buyer’s sole and absolute discretion, include a junior Related Interest provided that, and only for so long as, the corresponding Senior Interest with respect to any such junior Related Interest also remains subject to the applicable Transaction for such Purchased Loan.

“Environmental Law” shall mean any present or future federal, state or local law, statute, regulation or ordinance, any judicial or administrative order or judgment thereunder, pertaining to health, industrial hygiene, hazardous substances or the environment, including, but not limited to, each of the following, as enacted as of the date hereof or as hereafter amended: the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901 et seq.; the Toxic Substance Control Act, 15 U.S.C. §§ 2601 et seq.; the Water Pollution Control Act (also known as the Clean Water Act, 22 U.S.C. §§ 1251 et seq.), the Clean Air Act, 42 U.S.C. §§ 7401 et seq. and the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq.

“Equity Interests” shall mean, with respect to any Person, (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 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.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

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“ERISA Affiliate” shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Seller is a member and (ii) solely for purposes of potential liability under Section 302(b) of ERISA and Section 412(b) of the Code and the lien created under Section 303(k) of ERISA and Section 430(k)(4) of the Code, described in Section 414(m) or (o) of the Code of which Seller is a member.

“Event of Default” shall mean a Facility Event of Default or a Transaction Event of Default.

“Exceptions Report” shall mean, with respect to a Purchased Loan, a written schedule of exceptions, qualifications or modifications to the related Purchased Loan Representations furnished by Seller to Buyer, as set forth on Schedule 3 to the Confirmation for such Eligible Loan, and approved by Buyer on or prior to the related Purchase Date as evidenced by Buyer’s execution of such Confirmation.

“Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to Buyer or required to be withheld or deducted from a payment to Buyer: (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 Buyer being organized under the laws of, or having its principal office or the office from which it books the Transactions located in, the jurisdiction imposing such Taxes (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of Buyer with respect to an interest in the Repurchase Obligations pursuant to a law in effect on the date on which such Buyer (i) acquires such interest in the Repurchase Obligations or (ii) changes the office from which it books the Transactions, except in each case to the extent that, pursuant to Section 29, amounts with respect to such Taxes were payable either to such Buyer’s assignor immediately before such Buyer became a party hereto or to such Buyer immediately before it changed the office from which it books the Transactions, (c) Taxes attributable to Buyer’s failure to comply with Section 29(f) and (d) any U.S. federal withholding Taxes imposed under FATCA.

“Existing Repurchase Agreement” shall have the meaning specified in the Recitals to this Agreement.

“Exit Fee” shall have the meaning specified in the Letter Agreement.

“Extension Conditions” shall have the meaning specified in Section 3(p).

“Extended Purchased Loan Maturity Date” shall mean, for any Purchased Loan, the date(s) set forth on Schedule 2 to the Letter Agreement for the related Transaction to which the maturity date of such Purchased Loan may be extended pursuant to the Purchased Loan Documents.

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

“Facility Event of Default” shall have the meaning specified in Section 13(a)(II).

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“Facility Termination Date” shall mean the latest scheduled Extended Purchased Loan Maturity Date for all Purchased Loans then subject to a Transaction hereunder.

“FATCA” means 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), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code, and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code.

“FDIA” shall have the meaning specified in Section 22(c).

“FDICIA” shall have the meaning specified in Section 22(d).

“Federal Funds Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by Buyer from three (3) federal funds brokers of recognized standing selected by it.

“Filings” shall have the meaning specified in Section 6 of this Agreement.

“Financing Fee” shall mean, with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Financing Fee Rate to the Repurchase Price (excluding Price Differential) for such Transaction (as adjusted from time to time by reductions in the Repurchase Price pursuant to the terms of this Agreement including Sections 3(e), 3(k), 4(b), 5(c)(iii), 5(d)(iii), 5(d)(v), 5(d)(vi) and 5(e)(iv) and increases in the Repurchase Price pursuant to the terms of this Agreement including Sections 3(o) and/or Section 4(c)) on a 360-day-per-year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction (or, if later, the date of the Omnibus Amendment) and ending on (but excluding) the date of determination (reduced by any amount of such Financing Fee previously paid by Seller to Buyer with respect to such Transaction).

“Financing Fee Cap” shall have the meaning specified in Section 3(r).

“Financing Fee Rate” shall have the meaning specified in Section 3(r).

“Foreign Buyer” shall mean a Buyer that is not a U.S. Person.

“Future Funding Amount” shall mean with respect to any Purchased Loan for which a Future Funding Transaction has been duly requested by Seller pursuant to Section 3(o), the product of (a) the Maximum Original Purchase Percentage for such Purchased Loan and (b) the amount of future funding advances made under the Purchased Loan with respect to which the requested Future Funding Transaction relates; provided, in no event shall the aggregate amount so requested by Seller exceed the amount of future funding set forth on the related Confirmation for the initial Transaction relating to such Purchased Loan, multiplied by the Maximum Original Purchase Percentage for such Purchased Loan, minus all previous Future Funding Amounts funded by Buyer relating to such Purchased Loan.

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“Future Funding Conditions” shall have the meaning specified in Section 3(o).

“Future Funding Date” shall mean, with respect to any Purchased Loan, each date on which Seller is required to fund a future funding advance pursuant to the Purchased Loan Documents relating to such Purchased Loan.

“Future Funding Request Package” shall mean, with respect to one or more Future Funding Transactions, the following, to the extent applicable and available, unless any such items were previously delivered to Buyer and have not been modified since the date of each such delivery: (a) the related request for advance, executed by the Mortgagor under the related Purchased Loan (which shall include evidence of Seller’s approval of the related future funding), together with any advance request package submitted to Seller by the related Mortgagor, and any other documents that require Seller to fund; (b) the executed fund control agreement (or the executed escrow agreement, if funding through escrow); (c) certified copies of all relevant trade contracts; (d) the title policy endorsement for the advance; (e) copies of any tenant leases; (f) copies of any service contracts; (g) updated financial statements, operating statements and rent rolls; (h) evidence of required insurance; (i) engineering reports, updates to the engineering reports, and any other third-party/consultant reports or other reporting relevant to Buyer in connection with such request for advance; (j) an updated Preliminary Due Diligence Package for the related Purchased Loan; and (k) copies of any additional documentation as required in connection therewith, or as otherwise reasonably requested by Buyer.

“Future Funding Transaction” shall mean any Transaction approved by Buyer pursuant to Section 3(o).

“Future Funding Transaction Date” shall have the meaning specified in Section 3(o).

“Future Funding Transaction Request” shall have the meaning specified in Section 3(o).

“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 or any entity, authority, agency, division or department exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to a government (including any supra-national bodies such as the United Nations, European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

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“Guaranty” shall mean the Guaranty, dated as of August 2, 2016, from the Sponsor to Buyer, as the same may be amended, modified and/or restated from time to time.

“Hazardous Materials” shall mean oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials or gases, including any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,” “regulated substances,” “industrial solid wastes,” or “pollutants” under Environmental Laws and including arsenic, perchlorate, methane and carbon monoxide.

“Income” shall mean, with respect to any Purchased Loan at any time, the sum of (x) payments of principal, interest, dividends or other receipts, distributions, prepayments, recoveries, proceeds (including insurance and condemnation proceeds), prepayment fees, extension fees, exit fees, defeasance fees, transfer fees, make whole fees, late charges, late fees and all other fees or charges of any kind or nature, premiums, yield maintenance charges, penalties, default interest, dividends, receipts, allocations, rents, interests, payments in kind, net sale, foreclosure, liquidation, securitization or other disposition proceeds, insurance payments, settlements and proceeds or collections (including, without limitation, make-whole prepayment penalties, defaulted interest and, when released to Seller in accordance with the terms of the related Purchased Loan Documents, all Underlying Purchased Loan Reserves) and (y) all net sale proceeds received by Seller or any Affiliate of Seller in connection with a sale of such Purchased Loan, other than any origination fees that were earned and paid on or prior to the related Purchase Date.

“Indemnified Amounts” shall have the meaning specified in Section 26.

“Indemnified Parties” shall have the meaning specified in Section 26.

“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 (a), Other Taxes.

“Indebtedness” shall mean respect to 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 ninety (90) 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 or like arrangements; (vii) Indebtedness of others guaranteed by such Person to the extent of such guarantee; and (viii) all obligations of such Person incurred in connection with the

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acquisition or carrying of fixed assets by such Person. Notwithstanding the foregoing, nonrecourse Indebtedness owing pursuant to a securitization transaction such as a REMIC securitization, a collateralized loan obligation transaction or other similar securitization shall not be considered Indebtedness for any person.

“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 Mortgaged 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 years experience in the subject property type and is acceptable to Buyer in its sole and absolute discretion, applied in good faith.

“Independent Manager” shall mean an individual who has prior experience as an independent director, independent manager or independent member with at least three years of employment experience and who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional Independent Managers, another nationally-recognized company reasonably approved by Buyer, in each case that is not an Affiliate of Seller and that provides professional Independent Managers and other corporate services in the ordinary course of its business, and which individual is duly appointed as an Independent Manager and is not, and has never been, and will not while serving as Independent Manager be, any of the following:

(A) a member, partner, equityholder, manager, director, officer or employee of Seller or any of its equityholders or Affiliates (other than as an Independent Manager of Seller or an Affiliate of Seller that does not own a direct or indirect ownership interest in the Seller and that is required by a creditor to be a single purpose bankruptcy remote entity, provided that such Independent Manager is employed by a company that routinely provides professional Independent Managers or managers in the ordinary course of its business);

(B) a creditor, supplier or service provider (including provider of professional services) to Seller or any of its equityholders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Managers and other corporate services to Seller or any of its Affiliates in the ordinary course of its business);

(C) a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider of Seller or its Affiliates; or

(D) a Person that controls (whether directly, indirectly or otherwise) any of the entities described in (A), (B) or (C) above.

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A natural person who otherwise satisfies the foregoing definition and satisfies subparagraph (A) by reason of being the Independent Manager of a “single purpose entity” affiliated with the Seller, that does not own a direct or indirect ownership interest in the Seller, shall be qualified to serve as an Independent Manager of Seller, provided that the fees that such individual earns from serving as an Independent Manager of affiliates of the Seller in any given year constitute in the aggregate less than five percent (5%) of such individual’s annual income for that year. For purposes of this paragraph, a “single purpose entity” is an entity whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entity’s separateness that are substantially similar to those contained in Section 12 of this Agreement.

“Initial Buyer” shall mean Deutsche Bank AG, Cayman Islands Branch.

“Initial Servicer” shall mean Midland Loan Services, a division of PNC Bank, National Association, a national banking association.

“Initial Servicing Agreement” shall mean that certain Servicing Agreement, dated as of August 2, 2016, by and among Initial Servicer, Buyer and Seller.

“Investment Company Act” shall mean the Investment Company Act of 1940, as amended.

“IRS” shall mean the United States Internal Revenue Service.

“Joinder Agreement” shall have the meaning specified in Section 3(n).

“Knowledge” shall mean, as of any date of determination, the then-current actual (as distinguished from imputed or constructive) knowledge of (i) Stephen Plavin, Thomas C. Ruffing, Douglas Armer or Jonathan Pollack, (ii) (A) any asset manager with responsibility for managing any of the Purchased Assets at The Blackstone Group L.P., or (B) any employee with a title equivalent or more senior to that of “principal” within The Blackstone Group L.P., in each case, responsible for the origination, acquisition and/or management of any Purchased Loan.

“Last Endorsee” shall have the meaning specified in Section 7(b)(i).

“Letter Agreement” shall mean that certain letter agreement, dated as of the date hereof, by and between Buyer and Master Seller, as the same may be amended, modified and/or restated from time to time.

“LIBO Rate” shall mean, with respect to any Pricing Rate Period pertaining to a Transaction, a rate per annum determined for such Pricing Rate Period in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

LIBOR

1 – Reserve Requirement

“LIBOR” shall mean, with respect to each Pricing Rate Period, the rate (expressed as a percentage per annum and rounded upward, if necessary, to the next nearest 1/1000 of 1%) for deposits in U.S. dollars, for a one-month period, that appears on Reuters Screen LIBOR01 (or the successor thereto) as of 11:00 a.m., London time, on the related Pricing Rate Determination

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Date. If such rate does not appear on Reuters Screen LIBOR01 as of 11:00 a.m., London time, on such Pricing Rate Determination Date, Buyer shall request the principal London office of any four major reference banks in the London interbank market selected by Buyer to provide such bank’s offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in U.S. dollars for a one-month period as of 11:00 a.m., London time, on such Pricing Rate Determination Date for amounts of not less than the Repurchase Price of the Transaction. If at least two such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, Buyer shall request any three major banks in the City of New York selected by Buyer to provide such bank’s rate (expressed as a percentage per annum) for loans in U.S. dollars to leading European banks for a one-month period as of approximately 11:00 a.m., New York City time on the applicable Pricing Rate Determination Date for amounts of not less than the Repurchase Price of the Transaction. If at least two such rates are so provided, LIBOR shall be the arithmetic mean of such rates. LIBOR shall be determined by Buyer or its agent pursuant to the terms of this Agreement, which determination shall be conclusive absent manifest error. Notwithstanding the foregoing or any other provision in this Agreement or any other Transaction Document, in no event shall LIBOR be less than zero.

“LIBOR Floor” shall mean zero percent (0.00%).

“LIBOR Pricing Rate” shall mean, with respect to each Pricing Rate Period, the per annum rate equal to (i) the greater of the LIBO Rate and the LIBOR Floor plus (ii) the LIBOR Rate Spread.

“LIBOR Rate Spread” shall mean, with respect to each Transaction:

(A) so long as no Event of Default shall have occurred and be continuing, the per annum rate designated by Buyer in its sole and absolute discretion as the “Applicable Spread” for such Purchased Loan as set forth in the Confirmation for such Purchased Loan; and

(B) after the occurrence and during the continuance of an Event of Default, the Applicable Spread specified in each Confirmation, plus 400 basis points (4.00%).

“LIBOR Transaction” shall mean any Transaction at such time as interest thereon accrues at a rate of interest based upon LIBOR.

“LIBOR Unavailability Conditions” shall mean the occurrence of one or more of the following: (a) Dollar deposits in an amount approximately equal to the aggregate outstanding Purchase Price for all Transactions are not generally available at such time in the London interbank Eurodollar market for deposits in Eurodollars, (b) Buyer shall have determined in its sole but good faith discretion that by reason of circumstances affecting the interbank Eurodollar market or otherwise, adequate and reasonable means do not exist for ascertaining LIBOR in accordance with the definition thereof (including if fewer than two (2) LIBOR quotations are available), (c) the Pricing Rate for a LIBOR Transaction would be in excess of the maximum interest rate that Seller may by law pay, (d) LIBOR does not fairly and accurately reflect the

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costs to Buyer of making or maintaining a Transaction, (e) the adoption of any Requirement of Law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for Buyer to maintain any LIBOR Transaction as contemplated hereunder, (f) LIBOR is no longer a widely recognizable benchmark rate for commercial mortgage loans, securitizations of commercial mortgage loans or repurchase transactions or similar lending transactions secured or otherwise backed by commercial mortgage loans, (g) the applicable supervisor or administrator (if any) of LIBOR, or any Governmental Authority having jurisdiction over Buyer, has made a public statement identifying a specific date after which LIBOR shall no longer be used for determining interest rates for commercial mortgage loans, securitizations of commercial mortgage loans or repurchase transactions or similar lending transactions secured or otherwise backed by commercial mortgage loans, (h) the administrator (if any) of LIBOR has made a public statement or publication of information that it has invoked or will invoke, permanently or indefinitely, its insufficient submissions policy, (i) the regulatory supervisor for the administrator of LIBOR or any Governmental Authority having jurisdiction over Buyer has made a public statement announcing that LIBOR is no longer representative or may no longer be used, or (j) Buyer in good faith anticipates that LIBOR will no longer be available within the following six (6) months and/or, in connection with the exercise of any extension of the Facility Termination Date, at any time prior to the Facility Termination Date (as same may be extended hereunder).

“Manager” shall mean BXMT Advisors L.L.C., a Delaware limited liability company.

“Mandatory Early Repurchase” shall have the meaning specified in Section 3(l).

“Mandatory Early Repurchase Date” shall have the meaning specified in Section 3(l).

“Mandatory Early Repurchase Event” shall mean, with respect to any Purchased Loan, the occurrence of any of the following:

(i) with respect to any Purchased Loan, any default or event of default on such Purchased Loan or under the related Purchased Loan Documents which remains uncured for ten (10) Business Days or longer;

(ii) an Act of Insolvency with respect to the related Mortgagor or guarantor of such Purchased Loan;

(iii) the occurrence and continuance of any breach of a Purchased Loan Representation (other than an MTM Representation) relating to such Purchased Loan; or

(iv) all or any material portion of the Mortgaged Property securing such Purchased Loan shall be (A) materially damaged or destroyed by fire, flood, wind, earthquake, decay, environmental condition or other casualty or (B) taken by any Governmental Authority having jurisdiction over such Mortgaged Property as the result, in lieu or in anticipation, of the exercise of the right of condemnation or eminent domain.

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Certain additional terms and conditions related to Mandatory Early Repurchase Events are set forth in the Letter Agreement, which terms are incorporated herein by reference.

“Margin Deadline” shall mean 4:00 p.m. (New York City time).

“Margin Deficit” shall have the meaning specified in Section 4(a) hereof.

“Margin Excess” shall have the meaning specified in Section 4(a) hereof.

“Margin Notice” shall have the meaning specified in Section 4(b) hereof. “Market Value” shall mean, with respect to any Eligible Loan or Purchased Loan, as of any relevant date, the lesser of (i) the price at which such Eligible Loan or Purchased Loan may be sold in an arm’s length transaction to a third party (without regard to any unpaid interest which has accrued but is not yet due and payable), and (ii) the Principal Balance of such Eligible Loan or Purchased Loan. Buyer shall determine Market Value in its commercially reasonable discretion. For purposes of Section 4, changes in the Market Value of the Purchased Loan shall be determined solely in relation to material positive or negative changes relative to Buyer’s initial underwriting or the most recent determination of Market Value relating to (I) any breach of a MTM Representation or (II) the performance or condition of (x) the Mortgaged Property securing the Purchased Loan or other collateral securing or related to the Purchased Loan, (y) the Purchased Loan’s borrower (including obligors, guarantors, participants and sponsors) and the Mortgagor on any Mortgaged Property or other collateral securing the Purchased Loan, or (z) the commercial real estate market relevant to the Mortgaged Property, considered in the aggregate.

Certain additional terms and conditions related to the determination of Market Value are set forth in the Letter Agreement, which terms are incorporated herein by reference.

“Master Seller” shall mean Parlex 15 Finco, LLC, a Delaware limited liability company.

“Master Seller LLC Agreement” shall mean the limited liability company agreement of Master Seller, as same may be amended, modified and/or restated with Buyer’s prior written consent, and together with each completed Schedule C thereto hereafter executed with respect to each Series Seller.

“Material Action” shall mean any amendment, consent, waiver or other modification to the terms of any Purchased Loan or the applicable Purchased Loan Documents (except to the extent required under the express terms of the related Purchased Loan Documents and in respect of which the provision of lender’s consent, waiver, forbearance or approval is not, in and of itself, a condition precedent), which would have the effect of:

(a) decreasing the principal of, or interest on, the obligations evidenced by the related Mortgage Note, A-Note or participation certificate, as applicable, other than with respect to a principal prepayment to the extent such principal prepayment is distributed pursuant to Section 5;

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(b) (i) postponing or extending any scheduled date (other than the Underlying Loan Maturity Date, for which the provisions of clause (b)(ii) below shall apply) fixed for any payment of principal of, or interest on, the obligations evidenced by such Mortgage Note, A-Note or participation certificate, as applicable (other than postponements or extension required by the terms of the underlying Purchased Loan Documents and for which no lender consent is applicable), or (ii) extending the Underlying Loan Maturity Date thereunder to a date subsequent to the then-applicable Repurchase Date (other than extensions required by the terms of the underlying Purchased Loan Documents and for which no lender consent is applicable);

(c) releasing any portion of the collateral securing the obligations evidenced by such Mortgage Note, A-Note or participation certificate, as applicable (other than any release required by the terms of such underlying Purchased Loan Document, including, without limitation, releases of condominium units as and when the same are sold);

(d) releasing any Mortgagor in respect of the Purchased Loan or underlying mortgage loan (other than any release required by the terms of such underlying Purchased Loan Document);

(e) waiving a Material Default or any breach of any material representation, warranty or covenant under such Purchased Loan Documents;

(f) consenting to or approving the termination or appointment of any Servicer in respect of any Purchased Loan (or underlying Mortgage Loan related thereto);

(g) in the case of any Senior Interest, any consent, modification, waiver, forbearance, appointment, right or other action to which the Senior Interest holder has any such right under the related co-lender agreement or intercreditor agreement (including, without limitation, any right of the Senior Interest holder to participate in the selection of any appraiser in respect of the Mortgaged Property);

(h) exercising any consent or approval right of Seller relating to any material changes to any Business Plan or budget relating to any Construction Loan, but excluding, for the avoidance of doubt, minor, purely administrative or ministerial amendments to, or entering into, any contract obligating the related Mortgagor to pay no more than $250,000 (other than any construction management agreement, architect’s contract or environmental contract, each of which shall be deemed to be material); or

(i) exercising any consent or approval right of Seller relating to any material changes to the scope of the parameters (not including changes to line items in the project budget) for a project or material changes to the nature of construction or any changes to the property type (for example, from hospitality to condominium) from that contemplated, in each case, as of the related Purchase Date.

“Material Adverse Effect” shall mean a material adverse effect on or material adverse change in or to (a) the property, assets, business, operations, or financial condition of Seller and Sponsor taken as a whole, (b) the ability of Seller or Sponsor to pay or perform its obligations under any of the Transaction Documents to which it is a party, (c) the validity or enforceability of any of the Transaction Documents, or (d) the rights and remedies of Buyer under any of the Transaction Documents.

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“Material Default” shall mean the occurrence and continuance of any of the following defaults under the terms of any Purchased Loan Documents, regardless of whether the Seller shall have delivered notice to the related Mortgagor in respect of the applicable Purchased Loan of such default, but taking into account any cure or grace periods allowed to such Mortgagor in the applicable Purchased Loan Documents:

(a) payment default;

(b) maturity default;

(d) breach of any material provisions of a related guaranty delivered by a guarantor of the obligations of a Mortgagor of which Sponsor or Seller has Knowledge; and

(e) bankruptcy or insolvency of any Mortgagor or any guarantor of the obligations of any Mortgagor in respect of the related Purchased Loan.

“Maximum Amount” shall mean $1,700,000,000; provided, that from and after the Revolving Period Expiration Date, the Maximum Amount on any date shall be an amount equal to the lesser of (A) $1,700,000,000 and (B) (i) the aggregate Purchase Price of all Purchased Loans, as such amount declines and is permanently reduced as Purchased Loans are repurchased in whole or in part and Margin Deficits are paid plus (ii) the amount of any Approved Future Funding Amounts not drawn by Seller as of the applicable date of determination, all in accordance with the applicable terms of this Agreement.

“Maximum Original Purchase Percentage” shall mean, with respect to any Transaction, the percentage specified as the Maximum Original Purchase Percentage in the Confirmation for such Transaction as determined by Buyer in its sole and absolute discretion as of the related Purchase Date.

“Member” shall mean Parlex 15 Holdco, LLC, a Delaware limited liability company, which is the sole member of Master Seller.

“Member Guaranty” shall mean that certain Member Guaranty, dated as of the Second Amendment and Restatement Date, from Member to Buyer, as the same may be amended, modified and/or restated from time to time.

“Mezzanine Loan” shall mean a loan made by Seller or its Affiliate secured by the direct or indirect ownership interest in a Mortgagor in connection with the origination of a Purchased Loan.

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“Mortgage” shall mean a mortgage, deed of trust, deed to secure debt or other instrument, creating a valid and enforceable first lien on or a first priority ownership interest in an estate in fee simple or ground leasehold interest in real property and the improvements thereon, securing a mortgage note or similar evidence of indebtedness.

“Mortgage Loan” shall mean a loan made by Seller or its Affiliate to a Mortgagor and secured by a Mortgage.

“Mortgage Note” shall mean a note or other evidence of indebtedness of a Mortgagor secured by a Mortgage.

“Mortgaged Property” shall mean with respect to any Eligible Loan or Purchased Loan, the real property encumbered by the Mortgage(s) securing such Eligible Loan or Purchased Loan.

“Mortgagee” shall mean the record holder of a Mortgage Note secured by a Mortgage.

“Mortgagor” shall mean the obligor on a Mortgage Note and the mortgagor/grantor under the related Mortgage.

“MTM Representation” shall mean each of the representations and warranties, set forth as items 12, 13, 15, 49, 51 (solely with respect to the second sentence thereof), 53, 62, 64 and 66 (solely with respect to circumstances occurring after the related Purchase Date) of Exhibit VI attached hereto.

“Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been, or were required to have been, made by Seller or any ERISA Affiliate in the past six (6) years and which is covered by Title IV of ERISA.

“New Collateral” shall mean an Eligible Loan that Seller proposes to be included as Collateral.

“OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“Omnibus Amendment” shall mean that certain Amendment No. 2 to Amended and Restated Master Repurchase Agreement and Omnibus Amendment to Confirmations, dated as of October 16, 2017, by and among Master Seller, on behalf of itself and each Series Seller and Buyer.

“Original Repurchase Agreement” shall have the meaning specified in the Recitals to this Agreement.

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“Other Connection Taxes” shall mean Taxes imposed as a result of a present or former connection between Buyer and the jurisdiction imposing such Taxes (other than a connection arising from Buyer having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Transaction Document, or sold or assigned an interest in any Transaction or Transaction Document).

“Other Taxes” shall mean any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under any Transaction Document or from the execution, delivery, performance, or enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Transaction Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

“Other Financing Agreement” shall have the meaning set forth in the Guaranty.

“Participant Register” shall have the meaning specified in Section 18(d).

“Participation Interest” shall mean a participation interest in a Mortgage Loan.

“Person” shall mean an individual, corporation, limited liability company, business trust, partnership, joint tenant or tenant-in-common, trust, 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 by Seller or any ERISA Affiliate 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, other than a Multiemployer Plan.

“Plan Assets” shall have the meaning specified in Section 21(a).

“Plan Party” shall have the meaning specified in Section 21(a).

“Portfolio Interest Certificate” shall have the meaning specified in Section 29(c). “Preferred Equity Interest” shall mean a preferred equity interest or any other subordinate debt or equity interest relating to a Mortgaged Property or Mortgagor for any Transaction.

“Pledge Agreement” shall mean that certain Pledge Agreement, dated as of the Second Amendment and Restatement Date, from Member, as pledgor, in favor of Buyer, as same may be amended, modified and/or restated from time to time.

“Preliminary Due Diligence Package” shall mean with respect to any New Collateral, Seller’s summary memorandum outlining the proposed transaction, including, to the best Knowledge of Seller, potential transaction benefits and all material underwriting risks, all Underwriting Issues and all other characteristics of the proposed transaction that a reasonable buyer would consider material, together with the following due diligence information relating to the New Collateral to be provided by Seller to Buyer pursuant to this Agreement (in each case, to the extent applicable and in Seller’s possession):

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With respect to each Eligible Loan:

(i) all material documents that relate to such Eligible Loan;

(ii) current rent roll for the related Mortgaged Property, if applicable, together with the following information: (A) recent leasing activity including related tenant improvement and leasing commission obligations, (B) a delinquency report, (C) outstanding rent abatements and concessions and (D) a description of all percentage rent, additional rent and escalations payable by tenants for taxes, operating expenses, electricity and other expenses, as applicable;

(iii) (a) most recent audited financial statements, (b) three (3) years of operating statements, including current trailing twelve (12) month operating statement, and (c) Seller’s preliminary underwritten cash flow pro-forma for the related Mortgaged Property, in each case, if available;

(iv) description of the related Mortgaged Property and the ownership structure of the Mortgagor and the sponsor (including, without limitation, the board of directors, if applicable);

(v) Seller’s indicative debt service coverage ratios;

(vi) Seller’s indicative debt yield ratios;

(vii) Seller’s indicative loan-to-value ratio;

(viii) term sheet outlining the transaction generally including an abstract of the final terms of the proposed Eligible Loan (to the extent such information is not included in other “Preliminary Due Diligence Package” documents);

(ix) final sources and uses schedule for the proceeds of the proposed Eligible Loan delivered in connection with the closing of the Eligible Loan;

(x) an organizational chart of the Mortgagor showing all direct and indirect ownership interests in Mortgagor (and disclosing any direct or indirect ownership interests of Seller or its Affiliates in the Mortgagor, if any);

(xi) an Appraisal of the related Mortgaged Property, dated within six (6) months of the proposed Purchase Date;

(xii) Seller’s credit memorandum, in a form reasonably acceptable to Buyer;

(xiii) Seller’s underwriting model (in Excel);

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(xiv) any exceptions to the Purchased Loan Representations for such Eligible Loan, which may be contained in an internal memorandum or offering document prepared by a third party; and

(xv) Seller’s relationship with the Mortgagor, if any;

(xvi) current and, to the extent available, historical real estate tax bills, or an estimate of expected taxes, for the related Mortgaged Property;

(xvii) any other information reasonably requested by Buyer.

“Price Differential” shall mean, with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate to the Repurchase Price (excluding Price Differential) for such Transaction (as adjusted from time to time by reductions in the Repurchase Price pursuant to the terms of this Agreement including Sections 3(e), 3(k), 4(b), 5(c)(iii), 5(d)(iii), 5(d)(v), 5(d)(vi) and 5(e)(iv) and increases in the Repurchase Price pursuant to the terms of this Agreement including Sections 3(o) and/or Section 4(c)) on a 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 (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction).

“Pricing Rate” shall mean, with respect to each Pricing Rate Period an interest rate per annum equal to (i) for a LIBOR Transaction, the LIBOR Pricing Rate, determined as of the Pricing Rate Determination Date immediately preceding the commencement of such Pricing Rate Period, (ii) for a Prime Rate Transaction, the Prime Pricing Rate, determined as of the Pricing Rate Determination Date immediately preceding the commencement of such Pricing Rate Period, and (iii) for an Alternate Rate Transaction, the Alternate Pricing Rate, determined as of the Pricing Rate Determination Date immediately preceding the commencement of such Pricing Rate Period.

“Pricing Rate Determination Date” shall mean with respect to any Pricing Rate Period with respect to any Transaction, the second (2nd) Business Day preceding the first day of such Pricing Rate Period. So long as when any such Transaction is a LIBOR Transaction, when used with respect to a Pricing Rate Determination Date, Business Day shall mean any day on which banks are open for dealing in foreign currency and exchange in London.

“Pricing Rate Period” shall mean, (a) in the case of the first Pricing Rate Period and first Remittance Date with respect to any Transaction, the period commencing on and including the Purchase Date for such Transaction and ending on and excluding such Remittance Date, and (b) in the case of any subsequent Pricing Rate Period and Remittance Date, the period commencing on and including the prior Remittance Date and ending on and excluding such Remittance Date; provided, however, that in no event shall any Pricing Rate Period end subsequent to the Repurchase Date for such Transaction.

“Prime Index” shall mean the rate of interest per annum published in The Wall Street Journal from time to time as the “Prime Rate”. If more than one “Prime Rate” is published in The Wall Street Journal for a day, the average of such “Prime Rates” will be used,

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and such average will be rounded up to the nearest 1/1000th of one percent (0.001%). If The Wall Street Journal ceases to publish the “Prime Rate,” Buyer will select an equivalent publication that publishes such “Prime Rate,” and if such “Prime Rates” are no longer generally published or are limited, regulated or administered by a governmental or quasi-governmental body, then Buyer will select a comparable interest rate index.

“Prime Index Rate” shall mean, with respect to each Pricing Rate Period, the per annum rate of interest of the Prime Index, determined as of the Pricing Rate Determination Date immediately preceding the commencement of such Pricing Rate Period; provided that in no event will the Prime Index Rate be less than zero.

“Prime Pricing Rate” shall mean, with respect to each Pricing Rate Period, the per annum rate of interest equal to the greater of (i) the sum of (A) the Prime Index Rate, plus (B) the Prime Rate Spread, and (ii) the sum of (A) the LIBOR Floor, plus (B) the LIBOR Rate Spread.

“Prime Rate Spread” shall mean, in connection with the conversion of any Transaction in accordance with the terms hereof to a Prime Rate Transaction, (i) prior to the occurrence of any Event of Default, the sum (expressed as the number of basis points and determined at the time of such conversion) of (a)(x) if the Transaction is converted from a LIBOR Transaction to a Prime Rate Transaction, the LIBOR Rate Spread for such Transaction, or (y) if the Transaction is converted from an Alternate Rate Transaction to a Prime Rate Transaction, the Alternate Rate Spread for such Transaction, and (b) the Prime Rate Spread Adjustment; provided that (x) the Prime Rate Spread shall not be less than a spread resulting in the Pricing Rate immediately after giving effect to the conversion to a Prime Rate Loan being at least equal to the Pricing Rate immediately prior to conversion to a Prime Rate Transaction, and (y) in no event will the Prime Rate Transaction be less than zero, and (ii) after the occurrence and during the continuance of an Event of Default, the per annum rate of interest for such Transaction set forth in clause (i) plus 400 basis points (4.00%).

“Prime Rate Spread Adjustment” shall mean, in connection with any conversion of a Transaction in accordance with the terms hereof to a Prime Rate Transaction, a spread adjustment, expressed as the number of basis points and determined at the time of such conversion (which may be positive, negative or zero) equal to (1) (x) if the Transaction is being converted from a LIBOR Transaction to a Prime Rate Transaction, the daily average of LIBOR (with a floor of zero percent) or (y) if the Transaction is being converted from an Alternate Rate Transaction to a Prime Rate Transaction, the daily average of the Alternate Index Rate (with a floor of zero percent), in either case of (x) or (y), as applicable, over the one hundred eighty (180) day period (or such shorter period to the extent such historical rates are not available, and excluding days within such one hundred eighty (180) day or shorter period that are not Business Days) ending two (2) Business Days prior to the date of conversion, and excluding from such average, if such period of averaging exceeds thirty (30) days, the five (5) highest days and the five (5) lowest days of such one hundred eighty (180) day period), minus (2) the daily average of the Prime Index Rate (with a floor of zero percent) over the one hundred eighty (180) day period (excluding days within such one hundred eighty (180) day period that are not Business Days) ending two (2) Business Days prior to the date of conversion (excluding from such average the five (5) highest days and the five (5) lowest days of such one hundred eighty (180) day period).

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“Prime Rate Transaction” shall mean, with respect to any Pricing Rate Period, any Transaction with respect to which the Pricing Rate for such Pricing Rate Period is determined with reference to the Prime Pricing Rate.

“Principal Balance” shall mean, at any date of determination, the lesser of (i) the then current outstanding principal balance of an Eligible Loan or a Purchased Loan and (ii) if Seller intends to acquire or acquires an Eligible Loan or Purchased Loan at a discount, the purchase price paid or to be paid by Seller for such Eligible Loan or Purchased Loan less all Principal Payments received thereon plus all future advances funded by or on behalf of Seller therefor.

“Principal Payment” shall mean, with respect to any Purchased Loan, any payment or prepayment of principal received by Seller or Depository in respect thereof and the proceeds of any sale of such Purchased Loan or any interest therein received by Seller or Depository, including, without limitation, (i) scheduled or unscheduled principal payments and prepayments from any source and of any nature whatsoever, (ii) net insurance or net condemnation proceeds, to the extent applied to reduce the principal amount of the related Purchased Loan, or (iii) any net proceeds from any sale, refinancing, liquidation or other disposition of the underlying real property or interest relating to such Purchased Loan, to the extent applied to reduce the principal amount of the related Purchased Loan.

“Prohibited Person” shall mean, at any time, any Person with whom dealings are restricted or prohibited under the Sanctions Laws, including but not limited to any Person: (1) identified on any Sanctions Laws-related list of restricted Persons maintained by the U.S. Government (including, but not limited to OFAC’s SDN List); (2) Blocked by Operation of Law, or controlled or acting on behalf of a Person that is either described in clause (1) or Blocked by Operation of Law; (3) otherwise the target of the Sanctions Laws administered by OFAC (“OFAC Sanctions”) such that the entry into this Agreement or the performance of the obligation contemplated hereby would be prohibited under Sanctions Laws; or (4) the target of the Sanctions Laws administered by any other Governmental Authority.

“Prohibited Transferees” shall have the meaning specified in the Letter Agreement.

“Purchase Date” shall mean the date on which a Purchased Loan is to be transferred by Seller to Buyer.

“Purchase Date Market Value” shall mean, with respect to any Purchased Loan, the Market Value of such Purchased Loan as of the related Purchase Date, and which Purchase Date Market Value shall be set forth in the Confirmation for the related Transaction.

“Purchase Price” shall mean, with respect to any Purchased Loan, (i) as of the applicable Purchase Date, the price at which such Purchased Loan is transferred by Seller to Buyer on such Purchase Date, and (ii) as of any other date of determination, an amount (expressed in dollars) equal to the Purchase Price set forth in the foregoing clause (i) as increased by any Future Funding Amounts paid by Buyer and funds remitted by Buyer to or on account of Seller pursuant to Section 4(c) of this Agreement as of the date of such determination, and

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decreased by any payments made to Buyer to be applied in reduction of the Repurchase Price (other than Price Differential) of such Transaction pursuant to the terms of this Agreement, including Sections 3(e), 3(k), 4(b), 5(c)(iii), 5(d)(iii), 5(d)(v), 5(d)(vi) and 5(e)(iv) of this Agreement.

“Purchased Loan” or “Purchased Loans” shall mean (a) with respect to any Transaction, the Eligible Loan or Eligible Loans sold by the applicable Series Seller to Buyer in such Transaction and (b) with respect to the Transactions in general, all Eligible Loans sold by Seller to Buyer, in each case, together with all related (i) Purchased Loan Documents, (ii) Servicing Agreements, (iii) Servicing Records, (iv) Servicing Rights, (v) Income, (vi) insurance policies and payments and proceeds thereunder, (vii) collection, escrow, reserve, collateral, lock-box or other demand or time deposit accounts and all amounts and property from time to time on deposit therein, (viii) supporting obligations of any kind, and (ix) proceeds relating to the sale, securitization or other disposition of such Eligible Loan(s), in the case of clauses (v) through (ix) (inclusive) until the same are distributed to Seller in accordance with Section 5.

“Purchased Loan Default” shall mean for any Purchased Loan, any event which, with (or without) the giving of notice, the passage of time, or both, could give rise to a Purchased Loan Event of Default.

“Purchased Loan Documents” shall mean, with respect to a Purchased Loan, all documents, instruments and agreements evidencing and/or securing such Purchased Loan, as each of same may be amended, modified and/or restated in accordance with the terms of this Agreement.

“Purchased Loan Event of Default” shall mean for any Purchased Loan, an “Event of Default” as defined in the Purchased Loan Documents for such Purchased Loan (or such other term as is used in such documents to describe events the occurrence of which gives the lender the right to accelerate (or causes the automatic acceleration of) such Purchased Loan); provided, however, that no “Event of Default” as defined in the Purchased Loan Documents for such Purchased Loan shall become a Purchased Loan Event of Default until the expiration of all grace periods and cure rights related thereto under the Purchased Loan Documents.

“Purchased Loan File” shall mean the documents specified as the “Purchased Loan File” in Section 7(b), together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Agreement.

“Purchased Loan Representations” shall mean with respect to any Purchased Loan or prospective Purchased Loan, the representations and warranties set forth on Exhibit VI attached hereto or, if different, the representations and warranties applicable to such Purchased Loan as set forth on Schedule 2 to the Confirmation for such Purchased Loan, in each case, as modified by any exceptions to such representations and warranties disclosed in an Exceptions Report. It is acknowledged and agreed that Buyer, in its sole and absolute discretion, may from time to time, upon delivery of at least three (3) Business Days prior written notice to Seller, amend the representations and warranties set forth on Exhibit VI attached hereto applicable to any Purchased Loan prior to the related Purchase Date therefor. Any such amendment of the representations and warranties set forth on Exhibit VI shall not be effective with respect to any

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Purchased Loan for which the Purchase Date has occurred hereunder prior to the effective date of such amendment. Buyer may elect, in its sole and absolute discretion, to require any such amendment of the representations and warranties set forth on Exhibit VI to apply to all Purchased Loans with Purchase Dates occurring from and after the effective date of such amendment and, in such event, Seller and Buyer will each execute and deliver an amendment of this Agreement substituting the amended version of Exhibit VI for the version of Exhibit VI then in effect.

“Purchased Loan Schedule” shall mean a schedule of Purchased Loans attached to each Trust Receipt and Custodial Delivery, which may but is not required to, contain information substantially similar to the Collateral Information.

“Qualified Institutional Lender” shall mean one or more of the following:

(a) an insurance company, bank, savings and loan association, investment bank, trust company, commercial credit corporation, pension plan, pension fund, pension fund advisory firm, mutual fund, real estate investment trust, governmental entity or plan, in any case, that satisfies the Eligibility Requirements, or

(b) an investment company, money management firm or a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, or an institutional “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended, which satisfies the Eligibility Requirements, or

(c) an investment fund, limited liability company, limited partnership or general partnership in which a fund manager acceptable to Buyer in its commercially reasonable discretion acts as the general partner, managing member, or the fund manager responsible for the day to day management and operation of such investment vehicle and provided that at least fifty percent (50%) of the equity interests in such investment vehicle are owned, directly or indirectly, by one or more entities that are otherwise Qualified Institutional Lenders, or

(d) an institution substantially similar to any of the foregoing in clauses (a), (b) or (c) above which satisfies the Eligibility Requirements.

(e) any Person Controlled by, Controlling or under common Control with any of the Persons described in clause (a)-(d) or

(f) of this definition; (f) an investment fund, limited liability company, limited partnership or general partnership where a fund manager acceptable to Buyer in its commercially reasonable discretion acts as general partner, managing member or fund manager and at least fifty percent (50%) of the equity interests in such investment vehicle are owned, directly or indirectly, by one or more of the following: a Qualified Transferee, an institutional “accredited investor”, within the meaning of Regulation D promulgated under the Securities Act of 1933, as amended, or a “qualified institutional buyer” or both within the meaning of Rule 144A promulgated under the Securities Exchange Act of 1934, as amended, provided such institutional “accredited investors” or “qualified institutional buyers” that are used to satisfy the fifty percent (50%) test set forth above in this clause (f) satisfy the financial tests set forth in of the definition of Eligibility Requirements.

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“Qualified Servicing Expenses” shall mean any fees and expenses payable to any third-party Servicer that is not an Affiliate of Seller, which fees and expenses are netted by such Servicer out of collections pursuant to the Initial Servicing Agreement or any other Servicing Agreement with respect to which the related Servicer has entered into a Servicer Notice and Agreement substantially in the form attached hereto as Exhibit IX attached hereto.

“Rate Conversion” shall mean, if at any time a Transaction is converted from a LIBOR Transaction to either a Prime Rate Transaction or an Alternate Rate Transaction or from a Prime Rate Transaction to a LIBOR Transaction or Alternate Rate Transaction in accordance with Section 3(f) hereof.

“Rate Conversion Conforming Changes” shall mean, with respect to any conversion of a Transaction to an Alternate Rate Transaction or to a Prime Rate Transaction, Buyer, after non-binding consultation with Seller, may make any technical, administrative or operational changes (including changes to the definition of “Pricing Rate Period”, timing and frequency of determining rates and making payments of Price Differential and other administrative matters), that Buyer decides in its sole but good faith discretion may be reasonably appropriate to reflect the adoption and implementation of such Alternate Index or the Prime Index in a manner substantially consistent with market practice (or, if Buyer decides that adoption of any portion of such market practice is not administratively feasible or if Buyer or its designee determines in its sole but good faith discretion that no market practice for use of the Alternate Index or Prime Index exists, in such other manner as Buyer determines (after non-binding consultation with the Seller) is reasonably necessary).

“Real Estate Settlement Procedures Act” shall mean the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601 et seq.

“Register” shall have the meaning specified in Section 18(c) of this Agreement.

“Registrar” shall have the meaning specified in Section 18(c) of this Agreement.

“REIT” shall mean a Person satisfying the conditions and limitations set forth in Sections 856(b) and 856(c) of the Code and qualifying as a “real estate investment trust,” as defined in Section 856(a) of the Code.

“Related Interest” shall mean (a) a junior or pari passu participation interest in a commercial mortgage loan, or (b) a “B note” or other subordinate note in an “A/B” or similar structure or pari passu “A note” in a commercial mortgage loan with respect to which the Senior Interest is a Purchased Loan or prospective Purchased Loan hereunder.

“Release Amount” shall mean, with respect to any Purchased Loan, an amount equal to the lesser of (i) the Release Percentage multiplied by the unpaid Purchase Price of the related Purchased Loan in the case of repayment in full (or, in the case of a repayment in part, the amount the amount of Purchase Price repaid in connection with such partial repayment), and (ii) the aggregate outstanding Purchase Price of all Purchased Loans.

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“Release Percentage” shall mean with respect to any Purchased Loan:

(i) at all times from and after the Second Amendment and Restatement Date to but excluding the Revolving Period Expiration Date, 0%; and

(ii) at all times from and after the Revolving Period Expiration Date, 10.0%.

“Remittance Date” shall mean the twenty-third (23rd) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day, or such other day as is mutually agreed to by Seller and Buyer.

“Repurchase Date” shall mean, for any Purchased Loan, the earliest of (i) the Facility Termination Date, (ii) the date specified in the Confirmation for such Purchased Loan as may be extended pursuant to Section 3(p), (iii) if applicable, Mandatory Early Repurchase Date, Accelerated Repurchase Date or Accelerated Transaction Repurchase Date, and (iv) the date that is two (2) Business Days prior to the maturity date or other earlier repayment date (under the related Purchased Loan Documents) for such Purchased Loan (or, in the case of any Senior Interest, the underlying mortgage loan), without giving effect to any extension of such maturity date, whether by modification, waiver, forbearance or otherwise (other than extensions at the related Mortgagor’s option without requiring consent of the Seller or for which the Seller’s consent may not be unreasonably withheld, conditioned or delayed) pursuant to the terms of the Purchased Loan Documents as such Purchased Loan Documents existed on the related Purchase Date) that has not been approved by Buyer in writing in its sole discretion; provided, that, solely with respect to this clause (iv), the settlement date with respect to such Repurchase Date and Purchased Loan may occur two (2) Business Days after the related Repurchase Date.

“Repurchase Obligations” shall have the meaning specified in Section 6.

“Repurchase Price” shall mean, with respect to any Purchased Loan as of any date, the price at which such Purchased Loan is to be transferred from Buyer to Seller upon termination of the related Transaction; such price will be determined in each case as the sum of (i) the then outstanding Purchase Price of such Purchased Loan, (ii) the accrued but unpaid Price Differential with respect to such Purchased Loan as of the date of such determination, and (iii) unless, simultaneously with such repurchase, all other amounts otherwise due and payable under this Agreement are being repaid in full in connection with the termination of this Agreement, any Release Amounts payable in connection with such Purchased Loan.

“Repurchase Price Cap” shall mean, with respect to any Purchased Loan, an amount equal to (i) the product of (x) the then current Market Value of such Purchased Loan, and (y) the Maximum Original Purchase Percentage of such Purchased Loan, less (iii) any mandatory reductions of the Repurchase Price for such Purchased Loan required under the Confirmation therefor.

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“Requirement of Law” shall mean any law, treaty, rule, regulation, code, directive, policy, order or requirement or determination of an arbitrator or a court or other governmental authority whether now or hereafter enacted or in effect.

“Reserve Requirement” shall mean, with respect to any Pricing Rate Period, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect during such Pricing Rate Period (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System 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 such Board of Governors) maintained by Buyer.

“Revolving Period Expiration Date” shall mean December 16, 2022, or such later date as may be in effect by an extension thereof pursuant to Section 3(p); provided that, in the event that Seller requests an extension of the Revolving Period Expiration Date, such request may be approved or denied by Buyer in Buyer’s sole and absolute discretion.

“Sanctions Laws” shall mean economic or financial sanctions, trade embargoes, or other restrictive economic or financial measures enacted, imposed, administered or enforced from time to time pursuant to statute, executive order, or regulation by: (1) the U.S. Government, including those administered by OFAC, the U.S. Department of State, and the U.S. Department of Commerce; (2) the United Nations Security Council; (3) the European Union or any of its member states in which Buyer, Seller or Sponsor operates; (4) Her Majesty’s Treasury; (5) the Swiss Government; (6) the Canadian Government; or (7) Governmental Authorities of any other country in which Buyer, Seller or Sponsor operates.

“S&P” shall mean Standard & Poor’s Global Ratings.

“SDN List” shall mean OFAC’s List of Specially Designated Nationals and Blocked Persons.

“SEC” shall have the meaning specified in Section 23(a).

“Second Amendment and Restatement Date” shall mean December 16, 2019.

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

“Senior Interest” shall mean (a) a senior (or pari passu senior) participation interest, or (b) an A-Note.

“Senior Interest Documents” shall mean, for any Senior Interest, the A-Note or participation certificate, as applicable, together with any co-lender agreements, participation agreements and/or other intercreditor agreements or other documents governing or otherwise relating to the priority, rights or obligations of such Senior Interest and the applicable Related Interest.

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“Senior Interest Side Letter” shall mean, with respect to any Mortgage Loan or Senior Interest proposed to be included in a Transaction hereunder, if Seller, Sponsor or an Affiliate of Seller shall hold any other Related Interest related to such Mortgage Loan or Senior Interest, and such other Related Interest is not also a Purchased Loan, a letter agreement to be entered into on or before the Purchase Date of such Mortgage Loan or Senior Interest hereunder (unless Buyer agrees, in writing, in its sole discretion to waive such requirement with respect to such Senior Interest) among Seller, Sponsor or any such Affiliate of Seller that holds the Related Interest (or any portion thereof) and Buyer, in form and substance reasonably acceptable to Buyer, pursuant to which the parties shall agree: (a) that any Transfer by such holder of the Related Interest (or such portion thereof) or any interest therein shall be subject to the provisions of Section 10(q) of this Agreement; (b) that for so long as the Related Interest (or such portion thereof) is held by Seller or an Affiliate of Seller, notwithstanding anything to the contrary contained in the Senior Interest Documents, upon Buyer’s exercise of any of its remedies with respect to the applicable Mortgage Loan or Senior Interest pursuant to Sections 13(b)(iii) or 13(c)(iii) hereof after the occurrence and during the continuance of an Event of Default, such holder of the Related Interest (or portion thereof) shall not be entitled to (i) appoint or replace, or consent to the appointment or replacement of, the servicer or special servicer for the related Mortgage Loan, (ii) consent or approve of any major decisions with respect to the related Mortgage Loan or exercise any other rights of a “controlling holder” or “operating advisor” under the Senior Interest Documents, (iii) exercise any additional cure rights with respect to any Purchased Loan Event of Default or default under any Purchased Loan Documents that are granted to the holder of the Related Interest pursuant to the applicable Senior Interest Documents; provided that, unless an Event of Default has occurred and is continuing, the foregoing shall not restrict Seller from exercising any of Seller’s cure rights with respect thereto provided under this Agreement or the other Transaction Documents or (iv) exercise any right to purchase the related Senior Interest at a purchase price that is less than the sum of all amounts which would be payable by the Mortgagor to the holder of the Senior Interest pursuant to the Purchased Loan Documents during the continuance of a Purchased Loan Event of Default; and (c) to such other matters with respect to such Mortgage Loan or Senior Interest as Buyer may require in its sole discretion.

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

“Servicer” shall mean the servicer or subservicer under any Servicing Agreement or the Initial Servicer under the Initial Servicing Agreement, as applicable.

“Servicer Notice and Agreement” shall have the meaning specified in Section 28(a).

“Servicing Agreement” shall have the meaning specified in Section 28(a) or the Initial Servicing Agreement, as the case may be.

“Servicing Records” shall have the meaning specified in Section 28(b).

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“Servicing Rights” shall mean Seller’s right, title and interest in and to any and all of the following, in each case as the same may be subject to the terms of any applicable Servicing Agreements and the provisions of the documentation for the applicable Purchased Loans: (a) any and all rights of Seller to service the Purchased Loans or to appoint (or terminate the appointment of) any third party as servicer of the Purchased Loans; (b) any payments to or monies received by or payable to Seller (as opposed to any third-party servicer) as compensation for servicing the Purchased Loans (including, without limitation, workout fees, consent fees, liquidation fee, late fees, penalties or similar amounts payable to Seller); (c) all agreements or documents creating, defining or evidencing any such servicing rights to the extent they relate to such servicing rights and all rights of Seller (individually or as servicer) thereunder (including all rights to set the compensation of any third-party servicer); (d) the right, if any, to appoint a special servicer or liquidator of the Purchased Loans; and (e) all rights of Seller to give directions with respect to the management and distribution of any collections, escrow accounts, reserve accounts or other similar payments or accounts in connection with the Purchased Loans.

“SIPA” shall have the meaning specified in Section 23(a).

“Sponsor” shall mean Blackstone Mortgage Trust, Inc., a Maryland corporation.

“Supplemental Due Diligence List” shall mean, with respect to any New Collateral, information or deliveries concerning the New Collateral that Buyer shall reasonably request in addition to the Preliminary Due Diligence Package.

“Survey” shall mean a certified ALTA/ACSM (or applicable state standards for the state in which the property is located) survey of a Mortgaged Property prepared by a registered independent surveyor or engineer and in form and content satisfactory to Buyer and the company issuing the title policy for such Mortgaged Property.

“Taxes” means 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.

“Transaction” shall have the meaning specified in Section 1.

“Transaction Conditions Precedent” shall mean, with respect to each proposed Transaction,

(i) no Default, or Event of Default under this Agreement shall have occurred and be continuing as of the Purchase Date for such proposed Transaction;

(ii) Seller shall have provided evidence reasonably acceptable to Buyer substantiating the acquisition cost of such asset (or, in the case of any asset purchased from an Affiliate, the original acquisition cost of such asset at the time it was acquired by an Affiliate of Seller from a non-Affiliate) (including therein reasonable supporting documentation required by Buyer, if any) or if such loan was originated by Seller, the outstanding principal balance of such loan;

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(iii) Seller shall have delivered to Buyer all information which Seller reasonably believes to be necessary for Buyer to make an informed business decision with respect to the purchase of such Purchased Loan and Seller shall have certified to Buyer that Seller has no Knowledge of any material information concerning the related Purchased Loan which is not reflected in the related Diligence Materials or otherwise disclosed to Buyer in writing;

(iv) the representations and warranties made by Seller or Sponsor in any of the Transaction Documents (including the Purchased Loan Representations with respect to the Eligible Loans then being transferred, subject to any exceptions to such representations and warranties disclosed in an Exceptions Report) shall be true and correct in all material respects as of the Purchase Date for such Transaction (except to the extent such representations and warranties are made as of a particular date, in which case such representations and warranties shall be true and correct in all material respects as of such particular date);

(v) Seller has paid all expenses of Buyer (subject to Section 27 below) then due and payable (which, upon the agreement of Buyer and Seller, may be held back from funds remitted to Seller by Buyer);

(vi) Seller has satisfactorily completed its “Know Your Customer” and OFAC diligence (as to the related Mortgagor, guarantor and all other related parties, as determined by Buyer) and the results of such diligence shall be acceptable to Buyer in its sole discretion;

(vii) the Servicer of the related Purchased Loan shall have entered into a Servicer Notice and Agreement substantially in the form attached hereto as Exhibit IX;

(viii) Buyer shall have (A) determined, in accordance with the applicable provisions of Section 3(a) of this Agreement, that the assets proposed to be sold to Buyer by Seller in the related Transaction are Eligible Loans and (B) obtained internal credit approval for the inclusion of such Eligible Loan as a Purchased Loan in a Transaction, and in each case, such approval shall be evidenced by Buyer’s execution and delivery of the related Confirmation;

(ix) Master Seller shall have established the Series Seller which will be entering the proposed Transaction and executed and/or delivered to Buyer a Joinder Agreement with respect to such Series Seller and any organizational documents and amendments and any other documents and agreements required in connection with such new Series Seller or the proposed Transaction under Section 3(n);

(x) Buyer shall have received a Custodial Delivery and a Trust Receipt with respect to the assets proposed to be sold to Buyer by Seller in the related Transaction pursuant to Section 7(b) hereof;

(xi) the Amortization Period shall not yet have commenced; and

(xii) any other conditions as may be required by Buyer.

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

“Transaction Documents” shall mean, collectively, this Agreement, the Letter Agreement, the Guaranty, the Member Guaranty, the Custodial Agreement, the Controlled Account Agreement, the Pledge Agreement, all Confirmations and Joinder Agreements executed pursuant to this Agreement in connection with specific Purchased Loans, the Servicing Agreement(s), each Servicer Notice and Agreement, each Senior Interest Side Letter, and any and all other documents and agreements executed and delivered by Seller and/or Sponsor as required by this Agreement or any Transactions hereunder, as each may be amended, modified and/or restated from time to time.

“Transaction Event of Default” shall have the meaning set forth in Section 13(a)(II).

“Transfer” shall have the meaning specified in Section 10(b).

“Treasury Regulations” shall mean the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations are amended from time to time.

“Trust Receipt” shall mean a trust receipt issued by (i) Custodian to Buyer confirming the Custodian’s possession of certain Purchased Loan Files which are the property of and held by Custodian for the benefit of Buyer (or any other holder of such trust receipt) or (ii) a Bailee pursuant to a bailment arrangement with counsel or other third party acceptable to Buyer in its sole discretion.

“Truth in Lending Act” shall mean the Truth in Lending Act of 1968, 15 U.S.C. §§1601 et seq.

“UCC” shall have the meaning specified in Section 6 of this Agreement.

“Underlying Loan Maturity Date” shall mean, with respect to any Purchased Loan (including, with respect to a Senior Interest, the related Mortgage Loan), the maturity date as set forth in the related Purchased Loan Documents as such Purchased Loan Documents existed on the related Purchase Date, without giving effect to any extension of such maturity date, whether by modification, waiver, forbearance or otherwise that have not been approved by Buyer in writing in its sole discretion (other than any such extensions at the option of the Mortgagor under the related Purchased Loan that do not require consent of the related lender or for which the related lender’s consent may not be unreasonably withheld, conditioned or delayed).

“Underlying Purchased Loan Reserves” shall mean, with respect to any Purchased Loan, the escrows, reserve funds or other similar amounts properly retained in accounts maintained by the Servicer of such Purchased Loan unless and until such funds are, pursuant to and in accordance with the terms of the related Purchased Loan Documents, either (i) released or otherwise available to Seller (but not if such funds are used for the purpose for which they were maintained) or (ii) released to the related Mortgagor.

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“Underwriting Issues” shall mean, with respect to any Collateral as to which Seller intends to request a Transaction, all material information Known by Seller that, based on the making of reasonable inquiries and the exercise of reasonable care and diligence under the circumstances, which would be considered a materially “negative” factor (either separately or in the aggregate with other information), or a material defect in loan documentation or closing deliveries (such as any absence of any material Purchased Loan Document(s)), to a reputable nationally recognized institutional commercial mortgage loan buyer in determining whether to originate or acquire the Collateral in question.

“U.S. Person” shall mean any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” shall have the meaning specified in Section 29(f).

“Watchtower A-Note Eligible Loan” shall mean the Watchtower A-Note(s) specified in the related Confirmation therefor.

(b) Under this Agreement, all accounting terms not specifically defined herein shall be construed in accordance with GAAP and all accounting determinations made and all financial statements prepared hereunder shall be made and prepared in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. The words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole, including the exhibits and schedules hereto, as the same may from time to time be amended or supplemented and not to any particular paragraph, section, subsection, or clause contained in this Agreement. Each of the definitions set forth in Section 2 hereof shall be equally applicable to both the singular and plural forms of the defined terms. Unless specifically stated otherwise, all references herein to any agreements, documents or instruments shall be references to the same as amended, restated, supplemented or otherwise modified from time to time.

3. INITIATION; CONFIRMATION; TERMINATION; FEES; EXTENSION

(a) Subject to the terms and conditions set forth in this Agreement (including, without limitation, the satisfaction of the Transaction Conditions Precedent set forth herein), Buyer (x) has entered into certain Transactions specified in Schedule 2 to the Letter Agreement as of the Second Amendment and Restatement Date and (y) agrees to consider entering into Transactions from time to time in its sole and absolute discretion, in each case, pursuant to written request at the initiation of Master Seller as provided in this Agreement. Seller shall give Buyer written notice of each proposed Transaction and Buyer shall inform Master Seller of its determination with respect to any assets proposed to be sold to Buyer by Seller in accordance with Exhibit VIII attached hereto, which may be amended from time to time by Buyer in its sole and absolute discretion. Buyer shall have the right to (x) review all Eligible Loans proposed to be sold to Buyer in any Transaction and to conduct its own due diligence investigation of such Eligible Loans as Buyer determines in its sole and absolute discretion and (y) with respect to Construction Loans, review the related Business Plan and determine in Buyer’s sole and absolute

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discretion any additional terms and conditions and additional representations and warranties that shall be applicable to such Purchased Loan. Buyer shall be entitled to make a determination, in its sole and absolute discretion, whether it shall or shall not purchase any or all of the Eligible Loans proposed to be sold to Buyer by Seller. In addition, Buyer shall not be required to enter into any Transaction if an Event of Default has occurred and is continuing with respect to any Transaction Documents.

(b) Upon agreeing to enter into a Transaction hereunder, provided each of the Transaction Conditions Precedent shall have been satisfied (or waived in writing by Buyer), as determined by Buyer in its sole and absolute discretion (and evidenced by Buyer’s execution of a related Confirmation and funding of the related Purchase Price), Buyer shall promptly deliver to Master Seller a written confirmation (which shall also be in electronic form) in the form of Exhibit I attached hereto of each Transaction (a “Confirmation”). Such Confirmation shall describe each Purchased Loan to be included in such Transaction, shall identify Buyer and the applicable Series Seller for such Transaction, and shall set forth:

(i) the Purchase Date,

(ii) the Principal Balance,

(iii) the Purchase Date Market Value,

(iv) the Actual Original Purchase Percentage,

(v) the Maximum Original Purchase Percentage,

(vi) the Purchase Price, (vii) the Repurchase Date,

(viii) the initial Pricing Rate (including the Applicable Spread) applicable to the Transaction and the Financing Fee Rate applicable to the Transaction,

(ix) the total future funding obligations of Seller required to be funded pursuant to the terms of the related Purchased Loan Documents;

(x) if such Purchased Loan is a Construction Loan, the related Business Plan and such other conditions, documents and representations and warranties applicable to such Construction Loan, in each case, as Buyer may require in its sole discretion; and

(xi) any additional terms or conditions not inconsistent with this Agreement.

With respect to any Transaction, the Pricing Rate shall be determined initially on the Pricing Rate Determination Date applicable to the first Pricing Rate Period for such Transaction, and shall be reset on each Pricing Rate Determination Date for the next succeeding Pricing Rate Periods for such Transaction. Buyer or its agent shall determine the Pricing Rate on each Pricing Rate Determination Date for the related Pricing Rate Period and notify Seller of such rate for such period on such Pricing Rate Determination Date.

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(c) Each Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Transactions covered thereby unless specific objection is made by Seller no more than five (5) Business Days after the date thereof (unless such period is waived in writing by Seller). In the event of any conflict between the terms of such Confirmation and the terms of this Agreement, the Confirmation shall prevail. An objection sent by Seller with respect to any Confirmation must state specifically that the writing is an objection, must specify the provision(s) of such Confirmation being objected to by Seller, must set forth such provision(s) in the manner that Seller believes such provisions should be stated, and must be received by Buyer no more than five (5) Business Days after such Confirmation is received by Seller (unless such period is waived in writing by Seller).

(d) [Reserved.]

(e) On the applicable Repurchase Date for any Transaction, termination of such Transaction will be effected by transfer to the applicable Series Seller or its agent of the applicable Purchased Loan(s) and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Master Seller, such Series Seller or any other Series Seller pursuant to Section 5 of this Agreement), against the simultaneous transfer of the Repurchase Price for such Transaction to an account of Buyer including the Cash Management Account.

(f) (i) Subject to the terms and conditions of this Section 3(f), each Transaction shall be a LIBOR Transaction and shall bear interest at the LIBOR Pricing Rate applicable to such Transaction. In the event that Buyer shall have determined in its sole but good faith discretion (which determination shall be conclusive and binding upon Seller absent manifest error) that one or more LIBOR Unavailability Conditions Exists, then Buyer shall have the sole and exclusive right at its election, to be exercised in its sole but good faith discretion, to convert any LIBOR Transaction from a LIBOR Transaction to an Alternate Rate Transaction based on the applicable Alternate Index Rate selected by Buyer as provided in the definition thereof, provided that such conversion shall be subject to satisfaction of the following conditions: (A) at the time of conversion, such applicable Alternate Index Rate is a floating rate index that is then commonly used by Buyer in its commercial real estate repurchase facilities as an alternative to the LIBOR Pricing Rate, as determined by Buyer in its sole but good faith discretion, and (B) such applicable Alternate Index Rate is administratively and commercially reasonable for Buyer to implement, as determined by Buyer in its sole but good faith discretion. In the event the foregoing conditions shall be satisfied and the LIBOR Transaction is to be converted to an Alternate Rate Transaction as provided above, Buyer shall provide written notice of the conversion of such LIBOR Transaction to an Alternate Rate Transaction to Seller in the time period set forth in Section 6 of the Fee Letter prior to implementing such Alternative Rate on the next succeeding Pricing Rate Determination Date,. If such notice is given, the Transaction shall be converted, as of the first day of the next succeeding Pricing Rate Period, at Buyer’s option (in Buyer’s sole and absolute discretion) to an Alternate Rate Transaction bearing interest at the Alternate Pricing Rate. Notwithstanding any provision of this Agreement to the contrary, in no event shall Seller have the right to convert a LIBOR Transaction to a Prime Rate Transaction or an Alternate Rate Transaction.

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(ii) In the event that Buyer shall have determined in its sole but good faith discretion (which determination shall be conclusive and binding upon Seller absent manifest error) that one or more LIBOR Unavailability Conditions exists and the applicable Transaction has not previously been converted to an Alternate Rate Transaction in accordance with Section 3(f)(i) above, Buyer may, in its sole and absolute discretion elect to give notice thereof to Seller (which may be by telephone or e-mail, followed promptly by written notice in accordance with Section 3(f)(iii)) prior to the next succeeding Pricing Rate Determination Date. Subject to Section 3(f)(iii) hereof, if such notice is given, the Transaction shall be converted, as of the first day of the next succeeding Pricing Rate Period, at Buyer’s option (in Buyer’s sole and absolute discretion), to a Prime Rate Transaction bearing interest at the Prime Pricing Rate. Notwithstanding any provision of this Agreement to the contrary, in no event shall Seller have the right to convert a LIBOR Transaction to a Prime Rate Transaction or an Alternate Rate Transaction.

(iii) If, pursuant to Section 3(f)(ii) hereof, the Transaction has been converted to a Prime Rate Transaction and Buyer shall determine in its sole but good faith discretion (which determination shall be conclusive and binding upon Seller absent manifest error) that the event(s) or circumstance(s) which resulted in such conversion shall no longer be applicable (i.e., a LIBOR Unavailability Condition does not exist) and LIBOR can be determined as provided in the definition of LIBOR as set forth herein, Buyer shall give notice thereof to Seller (which may be by telephone or e-mail, followed promptly by written notice) prior to the next succeeding Pricing Rate Determination Date. Upon the giving of such notice, the Transaction shall be converted, as of the first day of the next succeeding Pricing Rate Period, to a LIBOR Transaction. Notwithstanding any provision of this Agreement to the contrary, in no event shall Seller have the right to convert a Prime Rate Transaction to a LIBOR Transaction or a LIBOR Transaction to a Prime Rate Transaction.

(iv) If, pursuant to the terms of Section 3(f)(i) hereof, the Transaction has been converted to an Alternate Rate Transaction but thereafter Buyer shall determine in its sole but good faith discretion (which determination shall be conclusive and binding upon Seller absent manifest error) that the Alternate Index Rate cannot be ascertained, or that the adoption of any Requirement of Law or any change therein or in the interpretation or application thereof, shall make it unlawful for Buyer to maintain an Alternate Rate Transaction as contemplated hereunder, or the Alternate Rate would be in excess of the maximum interest rate that Seller may by law pay, Buyer shall give notice thereof to Seller (which may be by telephone or e-mail, followed promptly by written notice) prior to the next succeeding Pricing Rate Determination Date. If such notice is given, such Alternate Rate Transaction shall be converted, as of the first day of the next Pricing Rate Period, to a Prime Rate Transaction. If, pursuant to the terms of this Section 3(f), such Transaction has been converted to a Prime Rate Transaction and thereafter Buyer has determined in its sole but good faith discretion that LIBOR has been succeeded by an Alternate Index and such Alternate Index can be determined, then Buyer shall have the sole and exclusive right, to be exercised in its sole but good faith discretion, to convert the Transaction from a Prime Rate Transaction to an Alternate Rate Transaction in accordance with, and subject to satisfaction of the conditions set forth in, the provisions

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of Section 3(f)(i) above, and Buyer shall give notice thereof to Seller (which may be by telephone or e-mail, followed promptly by written notice) prior to the next succeeding Pricing Rate Determination Date, and if such notice is given, the Transaction shall be converted, as of the first day of the next succeeding Pricing Rate Period, to an Alternate Rate Transaction. Notwithstanding any provision of this Agreement to the contrary, in no event shall Seller have the right to elect to convert an Alternate Rate Transaction to a Prime Rate Transaction or a Prime Rate Transaction to an Alternate Rate Transaction.

(v) If the adoption of any Requirement of Law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for Buyer to maintain a LIBOR Transaction as contemplated hereunder, without limiting the rights of Buyer to convert the Transaction to an Alternate Rate Transaction as set forth above, (a) the obligation of Buyer hereunder to make or maintain any LIBOR Transaction or to convert any Prime Rate Transaction to a LIBOR Transaction shall be cancelled forthwith and (b) any outstanding LIBOR Transaction shall be converted automatically to a Prime Rate Transaction on the first day of the next succeeding Pricing Rate Period, or upon such earlier date as may be required by law.

(vi) Seller hereby agrees to promptly pay to Buyer, upon demand, any additional amounts necessary to compensate Buyer for any actual out-of-pocket costs (not to include any lost profit or opportunity) incurred by Buyer in making any conversion to an Alternate Rate Transaction in accordance with this Agreement, including without limitation, any interest or fees payable by Buyer to lenders of funds obtained by it in order to make or maintain any LIBOR Transaction (or Alternate Rate Transaction) hereunder. Buyer’s notice of such costs, as certified to Seller, shall be conclusive absent manifest error.

(vii) Notwithstanding the foregoing, in connection with any Rate Conversion and/or the implementation thereof, Buyer shall have the right to make any Rate Conversion Conforming Changes from time to time as Buyer determines, in Buyer’s reasonable discretion, are necessary in connection with such conversion and/or the implementation thereof, and notwithstanding anything to the contrary contained herein or in any other Transaction Documents, any amendments implementing such Rate Conversion Conforming Changes will become effective without any further action or consent of Seller or any other party to this Agreement.

(viii) If any such conversion of a Transaction occurs on a day which is not the last day of the then current Pricing Rate Period with respect to such Transaction, Seller shall pay to Buyer such amounts, if any, as may be required pursuant to Section 3(i) hereof.

Buyer shall exercise its right to select an Alternative Rate Index as described in this Section 3(f), in a manner substantially similar to Buyer’s exercise of similar rights and remedies in commercial real estate repurchase agreements with similarly situated customers where Buyer has comparable contractual rights.

(g) [Reserved].

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(h) Upon written demand by Buyer, Seller shall indemnify Buyer and hold Buyer harmless from any net actual, out of pocket loss or expense (not to include any lost profit or opportunity) (including, without limitation, reasonable actual attorneys’ fees and disbursements) which Buyer may sustain or incur as a consequence of (i) default by Seller in terminating any Transaction after Seller has given a notice in accordance with Section 3(d) of a termination of a Transaction, (i) any payment of the Repurchase Price for any Purchased Loan on any day other than a Remittance Date or the Repurchase Date for such Purchased Loan (including, without limitation, any actual breakage costs and similar out of pocket costs or (iii) conversion of the Transaction to either a Prime Rate Transaction or an Alternate Rate Transaction pursuant to Section 3(f) of this Agreement on a day which is not the last day of the then current Pricing Rate Period. A certificate as to such actual costs, losses, damages and expenses, setting forth the calculations therefor shall be submitted promptly by Buyer to Seller and shall be prima facie evidence of the information set forth therein.

(i) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any Governmental Authority or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority having jurisdiction over Buyer made subsequent to the Closing Date:

(i) shall subject Buyer to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of “Excluded Taxes” or (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of Buyer which is not otherwise included in the determination of the LIBO Rate hereunder; or

(iii) shall impose on Buyer (other than Taxes) any other condition;

and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems, in its sole and absolute discretion, to be material, of entering into, continuing or maintaining Transactions or to reduce any amount receivable under the Transaction Documents in respect thereof; then, in any such case, Seller shall promptly pay Buyer, upon its demand, any additional amounts necessary to compensate Buyer for such increased cost or reduced amount receivable. If Buyer becomes entitled to claim any additional amounts pursuant to this Section 3(i), it shall, within ten (10) Business Days after Buyer has actual knowledge of such event, notify Seller in writing of the event by reason of which it has become so entitled. Such notification shall set forth in reasonable detail the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be prima facie evidence of such additional amounts. In exercising its rights and remedies under this Section 3(i), Buyer shall exercise its rights and remedies in a manner substantially similar to Buyer’s exercise of similar remedies in agreements with similarly situated customers where Buyer has comparable contractual rights. This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Loans.

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(j) If Buyer shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the Closing Date does or shall have the effect of increasing the amount of capital to be held by Buyer in respect of any Transaction hereunder or reducing the rate of return on Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer, in the exercise of its reasonable business judgment, to be material, then from time to time, after submission by Buyer to Seller of a written request therefor, Seller shall pay to Buyer such additional amount or amounts as will compensate Buyer for such reduction. Such notification as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be prima facie evidence of such additional amounts. In exercising its rights and remedies under this Section 3(j), Buyer shall exercise its rights and remedies in a manner substantially similar to Buyer’s exercise of similar remedies in agreements with similarly situated customers where Buyer has comparable contractual rights. This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Loan.

(k) Master Seller, on behalf of any Series Seller, shall have the right at any time, upon one (1) Business Day prior notice to Buyer, to transfer cash to Buyer for the purpose of reducing the Repurchase Price of, but not terminating, the Transaction to which such Series Seller is a party; provided, that (x) to the extent that the Purchase Price of any Purchased Loan is reduced by Master Seller pursuant to this sentence to an amount that is less than fifty percent (50%) of the Repurchase Price Cap of such Purchased Loan, the Margin Excess with respect to such Purchased Loan shall thereafter (unless Buyer, in its sole discretion, determines not to apply the following reduction) be reduced by the amount equal to the difference between (i) fifty percent (50%) of the Repurchase Price Cap of such Purchased Loan and (ii) the Purchase Price of such Purchased Loan following the application of such reduction to the Purchase Price pursuant to this sentence which causes the Purchase Price to be less than fifty percent (50%) of the Repurchase Price Cap, and (y) such transfers shall not occur on more than six (6) Business Days per calendar quarter (it being understood that such transfers may be made with respect to a single Purchased Loan or multiple Purchased Loans, at such Series Seller’s election, on any such day). In addition, Master Seller, on behalf of any Series Seller, shall be entitled to terminate the Transaction to which such Series Seller is a party on demand and repurchase a related Purchased Loan in whole on any Business Day prior to related Repurchase Date provided that (i) Seller notifies Buyer in writing of its intent to terminate such Transaction no later than one (1) Business Day prior to the intended repurchase date (an “Early Repurchase Date”) unless such Early Repurchase Date, is in connection with curing a Margin Deficit or breach of any representation, warranty or covenant or in connection with any change in any Requirement of Law or application thereof which makes the Transaction unlawful in which case advance notice shall not be required, and (ii) on such Early Repurchase Date, Seller pays to Buyer an amount equal to the

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Repurchase Price for the applicable Purchased Loan and any other amounts due and payable under this Agreement with respect to such Purchased Loan (including, without limitation, any Exit Fee payable pursuant to the Letter Agreement). In connection with any reduction of outstanding Purchase Price (other than a termination of a Transaction) pursuant to this Section 3(k), Buyer and Seller shall amend and restate the existing Confirmation for the Transaction to set forth the current outstanding Purchase Price and any other changes related thereto.

(l) Upon the occurrence of a Mandatory Early Repurchase Event with respect to any Purchased Loan, Buyer may, upon written notice to the applicable Series Seller, accelerate the Repurchase Date of such Purchased Loan to the date (the “Mandatory Early Repurchase Date”) which is three (3) Business Days following such notice, provided that such notice is sent by 3:00 p.m. (New York City time), or four (4) Business Days following such notice if such notice is sent after 3:00 p.m. (New York City time) (or such earlier date as may be required pursuant to the last sentence of this Section 3(l)), and require that the applicable Series Seller repurchase such Purchased Loan from Buyer on such Mandatory Early Repurchase Date (a “Mandatory Early Repurchase”), which repurchase by the applicable Series Seller shall be conducted pursuant to and in accordance with Section 3(e).

(m) If Buyer shall exercise its rights under Sections 3(g), 3(i) or 3(j), then Seller shall have the right, at any time thereafter (unless Buyer has at such time waived any claims pursuant to such Sections or such Sections no longer apply) to terminate this Agreement or all Transactions hereunder and, in connection with any such termination, notwithstanding anything to the contrary contained herein or in any other Transaction Document, there shall be no Exit Fee or prepayment fee or premium or similar payment due.

(n) On or before the Purchase Date for any Transaction, Member shall establish, pursuant to the provisions of the Master Seller LLC Agreement and in accordance with Delaware law, a new Series Seller to enter into such Transaction pursuant to the related Confirmation, and deliver copies of the completed Schedule C to the Master Seller LLC Agreement with respect to such Series Seller and same shall be reasonably acceptable to Buyer. On or prior to the Purchase Date for any Transaction, (i) Master Seller and such new Series Seller shall execute and deliver to Buyer a joinder agreement substantially in form attached hereto as Exhibit XI (a “Joinder Agreement”) pursuant to which such Series Seller shall be added as a party hereto and to the other Transaction Documents and any other documents and agreements as Buyer may reasonably require with respect to such Series Seller or in connection with such Transaction and (ii) if required by Buyer in its sole discretion, Buyer shall have filed UCC financing statements in all applicable filing offices with respect to such new Series Seller, which UCC financing statements shall be in form and substance satisfactory to Buyer and may describe the collateral as “All assets of [such new Series Seller], whether now owned or existing or hereafter acquired or arising and wheresoever located, and all proceeds and products thereof” or words to that effect, and any limitations on such collateral description.

(o) Other than with respect to Future Funding Amounts specifically disclosed by Seller and approved by Buyer either on the related Purchase Date in the Confirmation or otherwise in writing for the applicable Purchased Loan, Buyer shall have no obligation to consider entering into any Future Funding Transaction with respect to any Purchased Loan. With respect to Future Funding Amounts that were approved by Buyer in the related

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Confirmation on the Purchase Date (“Approved Future Funding Amounts”), Buyer’s agreement to enter into any related Future Funding Transaction is subject to the satisfaction of the conditions precedent set forth in this Section 3(o), both immediately prior to entering into such Future Funding Transaction and also after giving effect to the consummation thereof, and all such Future Funding Transactions shall be otherwise subject to the following terms and conditions:

(i) With respect to any one or more Purchased Loans with Approved Future Funding Amounts, on or prior to the first (1^st) Business Day of each calendar month prior to the Facility Termination Date, Seller may submit a request to Buyer requesting a Future Funding Transaction (a “Future Funding Transaction Request”) in which, subject to the conditions precedent set forth in this Section 3(o), Buyer shall remit Future Funding Amounts requested in such Future Funding Transaction Request to or on account of Seller by no later than the tenth (10^th) Business Day following the date of the related Future Funding Transaction Request (a “Future Funding Transaction Date”); provided, however, that Buyer shall only be obligated to fund Future Funding Amounts hereunder to the extent that future funding advances made by Seller under the related Purchased Loans from and after the date of the last preceding Future Funding Transaction are equal to or in excess of $1,000,000. Seller shall notify Buyer at least two (2) Business Days prior to the requested Future Funding Transaction Date (x) whether Seller has determined that all related conditions precedent to future funding advances under the related Purchased Loan Documents have been satisfied and (y) whether Seller funded, or approved for funding, the related advance under the Purchased Loan Documents.

(ii) In connection with any Future Funding Transaction, Buyer shall have the right to conduct an additional due diligence investigation of the Future Funding Request Package and/or the related Purchased Loan as Buyer reasonably determines. In addition, each of the following conditions shall have been satisfied (each such condition, a “Future Funding Condition”) on or before the related Future Funding Transaction Date: (a) Buyer shall have received a complete Future Funding Request Package on or prior to the date that Seller has submitted the related Future Funding Transaction Request, (b) Buyer shall have determined in its commercially reasonable discretion that all related conditions precedent to future funding advances under the related Purchased Loan Documents, as in effect on the related Purchase Date (or as modified thereafter in accordance with the express terms of this Agreement), have been satisfied according to the applicable standard of discretion set forth in such Purchased Loan Documents, (c) unless previously approved by Buyer, Buyer shall have approved in its commercially reasonable discretion the related Mortgagor’s budget and capital expenditure plan or any material changes thereto, (d) [reserved], (e) Buyer shall have received evidence, acceptable to Buyer in its commercially reasonable discretion, of title and lien searches relating to the Mortgaged Property performed in connection with the related future funding advances, (f) no Default or Event of Default under this Agreement, or any default or event of default (howsoever defined) on the Purchased Loan or under the related Purchased Loan Documents, shall have occurred and be continuing, no Margin Deficit under this Agreement shall be outstanding, and (g) the Future Funding Amount requested of Buyer in connection with such Future Funding Transaction shall be in an amount of no less than $500,000 (subject in all cases to the proviso set forth in the preceding clause (i)). Buyer hereby agrees to

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act diligently in good faith to confirm the satisfaction of the Future Funding Conditions set forth in this Section 3(o)(ii) on or prior to the related Future Funding Transaction Date. Buyer’s determination, in its commercially reasonable discretion, that the Future Funding Conditions have not been satisfied shall not affect Seller’s obligations with respect to future advances under a Purchased Loan as and when required pursuant to the related Purchased Loan Documents.

(iii) With respect to each Future Funding Transaction, Seller and Buyer shall amend the related Confirmation to reflect the outstanding principal balance and current Purchase Price of the related Purchased Loan after giving effect to such Future Funding Transaction.

(iv) Notwithstanding the foregoing, Seller and Buyer may, in Buyer’s sole discretion, agree from time to time to cause a Future Funding Transaction to occur on the same day as a Future Funding Date with respect to a Purchased loan, in which case the Buyer shall remit the related Future Funding Amount on the related Future Funding Date, as Seller may direct in writing, as follows: (a) if an escrow agreement has been established in connection with such Future Funding Transaction, remit the related Future Funding Amount to the related escrow account, (b) if the terms of the Purchased Loan Documents provide for a reserve account in connection with future advances, remit the related Future Funding Amount to the applicable reserve account or (c) otherwise, remit the related Future Funding Amount directly to the Mortgagor under the related Purchased Loan.

(p) Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents, upon written request of Seller prior to the then current Revolving Period Expiration Date, provided all of the Extension Conditions shall have been satisfied, Buyer may in its sole discretion agree to extend the current Revolving Period Expiration Date for one or more additional terms, each for a period not longer than one (1) year, by giving written notice to Seller of such extension. For purposes of the preceding sentence, with respect to each extension, the “Extension Conditions” shall be deemed to have been satisfied if:

(i) Seller shall have given Buyer written notice, not less than fifteen (15) Business Days prior to the then current Revolving Period Expiration Date of Seller’s request for such extension, to which Buyer shall respond with its approval or disapproval within fifteen (15) Business Days of its receipt of such request, provided that if Buyer has not so responded within such fifteen (15) Business Day period such request shall be deemed denied;

(ii) no Default or Event of Default under this Agreement shall have occurred and be continuing as of the then current Revolving Period Expiration Date, and no due and unpaid Margin Deficit shall exist;

(iii) all other fees and amounts then due from Seller to Buyer hereunder or the other Transaction Documents shall have been paid, including without limitation all fees payable pursuant to any Confirmation; and

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(iv) the representations and warranties made by Seller and Sponsor in each of the Transaction Documents shall be true and correct in all material respects as of the then current Revolving Period Expiration Date (except to the extent that such representations and warranties are made as of a particular date, in which case such representations and warranties shall be true and correct in all material respects as of such particular date), except as disclosed to Buyer in writing prior to the Purchase Date for any applicable Purchased Loan in an Exceptions Report.

Notwithstanding anything to the contrary, in connection with any extension of the Facility Termination Date in accordance with the terms of such definition (i.e., pursuant to an amendment to Schedule 2 to the Letter Agreement made in accordance with the Letter Agreement), the Repurchase Date of each Purchased Loan as set forth in the related Confirmation shall be deemed extended, with respect to each such Purchased Loan, to the earlier of (x) the applicable extended Facility Termination Date and (y) the date that is two (2) Business Days prior to the maturity date or other earlier repayment date (under the related Purchased Loan Documents) for such Purchased Loan (or, in the case of any Senior Interest, the underlying mortgage loan), without giving effect to any extension of such maturity date, whether by modification, waiver, forbearance or otherwise (other than extensions at the related Mortgagor’s option without requiring consent of the Seller or for which the Seller’s consent may not be unreasonably withheld, conditioned or delayed) pursuant to the terms of the Purchased Loan Documents as such Purchased Loan Documents existed on the related Purchase Date.

(q) Notwithstanding anything to the contrary contained herein or in the Repurchase Agreement, Buyer shall not be required to purchase any Eligible Loan proposed by Seller for sale under this Agreement if, after giving effect to such Transaction and any Future Funding Amounts requested in connection therewith, the aggregate Repurchase Price (other than Price Differential) for all Transactions then outstanding would exceed the Maximum Amount.

(r) Without limiting the provisions hereof or of the other Transaction Documents, unless otherwise expressly set forth in a Confirmation with respect to a specific Purchased Loan, Master Seller, on behalf of itself and each Series Seller that may be a party to a Transaction hereunder, and Buyer hereby agree that Seller shall be obligated to pay to Buyer, for each Transaction, a Financing Fee at a rate specified by Buyer in its sole and absolute discretion (for each Transaction, the “Financing Fee Rate”) as set forth in the Confirmation related to such Transaction, which Financing Fee Rate shall not exceed the cap specified in such Confirmation (the “Financing Fee Cap”). The accrued but unpaid Financing Fee with respect to a Purchased Loan shall be payable on each Remittance Date and, unless otherwise paid by Seller or its Affiliates, the accrued Financing Fees shall be remitted by Depository to Buyer (or to such other party as may be designated by Buyer in the relevant Confirmation) from the Cash Management Account on each Remittance Date pursuant to the provisions of Sections 5(c)(iv), 5(d)(iv) or 5(e)(iii), as applicable. For the avoidance of doubt: (i) if no Financing Fee Rate is specified in the applicable Confirmation, the amount of corresponding Financing Fee shall be zero, (ii) if a Financing Fee Rate is specified in the applicable Confirmation for a Transaction, it shall be expressed as a percentage or as basis points, and (iii) in no event shall Seller be obligated to pay Financing Fees in excess of the Financing Fee Cap with respect to any Transaction.

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(s) All amounts payable by Seller under the Transaction Documents shall be paid without notice (other than as required herein), demand (other than as required herein), counterclaim, set-off, deduction or defense (as to any Person and for any reason whatsoever) and without abatement, suspension, deferment, diminution or reduction (as to any Person and for any reason whatsoever), and the Repurchase Obligations shall not be released, discharged or otherwise affected, except as expressly provided herein, by reason of: (i) any Act of Insolvency relating to Seller, any Mortgagor or any other loan participant under a Related Interest, or any action taken with respect to any Transaction Document, Purchased Loan Document by any trustee or receiver of Seller, any Mortgagor or any other loan participant under a Related Interest, or by any court in any such proceeding, (ii) any claim that Seller has or might have against Buyer under any Transaction Document or otherwise, (iii) any default or failure on the part of Buyer to perform or comply with any Transaction Document or other agreement with Seller, (iv) the invalidity or unenforceability of any Purchased Loan, Transaction Document or Purchased Loan Document, or (v) any other occurrence whatsoever, whether or not similar to any of the foregoing, and whether or not Seller has notice or knowledge of any of the foregoing; provided, however, that nothing in the foregoing shall in any way (A) limit any notice and cure periods in favor of Seller set forth in the Transaction Documents or (B) undermine any requirement that Buyer exercise its remedies hereunder in accordance with the UCC (to the extent the UCC is applicable to such exercise of remedies) or to determine Market Value in accordance with the definition thereof. The Repurchase Obligations shall be full recourse to Seller and recourse to Sponsor and Member as and to the extent set forth in the Guaranty and Member Guaranty, as applicable. This Section 3(s) shall survive the termination of the Transaction Documents and the payment in full of the Repurchase Obligations.

4. MARGIN MAINTENANCE

(a) Buyer shall determine the Repurchase Price Cap of each Purchased Loan on each Business Day and shall determine (i) the amount, if any, by which such Repurchase Price Cap is less than the Repurchase Price (excluding Price Differential) (a “Margin Deficit”) and (ii) the amount, if any, by which the Repurchase Price Cap exceeds the Repurchase Price (excluding Price Differential) (“Margin Excess”).

(b) Subject to Section 4(f) hereunder, if at any time an aggregate Margin Deficit exists with respect to one or more Purchased Loans in an amount greater than the Margin Call Threshold, then Buyer may by written notice (which notice shall be given in accordance with Section 16 hereof) (a “Margin Notice”) to Master Seller on behalf of the applicable Series Seller(s), require the applicable Series Seller(s) to make a payment to Buyer in the amount of the Margin Deficit for such Purchased Loan(s) (which, subject to Section 4(c), Seller may satisfy by requesting in writing that Buyer apply any then-existing Margin Excess to such Purchased Loan in full or partial satisfaction of such Margin Deficit), to be applied in reduction of the Repurchase Price of some or all of the related Purchased Loans, as determined by Buyer, by no later than the Margin Deadline on the date that is two (2) Business Days following the date of receipt of such Margin Notice. The applicable Series Seller’s failure to cure any Margin Deficit as required by this paragraph within the time periods set forth herein shall constitute a Transaction Event of Default with respect to the applicable Transaction under the Transaction Documents and shall entitle Buyer to exercise its remedies under Section 13(c) of this Agreement.

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(c) If at any time a Margin Excess exists with respect to a Purchased Loan, then Master Seller may by notice delivered to Buyer require Buyer to transfer to Master Seller on behalf of the applicable Series Seller cash in an amount up to the Margin Excess by no later than the Margin Deadline on the date that is one (1) Business Day following Buyer’s receipt of such notice from Master Seller, provided that such notice is received by 6:00 p.m. (New York City time), or two (2) Business Days following the date of Buyer’s receipt of such notice from Seller if such notice is received after 6:00 p.m. (New York City time) on such date; provided, however, that (1) any such transfer of cash shall not be in an amount less than $100,000, (2) any such transfer of cash shall not cause the Repurchase Price for the applicable Purchased Loan to exceed the Repurchase Price Cap for such Transaction, (3) no Default or Event of Default under this Agreement shall have occurred and be continuing, (4) Seller shall have delivered to Buyer such information and other reporting with respect to the applicable Purchased Loan as required to be delivered by Seller hereunder, and (5) Master Seller shall delivered a certificate of an Authorized Representative of Master Seller in the form of Exhibit XIII certifying that, to Master Seller’s Knowledge, no Default or Event of Default, and no Purchased Loan Default or Purchased Loan Event of Default relating any Purchased Loan subject to such transfer, has occurred and is continuing as of the date of such transfer which has not been disclosed to Buyer.

(d) The failure of, or delay by, Buyer or Seller, on any one or more occasions, to exercise its respective rights under Section 4(b) and 4(c) of this Agreement shall not (i) change or alter the terms and conditions to which this Agreement is subject, (ii) limit the right of such party to do so at a later date, (iii) limit such party’s rights under this Agreement or otherwise existing by law, or (iv) in any way create additional rights for such party.

(e) If Master Seller and/or any applicable Series Sellers transfer cash to Buyer on account of Margin Deficits relating to more than one Purchased Loan, but such cash is insufficient to fully satisfy such Margin Deficits (after giving effect to any netting pursuant to Section 4(f)), Buyer shall have the right to designate the Purchased Loan(s) and Margin Deficit(s) to which such payments shall be applied, in its sole and absolute discretion.

(f) Buyer and Master Seller acknowledge and agree that, so long as no Default or Event of Default shall have occurred and be continuing, then notwithstanding the provisions of Sections 4(a) through 4(c) hereof, Margin Excess and Margin Deficit shall be netted for all the Transactions under this Agreement, and the aggregate amount of the Margin Excess for all Transactions shall be credited against the aggregate Margin Deficit owed under Section 4(b) and only the net amount need be paid; provided, that any net payment to Master Seller shall be subject to the conditions set forth in Section 4(c).

5. INCOME PAYMENTS AND PRINCIPAL PAYMENTS

(a) On each Remittance Date, each Series Seller shall be obligated to pay to Buyer (to the extent not paid on such date through the distributions required pursuant to Sections 5(c), (d), (e) and (f) hereof) the accrued but unpaid Price Differential for its applicable Transaction(s) due as of such Remittance Date (along with any other amounts then due and

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payable), by wire transfer in immediately available funds. A Cash Management Account shall be established by Master Seller, on behalf of itself and each Series Seller, at the Depository. Buyer shall have sole dominion and control over the Cash Management Account. All Available Income in respect of the Purchased Loans shall be deposited by Master Seller and each Series Seller or the applicable Servicer (i) directly into the Cash Management Account without any further action of Buyer or (ii) directly into the Applicable Servicer Account for further remittance by the applicable Servicer to the Cash Management Account, subject in all cases to the terms and conditions of the related Servicer Notice and Agreement. All such amounts transferred into the Cash Management Account shall be remitted by the Depository in accordance with the applicable provisions of Sections 5(b), 5(c), 5(d), 5(e), 13(b)(iii) and 13(c)(iii) of this Agreement.

(b) Seller shall cause the Servicer (other than the Initial Servicer) of each Purchased Loan to enter into a Servicer Notice and Agreement in the form attached as Exhibit IX to this Agreement (or in such other form as is acceptable to Buyer in its sole discretion), which provides, inter alia, that the Servicer shall deposit, or cause to be deposited, all Available Income with respect to such Purchased Loan into the Cash Management Account. If a Servicer forwards any Available Income with respect to a Purchased Loan to Master Seller, any Series Seller or any other Person, rather than directly to the Cash Management Account or directly into the Applicable Servicer Account for further remittance by the applicable Servicer to the Cash Management Account, subject in all cases to the terms and conditions of the related Servicer Notice and Agreement, Master Seller shall (i) redeliver an executed copy of the Servicer Notice and Agreement to the applicable Servicer, and make other commercially reasonable efforts to cause such Servicer to forward such amounts directly to the Cash Management Account, (ii) hold such amounts in trust for the benefit of Buyer and (ii) promptly (but in no event more than one (1) Business Day after receipt) deposit in the Cash Management Account any such amounts. Contemporaneously with the sale to Buyer of any Purchased Loan, the applicable Series Seller shall deliver to Custodian an irrevocable direction letter, each in a form acceptable to Buyer (the “Re-direction Letter”) undated and signed in blank, instructing, as applicable, each Mortgagor, issuer of a Participation Interest, servicer, paying agent or similar Person with respect to such Purchased Loan (as applicable) to pay all amounts payable under the related Purchased Loan into the Cash Management Account, instead of into the Applicable Servicer Account or any other account or to any other Person. If a Mortgagor, issuer of a Participation Interest, servicer or paying agent with respect to the Purchased Loan or borrower forwards any Income or other amounts with respect to a Purchased Loan to such Series Seller, any Affiliate of such Series Seller or any other Person rather than directly into the Applicable Servicer Account or Cash Management Account, as applicable pursuant to the requirements of Section 5(a) hereof, such Series Seller shall, or shall cause such Affiliate to, (i) deliver a separate Re-direction Letter to the applicable Mortgagor, issuer of a Participation Interest, servicer, paying agent or similar Person with respect to the Purchased Loan and make other best efforts to cause such Mortgagor, issuer of a Participation Interest, servicer, paying agent or similar Person with respect to the Purchased Loan or borrower to forward such amounts directly to the Cash Management Account and (ii) deposit in the Applicable Servicer Account or Cash Management Account, as applicable pursuant to the requirements of Section 5(a) hereof, any such amounts within one (1) Business Day of such Series Seller’s (or its Affiliate’s) receipt thereof.

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(c) So long as no Event of Default shall have occurred and be continuing, all Available Income received by the Depository in respect of the Purchased Loans (other than Principal Payments and net sale proceeds) during each Collection Period shall be applied by the Depository on the related Remittance Date in the following order of priority:

(i) first, to remit to (a) the Custodian an amount equal to any accrued and unpaid custodial fees and expenses due and payable under the Custodial Agreement, and (b) the Depository an amount equal to any accrued and unpaid fees and expenses due and payable under the Controlled Account Agreement;

(ii) second, to remit to Buyer an amount equal to the aggregate Price Differential which is due and payable in respect of all of the Purchased Loans as of such Remittance Date;

(iii) third, after giving effect to Section 4(f), to make a payment to Buyer on account of any outstanding and unpaid Margin Deficit;

(iv) fourth, to remit to Buyer on account of any unpaid fees, costs, expenses, indemnity amounts and any and all other amounts due and payable from Seller under this Agreement or the other Transaction Documents; and

(v) fifth, to remit to Master Seller, on behalf of all applicable Series Sellers, the remainder, if any; provided that, if any Default has occurred and is continuing on such Remittance Date that has not become an Event of Default, all amounts otherwise payable to Master Seller, on behalf of the applicable Series Sellers, hereunder shall be retained in the Cash Management Account until the earlier of (x) the day on which Buyer provides written notice to Depository that such Default has been cured to the satisfaction of Buyer in its sole discretion and no other Default or Event of Default has occurred and is continuing, at which time the Depository shall apply all such amounts pursuant to this priority fifth; and (y) the expiration of the cure period applicable to such Default, at which time the Depository shall apply all such amounts pursuant to Section 5(e).

(d) So long as no Event of Default shall have occurred and be continuing, any scheduled or unscheduled Principal Payment (including net sale proceeds) in respect of a Purchased Loan which is a portion of the Available Income received by the Depository during each Collection Period shall be applied by the Depository (1) on the Business Day following the day on which such funds are deposited in the Cash Management Account for funds deposited in the Cash Management Account by 2:00 p.m. (Central time) or (2) on the second (2^nd) Business Day following the day on which such funds are deposited in the Cash Management Account for funds deposited in the Cash Management Account after 2:00 p.m. (Central time), in the following order of priority:

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(ii) second, to remit to Buyer an amount equal to the aggregate Price Differential which has accrued and is outstanding in respect of all of the Purchased Loans as of such Remittance Date (or such other date of application) (to the extent not paid pursuant to Section 5(c)(ii) above);

(iii) third, after giving effect to Section 4(f), to make a payment to Buyer on account of any outstanding and unpaid Margin Deficit (to the extent not paid pursuant to Section 5(c)(iii) above);

(v) fifth, to make a payment to Buyer on account of the Repurchase Price (other than Price Differential paid pursuant to Sections 5(c)(ii) or 5(d)(ii) above) of each of the respective Purchased Loans in respect of which such Principal Payment(s) and/or net sales proceeds have been received, in an amount equal to the product of (A) such Principal Payment(s) and/or net sales proceeds multiplied by (B) the respective Allocable Percentages applicable thereto;

(vi) sixth, to pay to Buyer all Release Amounts, if any, to be applied by Buyer first to reduce the then-current unpaid Repurchase Price of the Purchased Loan in respect of which such Release Amount was paid, and second to reduce the then-current unpaid Repurchase Price of the remaining Purchased Loans on a pro rata basis; and

(vii) seventh, to remit to Master Seller, on behalf of all applicable Series Sellers, the remainder of such Principal Payment or net sale proceeds, if any; provided that, if any Default has occurred and is continuing as of such disbursement date that has not become an Event of Default, all amounts otherwise payable to Master Seller, on behalf of the applicable Series Sellers, hereunder shall be retained in the Cash Management Account until the earlier of (x) the day on which Buyer provides written notice to Depository that such Default has been cured to the satisfaction of Buyer in its sole discretion and no other Default or Event of Default has occurred and is continuing, at which time the Depository shall apply all such amounts pursuant to this priority seventh; and (y) the expiration of the cure period applicable to such Default, at which time the Depository shall apply all such amounts pursuant to Section 5(e).

(e) If an Event of Default shall have occurred and be continuing, all Available Income (including Principal Payments and net sale proceeds) received by Buyer or the Depository in respect of the Purchased Loans during each Collection Period shall be applied by Buyer or the Depository on the Business Day following the day on which such funds are deposited in the Cash Management Account as follows:

(i) first, to remit to (a) the Custodian in an amount equal to any accrued and unpaid custodial fees and expenses due and payable under the Custodial Agreement, and (b) the Depository in an amount equal to any accrued and unpaid fees and expenses due and payable under the Controlled Account Agreement;

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(ii) second, to remit to Buyer an amount equal to the aggregate Price Differential which is due and payable in respect of all of the Purchased Loans as of such Business Day;

(iii) third, to remit to Buyer in an amount equal to any unpaid fees, costs, expenses, indemnity amounts and any and all other amounts due and payable from Seller under this Agreement or the other Transaction Documents;

(iv) fourth, to make a payment to Buyer in an amount equal to (a) the Repurchase Price of each of the Purchased Loans if a Facility Event of Default exists (which amount may be allocated by Buyer to one or more of the Purchased Loans in such amounts as Buyer may determine in its sole and absolute discretion), or (b) the Repurchase Price of each of the Purchased Loans with respect to which a Transaction Event of Default has occurred and is continuing (but no Facility Event of Default then exists), in each case until the Repurchase Price for each of such Purchased Loans has been reduced to zero (if a Facility Event of Default shall exist or Transaction Events of Default shall exist with respect to more than one Purchased Loan, Buyer may allocate amounts under this Section 5(e)(iv) to the Repurchase Price(s) of one or more of such Purchased Loans in such amounts as Buyer may determine in its sole and absolute discretion); and

(v) fifth, to remit to Master Seller the remainder, if any.

(f) Notwithstanding that each Series Seller shall be responsible for its own Available Income, the distribution and allocation of Available Income in accordance with the foregoing provisions of this Section 5 may, for administrative convenience, be accomplished on an aggregate basis for all Series Sellers. In the event that the amounts remitted pursuant to Sections 5(c), (d) and (e) above on any Remittance Date are insufficient to pay the accrued Price Differential due with respect to each of the Transactions at the respective Pricing Rates as of such Remittance Date (along with any other amounts then due and payable), then Buyer, in its sole and absolute discretion, shall determine each Series Seller which had insufficient Available Income to pay all accrued and unpaid Price Differential at the applicable Pricing Rate as of such Remittance Date and Margin Deficit payments related to the Transaction(s) to which such Series Seller is a party (together with such Series Seller’s share of the custodial fees and any other joint expenses allocated ratably according to the Available Income received by each of the Series Sellers) and deliver notice (which may be delivered via email) to Master Seller, on behalf of each of the Series Sellers, on the Remittance Date of the portion of such Cash Flow Deficiency payable by the respective Series Sellers. Each applicable Series Seller shall be required to pay the portion of the Cash Flow Deficiency allocable to such Series Seller (as set forth in such notice from Buyer) to Buyer, by wire transfer in immediately available funds within one (1) Business Day after such Remittance Date. If any Series Seller shall fail to pay the portion of the Cash Flow Deficiency due from such Series Seller within one (1) Business Day after such Remittance Date, such failure shall constitute a Transaction Event of Default with respect to the Transaction(s) to which each such Series Seller is a party.

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(g) All Underlying Purchased Loan Reserves for any Purchased Loan must be held with the applicable Servicer in accordance with Section 28 in segregated accounts held for the benefit of Seller or otherwise subject to control agreements approved by the Buyer. In the event that no Servicer holds any such Underlying Purchased Loan Reserves for a Purchased Loan and Seller would otherwise hold the Underlying Purchased Loan Reserves directly, it shall forward such Underlying Purchased Loan Reserves to the Cash Management Account to be held and applied in accordance with the applicable Purchased Loan Documents.

6. SECURITY INTEREST

Buyer and Seller intend, for all purposes other than those described in Section 22(e), that all Transactions hereunder be sales to Buyer of the Purchased Loans and not loans from Buyer to Seller secured by the Purchased Loans. However, in the event any such Transaction is deemed to be a loan and as security for the performance by Seller of all of Seller’s obligations to Buyer under the Transaction Documents and the Transactions hereunder or in the event that a transfer of a Purchased Loan is otherwise ineffective to effect an outright transfer of such Purchased Loan to Buyer, Master Seller, on behalf of itself and with respect to each Series Seller, hereby pledges all of its right, title, and interest in, to and under and grants a lien on, and security interest in (which lien and security interest shall be of first priority), all of its right, title, and interest in the following property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (collectively, the “Collateral”) to Buyer to secure the payment and performance of all other amounts or obligations owing to Buyer pursuant to this Agreement and the other Transaction Documents (the “Repurchase Obligations”) (it being understood that the grant of security interest in any items described below which are otherwise sold to Buyer pursuant to any Transaction hereunder is made to secure Buyer’s interest therein in the event any such Transaction is deemed to be a loan):

(a) the Purchased Loans, Servicing Agreements, Servicing Records, Servicing Rights, insurance relating to the Purchased Loans, and collection and escrow accounts relating to the Purchased Loans;

(b) the Cash Management Account and all monies from time to time on deposit in the Cash Management Account;

(c) all “general intangibles”, “accounts” and “chattel paper” as defined in the UCC relating to or constituting any and all of the foregoing; and

(d) all replacements, substitutions or distributions on or proceeds, payments, Income and profits of, and records (but excluding any financial models or other proprietary information) and files relating to any and all of any of the foregoing.

For purposes of the grant of the security interest pursuant to Section 6 of this Agreement, this Agreement shall be deemed to constitute a security agreement under the New York Uniform Commercial Code (the “UCC”). Buyer shall have all of the rights and may exercise all of the remedies of a secured creditor under the UCC and the other laws of the State of New York. In furtherance of the foregoing, (a) Buyer, at Seller’s sole cost and expense, shall cause to be filed in such locations as may be necessary to perfect and maintain perfection and

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priority of the security interest granted hereby, UCC financing statements and continuation statements (collectively, the “Filings”), and (b) Seller shall from time to time take such further actions as may be reasonably requested by Buyer to maintain and continue the perfection and priority of the security interest granted hereby.

Seller hereby irrevocably authorizes Buyer at any time and from time to time to file in any filing office in any appropriate jurisdiction any initial financing statements and amendments thereto that (1) indicate the Collateral (i) as all Purchased Loans or words of similar effect, regardless of whether the description of the Purchased Loans in such financing statements includes every component set forth in the definition, or (ii) as being of an equal or lesser scope or with greater detail, and (2) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including whether Seller is an organization, the type of organization and any organization identification number issued to Seller. Seller also ratifies its authorization for Buyer to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof. Without limiting the foregoing, Seller also hereby irrevocably authorizes the Buyer and its counsel to file UCC financing statements in form and substance satisfactory to the Buyer, describing the collateral as “All assets of Master Seller and all assets of each series of interests now or hereafter established by Master Seller or its member, in each case, whether now owned or existing or hereafter acquired or arising and wheresoever located, and all proceeds and products thereof” or words to that effect, and any limitations on such collateral description.

Buyer’s security interest in a Purchased Loan, or the Collateral as a whole, shall terminate only upon (i) in the case of an individual Purchased Loan, the repurchase thereof in accordance with this Agreement and (ii) in the case of the Collateral as a whole, the termination of Seller’s obligations under this Agreement and the documents delivered in connection herewith and therewith. Upon any such termination, Buyer shall deliver to Seller such UCC termination statements and other release documents as may be commercially reasonable to evidence the release of Buyer’s lien on and security interest in the applicable Purchased Loan, or the Collateral, as applicable and to return the Purchased Documents for the applicable Purchased Loan to Seller.

7. PAYMENT, TRANSFER AND CUSTODY

(a) On the Purchase Date for each Transaction, ownership of the Purchased Loans shall be transferred to Buyer or its designee (including the Custodian) on a servicing-released basis against the simultaneous transfer to an account of Seller or as otherwise specified in the Confirmation relating to such Transaction of the difference between (i) the Purchase Price for the Purchased Loan(s) minus (ii) any and all fees, costs and expenses including, without limitation, reasonable attorneys’ fees and disbursements payable to Buyer in connection with such Transaction (if and to the extent that Buyer requires that Seller pay such fees, costs and expenses on the Purchase Date for such Transaction). The Servicing Rights and other servicing provisions under this Agreement are not severable from or to be separated from the Purchased 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.

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(b) On or before such Purchase Date, Seller shall deliver or cause to be delivered to Buyer or its designee (including the Bailee or the Custodian) the Custodial Delivery in the form attached hereto as Exhibit IV. In connection with each sale, transfer, conveyance and assignment of a Purchased Loan, on or prior to each Purchase Date with respect to such Purchased Loan, Seller shall deliver or cause to be delivered and released to the Custodian or Bailee, as applicable, and shall cause the Custodian or Bailee, as applicable, to deliver a Trust Receipt on the Purchase Date concerning the receipt of, the following documents (collectively, the “Purchased Loan File”) pertaining to each of the Purchased Loans identified in the Custodial Delivery delivered therewith; provided, that Seller shall deliver a certificate of an Authorized Representative of Seller certifying that any copies of documents delivered represent true and correct copies of the originals of such documents:

(i) The original Mortgage Note (or A-Note with respect to any Senior Interest) (and if applicable, one or more allonges) 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 (in the event that the Purchased Loan 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]”; in the event that the Purchased Loan 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 as [previous name]”).

(ii) An original (or, in the case of the Watchtower A-Note Eligible Loan, a copy) of each guarantee executed in connection with the Mortgage Note (if any).

(iii) The original (or, in the case of the Watchtower A-Note Eligible Loan, a copy) of the loan agreement.

(iv) The original Mortgage with evidence of recording thereon, or a copy thereof together with an officer’s certificate of Seller certifying that such represents a true and correct copy of the original and, that such original has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(v) The originals of all assumption, modification, consolidation or extension of mortgage agreements (if any) with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(vi) The original Assignment of Mortgage in blank for each Purchased Loan, in form and substance acceptable for recording in the relevant jurisdiction, and in form and substance otherwise acceptable to Buyer and signed in the name of the Last Endorsee (in the event that the Purchased Loan 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]”; in the event that the Purchased Loan was acquired or originated while doing business under another name, the signature must be in the following form: “[Last Endorsee], formerly known as [previous name]”).

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(vii) The originals of all intervening assignments of mortgage (if any) with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(viii) The original (or, in the case of the Watchtower A-Note Eligible Loan, a copy) of the attorney’s opinion of title and abstract of title or the original (or, in the case of the Watchtower A-Note Eligible Loan, a copy) of the mortgagee title insurance policy, or if the mortgagee title insurance policy has not been issued, the binding pro forma policy or commitment marked effective attached to the Purchased Loan closing escrow letter.

(ix) The original (or, in the case of the Watchtower A-Note Eligible Loan, a copy) of any security agreement, chattel mortgage or equivalent document executed in connection with the Purchased Loan (if any).

(x) The original assignment of leases and rents, if any, with evidence of recording thereon, or a copy thereof together with an officer’s certificate of Seller, certifying that such copy represents a true and correct copy of the original and that such original has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(xi) The originals of all intervening assignments of assignment of leases and rents, if any, or copies thereof, with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located (or, in the case of the Watchtower A-Note Eligible Loan, if applicable, copies thereof together with an officer’s certificate of Seller, certifying that such copies represent true and correct copies of the originals and that such originals have been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located).

(xii) A copy of the UCC financing statements and all necessary UCC continuation statements with evidence of filing thereon, and UCC assignments, which UCC assignments shall be in form and substance acceptable for filing.

(xiii) An original (or, in the case of the Watchtower A-Note Eligible Loan, a copy) of the environmental indemnity agreement (if any).

(xiv) The originals (or, in the case of the Watchtower A-Note Eligible Loan, copies) of all lockbox agreements, cash management agreements, other Loan Documents and other material documents (including, without limitation, legal opinions) and agreements relating to such Purchased Loan.

(xv) An omnibus assignment in blank (if any).

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(xvi) For any Senior Interest which is a Participation Interest, the original participation certificate evidencing such Senior Interest endorsed “Pay to the order of ___________ without recourse” and signed in the name of the Last Endorsee by an authorized Person (in the event that the Purchased Loan 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]”; in the event that the Senior Interest 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 as [previous name]”).

(xvii) For any Senior Interest, the original or a copy of the participation agreement or co-lender agreement, as applicable, and all other Senior Interest Documents executed in connection with the Senior Interest.

(xviii) For any Senior Interest, the original (or, in the case of the Watchtower A-Note Eligible Loan, a copy) of the Senior Interest Side Letter (if applicable).

(xix) The original or a copy of the intercreditor or co-lender agreement (if any) executed in connection with the Purchased Loan to the extent the subject borrower, or an affiliate thereof, has encumbered its assets with mezzanine or other subordinate financing in addition to the Purchased Loan.

(xx) Other than in the case of the Watchtower A-Note Eligible Loan, a Mortgagor’s certificate or title affidavit (if any).

(xxi) A survey of the Mortgaged Property (if any) as accepted by the title company for issuance of the mortgagee title policy.

(xxii) A copy of the Mortgagor’s, and (if applicable) any guarantor’s, opinion of counsel.

(xxiii) An original (or, in the case of the Watchtower A-Note Eligible Loan, a copy) of an assignment of permits, contracts and agreements (if any).

(xxiv) The original of all letters of credit issued and outstanding in connection with such Purchased Loan, with any modifications, amendments or endorsements necessary to permit Buyer to draw upon them when and if it is contractually permitted to do so pursuant to this Agreement (if any).

(c) In addition, with respect to each Purchased Loan, Seller shall deliver an instruction letter from Seller to the Mortgagor under each Purchased Loan, instructing the Mortgagor to remit all sums required to be remitted to the holder of the Purchased Loan under the related Purchased Loan Documents to the Servicer for deposit in the Applicable Servicer Account or as otherwise directed in a written notice signed by Seller and Buyer; provided, however, that to the extent that all sums required to be remitted to Seller under a Purchased Loan are to be remitted to Seller by a primary Servicer pursuant to the related Purchased Loan Documents, Seller shall deliver an instruction letter from Seller to such primary Servicer, instructing such primary Servicer to remit all sums required to be remitted to the Seller under the

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related Purchased Loan Documents, to the Cash Management Account or as otherwise directed in a written notice signed by Seller and Buyer. If the Mortgagor or the primary Servicer, as applicable, under any Purchased Loan remits any sums required to be remitted to the holder of such Purchased Loan under the related Purchased Loan Documents to Seller or its Affiliate, Seller shall, within two (2) Business Days after receipt thereof, (i) remit such sums (other than Underlying Purchased Loan Reserves) to the Depository for deposit in the Cash Management Account as set forth in Section 5 hereof or as otherwise directed in the written notice signed by Seller and Buyer, and (ii) deliver (or cause Servicer to deliver) an additional instruction letter from Seller or Servicer, as applicable, to the Mortgagor or the primary Servicer, as applicable, under the applicable Purchased Loan, instructing the Mortgagor or the primary Servicer, as applicable to remit all sums required to be remitted to the holder of the Purchased Loan under the related Purchased Loan Documents to the Servicer for deposit in the Applicable Servicer Account or as otherwise directed in a written notice signed by Seller and Buyer.

(d) From time to time, Seller shall forward to the Custodian additional original documents or additional copies of documents evidencing any assumption, modification, consolidation or extension of a Purchased Loan approved in accordance with the terms of this Agreement, and upon receipt of any such other documents, the Custodian shall hold such other documents as Custodian 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 Buyer or its designee (including the Custodian) 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 Buyer or its designee (including the Custodian) within five (5) Business Days after they are received. With respect to all of the Purchased Loans delivered by Seller to Buyer or its designee (including the Custodian), Seller shall execute an omnibus power of attorney substantially in the form of Exhibit V attached hereto irrevocably appointing Buyer its attorney-in-fact with full power to, during the continuance of an Event of Default, (i) complete and record the Assignment of Mortgage, (ii) complete the endorsement of the Mortgage Note, (iii) request and receive progress reports, revised, amended or supplemented construction budgets, construction manager reports and any material notices or other documents with respect to any Construction Loans and (iv) take such other steps as may be reasonably necessary or desirable to enforce Buyer’s rights against such Purchased Loans and the related Purchased Loan Files and the Servicing Records. Buyer shall deposit the Purchased Loan Files representing the Purchased Loans, or direct that the Purchased Loan Files be deposited directly, with the Custodian. The Purchased Loan Files shall be maintained in accordance with the Custodial Agreement. Any Purchased Loan Files not delivered to Buyer or its designee (including the Custodian) are and shall be held in trust by Seller or its designee for the benefit of Buyer as the owner thereof. Seller or its designee shall maintain a copy of the Purchased Loan File and the originals of the Purchased Loan Files not delivered to Buyer or its designee. The possession of the Purchased Loan Files by Seller or its designee is at the will of Buyer for the sole purpose of servicing the related Purchased Loan, 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 sale of the related Purchased Loan to Buyer. Seller or its designee (including the Custodian) shall release its custody of the Purchased Loan Files only in accordance with written instructions from Buyer and in accordance with the provisions of the Custodial Agreement, unless such release is required as incidental to the servicing of the Purchased Loans, is in connection with a repurchase of any Purchased Loan by Seller or as otherwise required by law.

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(e) Unless an Event of Default shall have occurred and be continuing, Buyer hereby appoints and authorizes Seller to act as Buyer’s agent for purposes relating to the holder of the Purchased Loan and to take such actions on Buyer’s behalf under the Purchased Loan Documents and to exercise such powers and perform such duties as are necessary under the Purchased Loan Documents to administer the Purchased Loans, including, without limitation, (i) entering into amendments, modifications and waivers to, under or in connection with the Purchased Loan Documents, (ii) releasing and otherwise dealing with any collateral for such Purchased Loan, (iii) receiving all notices and deliveries delivered by the obligor(s) under the Purchased Loan Documents, (iv) consenting to or approving any matter which requires “lender’s” or, in the case of any Senior Interest, “participant’s” or “noteholder’s”, consent or approval under the Purchased Loan Documents, (v) administering all matters related to additional advances to be provided under any Purchased Loan Document, including, if applicable, making out of its own funds, any additional advances pursuant to the terms of the related Purchased Loan Documents, (vi) enforcement and related remedies under the Purchased Loan Documents and (vii) exercising all voting, consent, corporate and decision-making rights with respect to the Purchased Loans, provided that Seller shall not take, and shall not permit any other Person to take, any Material Action with respect to any Purchased Loan or Purchased Loan Document without the prior written consent of Buyer; provided, further, that with respect to any amendment, modification, waiver or consent in respect of any Purchased Loan or Purchased Loan Documents, regardless of whether constituting a Material Action, Seller shall send notice and copies thereof to Buyer promptly after entering into such amendment, modification, waiver or consent. Upon the occurrence and during the continuation of an Event of Default, Buyer shall be entitled to exercise all voting, consent, corporate, and decision-making rights with respect to the Purchased Loans without regard to Seller’s instructions. Buyer agrees to exercise the same standard of discretion required of Seller under the Purchased Loan Documents in determining whether to consent to any Material Action.

8. SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS

(a) Title to all Purchased Loans shall pass to Buyer on the applicable Purchase Date, and Buyer shall have free and unrestricted use of all Purchased Loans, subject, however, to the terms of this Agreement. Subject to Section 18(b), nothing in this Agreement or any other Transaction Document shall preclude Buyer from engaging in repurchase transactions with the Purchased Loans or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating the Purchased Loans, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Loans to Seller pursuant to Section 3 of this Agreement or of Buyer’s obligation to credit or pay Available Income to, or apply Available Income to the obligations of, Seller pursuant to Section 5 hereof.

(b) Nothing contained in this Agreement or any other Transaction Document shall obligate Buyer to segregate any Purchased Loans delivered to Buyer by Seller. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, no Purchased Loan shall remain in the custody of Seller or an Affiliate of Seller.

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9. REPRESENTATIONS

(a) Buyer represents and warrants to Seller as follows:

(i) Organization. Buyer has the power and authority to execute, deliver, and perform its obligations under this Agreement and the other Transaction Documents, and the Transactions contemplated hereunder and thereunder.

(ii) Due Execution; Enforceability. The Transaction Documents have been duly executed and delivered by Buyer, for good and valuable consideration. The Transaction Documents constitute the legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

(iii) Non-Contravention. None of the execution and delivery of the Transaction Documents, the consummation by Buyer of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by Buyer with the terms, conditions and provisions of the Transaction Documents (or any of them) will conflict with or result in a breach of any of the terms, conditions or provisions of (i) the organizational documents of Buyer, (ii) any contractual obligation to which Buyer is now a party or by which it is otherwise bound or to which the assets of Buyer are subject or constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of the assets of Buyer, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to Buyer, or (iv) any applicable Requirement of Law, in the case of clauses (ii)-(iv) above, to the extent that such conflict or breach would have a material adverse effect upon Buyer’s ability to perform its obligations hereunder.

(b) Seller represents and warrants to Buyer that as of the Closing Date, the Amendment and Restatement Date, the Second Amendment and Restatement Date and as of each Purchase Date (and, in the case of the representations and warranties made in Section 9(b)(viii), at all times while this Agreement and any Transaction is in effect); provided that, for purposes hereof, all references to the term “Seller” in this Section 9(b) shall be deemed to mean and refer to Master Seller together with each Series Seller which is a party to this Agreement as of the date the applicable representation and warranty is made or deemed made:

(i) Organization. Master Seller is duly formed, validly existing and in good standing under the laws and regulations of the state of Seller’s formation and 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 to the extent such failure would not reasonably be expected to result in a Material Adverse Effect. Seller has the power to own and hold the assets it purports to own and hold, to carry on its business as now being conducted and proposed to be conducted, and to execute, deliver, and perform its obligations under this Agreement and the other Transaction Documents.

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(ii) Due Execution; Enforceability. 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.

(iii) Non-Contravention. None of the execution and delivery of the Transaction Documents, the 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 conflict with or result in a breach of any of the terms, conditions or provisions of (i) the organizational documents of Seller, (ii) any contractual obligation to which Seller is now a party or by which it is otherwise bound or to which the assets of Seller are subject or constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of the assets of Seller, other than pursuant to the Transaction Documents, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to Seller, or (iv) any applicable Requirement of Law, in the case of clauses (ii)-(iv) above, to the extent that such conflict or breach would have a Material Adverse Effect. Seller has all necessary licenses, permits and other consents from Governmental Authorities necessary to acquire, own and sell the Purchased Loans and for the performance of its obligations under the Transaction Documents, except to the extent the failure to have any such licensees, permits or consents would not result in a Material Adverse Effect.

(iv) Litigation; Requirements of Law. Except as otherwise disclosed in writing to Buyer on or prior to the Closing Date, the Amendment and Restatement Date and the Second Amendment and Restatement Date, there is no material action, suit, proceeding, investigation, or arbitration pending or, to the Knowledge of Seller, threatened against Seller, the Sponsor or any of their respective assets, which is reasonably likely to result in a Material Adverse Effect. Seller is in compliance in all material respects with all Requirements of Law applicable to Seller. Neither Seller nor the Sponsor is 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 Buyer or an Affiliate of Buyer) who may be entitled to any commission or compensation in connection with the sale of Purchased Loans pursuant to any of the Transaction Documents.

(vi) Good Title to Purchased Loans. Immediately prior to the purchase of any Purchased Loan by Buyer from Seller, Seller owned such Purchased Loan free and clear of any lien, encumbrance or impediment to transfer (including any “adverse claim” as defined in Section 8-102(a)(1) of the UCC), and Seller is the record and beneficial owner of and has good and marketable title to and the right to sell and transfer such Purchased

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Loan to Buyer and, upon transfer of such Purchased Loan to Buyer, Buyer shall be the owner of such Purchased Loan free of any adverse claim, subject to the rights of Seller and obligations of Buyer pursuant to the terms of this Agreement and the Transaction Documents, in each case except for liens to be released simultaneously with the sale of a Purchased Loan to Buyer hereunder, and subject to the terms and conditions of any participation agreement, co-lender agreement, intercreditor agreement or similar agreement with respect to any Purchased Loan. In the event that any Transaction is characterized as a secured financing of the related Purchased Loans, the provisions of this Agreement are effective to create in favor of Buyer a valid “security interest” (as defined in Section 1-201(b)(37) of the UCC) in all rights, title and interest of Seller in, to and under the Collateral and Buyer shall have a valid perfected first priority security interest in such Purchased Loans.

(vii) No Default. No Event of Default or, to Seller’s Knowledge, Default exists under or with respect to the Transaction Documents unless disclosed to Buyer in writing on or prior to the Closing Date.

(viii) Representations and Warranties Regarding the Purchased Loans; Delivery of Preliminary Due Diligence Package and Purchased Loan File. With respect to each Purchased Loan sold in a Transaction hereunder, each of the Purchased Loan Representations applicable to such Purchased Loan are true and correct, except as disclosed to Buyer in writing prior to the Purchase Date for the applicable Purchased Loan in an Exceptions Report. It is understood and agreed that the Purchased Loan Representations shall survive delivery of the respective Purchased Loan File to Buyer or its designee (including the Custodian) and shall remain true and correct at all times while this Agreement is in effect. With respect to each Purchased Loan, the Preliminary Due Diligence Package delivered to Buyer in connection with such Purchased Loan is complete, true and accurate in all material respects to the best of Seller’s Knowledge (including, but not limited to, complete, true and accurate in all material respects with respect to the disclosure of any direct or indirect ownership interests of Seller or its Affiliates in the Mortgagor). With respect to each Purchased Loan, the Mortgage Note the Mortgage, the Assignment of Mortgage and any other documents required to be delivered under this Agreement and the Custodial Agreement for such Purchased Loan have been delivered to Buyer or its designee (including the Custodian or a Bailee, as applicable) on its behalf. Seller or its designee is in possession of a complete, true and accurate Purchased Loan File with respect to each Purchased Loan, except for such documents the originals of which have been delivered to the Custodian or a Bailee and except as may otherwise be approved by Buyer in accordance with this Agreement and the Custodial Agreement.

(ix) Adequate Capitalization; No Fraudulent Transfer. Seller has, as of the Purchase Date, adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations. Seller is generally able to pay, as of the Closing Date and the Amendment and Restatement Date, and as of the Second Amendment and Restatement Date is paying, its debts as they come due. Seller is not insolvent nor will Seller be made insolvent by virtue of Seller’s execution of or performance under any of the Transaction Documents

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within the meaning of the bankruptcy laws or the insolvency laws of the United States, the State of New York or any other jurisdiction under which Seller is organized or qualified to do business. Seller has not entered into any Transaction Document or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

(x) Consents. No consent, approval or other action of, or filing by Seller with, any Governmental Authority or any other Person is required to authorize, or is otherwise required in connection with, the execution, delivery and performance by Seller of any of the Transaction Documents (other than consents, approvals and filings that have been obtained or made, as applicable).

(xi) Ownership. The direct, and to the extent depicted, the indirect, ownership interests in Seller are as set forth on the organizational chart attached hereto as Exhibit VII hereto.

(xii) Organizational Documents. Seller has delivered to Buyer certified copies of its organizational documents, together with all amendments thereto, if any.

(xiii) No Encumbrances. Subject to the terms of this Agreement, and subject to the terms and conditions of any participation agreement, co-lender agreement, intercreditor agreement with respect to any Purchased Loan, there are (i) no outstanding rights, options, warrants or agreements on the part of Seller for a purchase, sale or issuance, in connection with the Purchased Loans, and (ii) no agreements on the part of Seller to issue, sell or distribute the Purchased Loans.

(xiv) Federal Regulations. None of Master Seller, any Series Seller, Sponsor or Member is required to register as an “investment company” under the Investment Company Act and the basis of each such exemption from the registration requirements of the Investment Company Act is other than the exemptions set forth in Section 3(c)(1) or Section 3(c)(7) thereof.

(xv) Taxes. Seller has filed or caused to be filed all federal and other material Tax returns which would be delinquent if they had not been filed on or before the date hereof and has paid all Taxes shown to be due and payable on or before the date hereof on such returns or on any assessments made against it or any of its property and all other Taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority 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; no Tax liens have been filed against any of Seller’s assets except for any such Tax liens 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 in all material respects and, to the Knowledge of Seller, no claims are being asserted with respect to any such Taxes, fees or other charges.

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(xvi) ERISA. Neither Seller nor any of its ERISA Affiliates sponsors, maintains, contributes to, or has within the immediately preceding five calendar years sponsored, maintained or contributed to, any Plans or Multiemployer Plans, the liability for which could reasonably be expected in the aggregate to result in a Material Adverse Effect.

(xvii) Judgments/Bankruptcy; Liens. Except as disclosed in writing to Buyer there are no judgments against Seller or Sponsor unsatisfied of record or docketed in any court located in the United States of America, no Act of Insolvency has ever occurred with respect to Seller or Sponsor (provided that any Act of Insolvency occurring pursuant to clause (iv) of the definition thereof shall for purposes of this clause be limited to such admissions by any Person described in the definition of “Knowledge”) and Seller has no liens of any nature against it, except for liens created in favor of Buyer under this Agreement or the other Transaction Documents.

(xviii) Full and Accurate Disclosure. No information contained in the Transaction Documents, or any written statement furnished to Buyer by or on behalf of Seller pursuant to the terms of the Transaction Documents, contains any untrue statement of a material fact or, to the Knowledge of Seller, omits to state a material fact necessary to make the statements contained herein or therein not misleading when taken as a whole and in light of the circumstances under which they were made.

(xix) Financial Information. All financial data concerning Seller that has been delivered by or on behalf of Seller to Buyer is true, complete and correct in all material respects and has been prepared in accordance with GAAP. Since the delivery of such data, except as otherwise disclosed in writing to Buyer, there has been no change in the financial position of Seller, or in the results of operations of Seller, which change is reasonably likely to result in a Material Adverse Effect.

(xx) Reserved.

(xxi) Notice Address; Jurisdiction of Organization. On the date of this Agreement, Seller’s address for notices is as set forth on Annex I attached hereto. Seller’s jurisdiction of formation is Delaware. The location where Seller keeps its books and records, including all computer tapes and records relating to the Collateral, is its notice address.

(xxii) Prohibited Person. (a) None of the funds or other assets of Seller or Sponsor constitute property of, or are beneficially owned, directly or indirectly, by a Prohibited Person with the result that the investment in Seller or Sponsor, as applicable (whether directly or indirectly), is prohibited by law or the entering into this Agreement by Buyer is in violation of law; (b) no Prohibited Person has any interest of any nature whatsoever in Seller or Sponsor, as applicable, with the result that the investment in Seller or Sponsor, as applicable (whether directly or indirectly), is prohibited by law or the entering into this Agreement is in violation of law; (c) none of the funds of Seller or Sponsor, as applicable, have been derived from any unlawful activity with the result that the investment in Seller or Sponsor, as applicable (whether directly or indirectly), is

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prohibited by law or the entering into this Agreement is in violation of law; (d) neither Seller nor Sponsor has conducted or will conduct any business or has engaged or will engage in any transaction dealing with any Prohibited Person; and (e) neither Seller nor Sponsor is a Prohibited Person or has been convicted of a felony or a crime which if prosecuted under the laws of the United States of America would be a felony.

(xxiii) Anti-Corruption. Seller, Sponsor, each of their Subsidiaries and their respective directors, officers and employees and, to the knowledge of Seller or Sponsor, the agents of Seller, Sponsor and their Subsidiaries, are in compliance with all applicable Anti-Corruption Laws in all material respects. Seller, Sponsor and their Subsidiaries have instituted, or remain subject to, policies and procedures reasonably designed to ensure compliance with applicable Anti-Corruption Laws.

(xxiv) Obligations. Seller has no material contingent or actual obligations not related to the Purchased Loans or as permitted under Section 12(i).

(c) On the Purchase Date for any Transaction, Master Seller and each Series Seller party to any Transaction hereunder (including the Transaction closing on such Purchase Date) shall be deemed to have made all of the representations set forth in this Section 9 as of such Purchase Date (except to the extent such representations and warranties are made solely as of a particular date, in which case such representations and warranties shall be true and correct in all material respects as of such particular date).

10. NEGATIVE COVENANTS OF SELLER

During the term of this Agreement and so long as any Transaction is in effect hereunder, Seller shall not without the prior written consent of Buyer (for purposes hereof, all references to the term “Seller” in this Section 10 shall be deemed to mean and refer to Master Seller together with each Series Seller which is a party to this Agreement as of the applicable date):

(a) take any action which would directly or indirectly impair or adversely affect Buyer’s title to any of the Purchased Loans;

(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, encumber or hypothecate, directly or indirectly (any of the foregoing, a “Transfer”), any interest in the Purchased Loans (or any of them) to any Person other than Buyer, or engage in repurchase transactions or similar transactions with respect to the Purchased Loans (or any of them) with any Person other than Buyer, except, in each case, for the establishment of any new Series Seller in connection with any Transaction in accordance with the provisions of Section 3(n) hereof;

(c) change its name or its jurisdiction of organization from the jurisdiction referred to in Section 9(b)(xxi) unless it shall have provided Buyer at least thirty (30) days’ prior written notice of such change;

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(d) create, incur or permit to exist any lien, encumbrance or security interest in or on any of the Purchased Loans or the other Collateral, except for any liens created in favor of Buyer under this Agreement or the other Transaction Documents;

(e) modify or terminate the Master Seller LLC Agreement or any of the organizational documents of Seller (provided, however, notwithstanding anything to the contrary in this Agreement, Buyer hereby consents to Member’s execution of that certain Second Amended and Restated Limited Liability Company Agreement of Master Seller dated as of February 9, 2017);

(f) enter into, consent or assent to any amendment or supplement to, or termination of, or waiver of any provision of, any of the Purchased Loan Documents relating to any Purchased Loan, other than in accordance with Section 7(e) hereof;

(g) transfer or permit to be transferred any direct or indirect ownership interests in Seller, or take any action or permit any action to be taken, if any such transfers and/or actions, individually or in the aggregate, would result in a Change of Control.

(h) take any action, file any Tax return, or make any election inconsistent with the treatment of Seller, for purposes of U.S. federal, state and local income taxes, as a disregarded entity, including making an election under Section 301.7701-3(a) of the Treasury Regulations to be treated as an association taxable as a corporation for U.S. federal income tax purposes;

(i) after the occurrence and during the continuation of any Event of Default, make any distribution, 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 direct or indirect 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;

(j) send a payment redirection letter to the Mortgagor of any Purchased Loan, or otherwise instruct any Mortgagor, to make any payment due on a Purchased Loan to any account, other than the Applicable Servicer Account or Cash Management Account;

(k) 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 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

(l) engage in any transaction that would cause any obligation or action taken or to be taken hereunder (or the exercise by Buyer of any of its rights under this Agreement, the Purchased Loans or any Transaction Document) to be a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code;

(m) make any future advances under any Purchased Loan to any underlying obligor that are not (i) protective advances or (ii) future advances which are (x) permitted or contemplated by the related Purchased Loan Documents and (y) in accordance with the budgets and capital expenditure plans approved under the Purchased Loan Documents (and, if applicable, approved by Buyer under Section 3(o) hereof);

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(n) seek its dissolution, liquidation or winding up, in whole or in part;

(o) incur any Indebtedness except as provided in Section 12(i) or otherwise cease to be a Single-Purpose Entity.

(p) (x) other than as expressly permitted under the terms of the related Confirmation, exercise any remedies under the Purchased Loan Documents for any Purchased Loan as to which a Purchased Loan Event of Default has occurred including, without limitation, the commencement or prosecution of any foreclosure proceeding, the exercise of any power of sale, the taking of a deed-in-lieu of foreclosure or other realization upon the security for any Purchased Loan or (y) in connection with any foreclosure or exercise of remedies relating to any Purchased Loan, take title to or otherwise obtain an ownership interest in any underlying Mortgaged Property, in each case, without Buyer’s prior written consent; provided, that nothing herein shall prohibit Seller from sending any notice of a Purchased Loan Default or Purchased Loan Event of Default to any Mortgagor.

(q) except as otherwise expressly permitted without the Seller’s consent under the terms of the applicable intercreditor agreement, co-lender agreement or participation agreement for the applicable Purchased Loan as in effect on the Purchase Date, or any such similar agreement or amendment thereto entered into subsequent to the applicable Purchase Date that has been approved by Buyer, or as otherwise expressly agreed by Buyer pursuant to the terms of the Confirmation and/or the Senior Interest Side Letter for the applicable Purchased Loan, Transfer or permit to be Transferred, in whole or in part, any Related Interest, Mezzanine Loan or Preferred Equity Interest held by Seller or any Affiliate of Seller or consent to the Transfer, in whole or in part, of any Related Interest, Mezzanine Loan or Preferred Equity Interest held by any other Person, except to a Qualified Institutional Lender;

(r) other than as specified in the related Confirmation, consent to, or grant any waiver with respect to, any incurrence of additional debt by the Mortgagor or any mezzanine loan by any direct or indirect beneficial owner of the Mortgagor which is not expressly permitted under the related Purchased Loan Documents;

(s) following the Purchase Date with respect to the Watchtower A-Note Eligible Loan, transfer, sell or permit to be transferred or sold any interest in the Watchtower A-Note Eligible Loan, without Buyer’s prior written consent;

(t) without Buyer’s consent, cause any Purchased Loan to be serviced by any servicer other than the Initial Servicer or other servicer expressly approved in writing by Buyer on the related Purchase Date; or

(u) permit Manager to be terminated as Sponsor’s external manager pursuant to the Second Amended and Restated Management Agreement, dated as of October 23, 2014 (as the same may be further amended, restated, supplemented or otherwise modified, provided that such amendment, restatement, supplement or other modification does not terminate or replace Manager as Sponsor’s external manager), between Sponsor and Manager, unless any replacement external manager or switch to internal management shall have been approved by Buyer in writing, such approval not to be unreasonably withheld, conditioned or delayed.

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(v) amend, modify or waive in any material respect or terminate any provision of any Servicing Agreement, without the consent of Buyer in its sole and absolute discretion;

(w) acquire or maintain any right or interest in any Purchased Loan or Mortgaged Property that is senior to or pari passu with the rights and interests of Buyer therein under this Agreement and the other Transaction Documents;

(x) use any part of the proceeds of any Transaction hereunder for any purpose which violates, or would be inconsistent with, the provisions of Regulations T, U or X of the Board of Governors of the Federal Reserve System or otherwise for the purpose of acquiring or purchasing “Margin Stock” as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System;

(y) take any action, cause, allow, or permit any of Seller, Sponsor or any Subsidiary of Sponsor that is also a direct or indirect parent of Seller to be required to register as an “investment company,” or a company “controlled by an investment company,” within the meaning of the Investment Company Act, or to violate any provisions of the Investment Company Act, including Section 18 thereof or any rules or regulations promulgated thereunder;

(z) directly or indirectly, use or permit Sponsor to use the proceeds of any Transaction, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of Anti-Corruption Laws; or

(aa) notwithstanding anything to the contrary contained in this Agreement or any other Transaction Document, (i) Seller shall not enter into (or agree to enter into) any Division/Series Transaction and (ii) none of the provisions in this Agreement nor any other Transaction Document, shall be deemed to permit any Division/Series Transaction, except, in each case, for the establishment of any new Series Seller in connection with any Transaction in accordance with the provisions of Section 3(n) hereof; or

(bb) fail to comply with Section 5 of the Letter Agreement.

11. AFFIRMATIVE COVENANTS OF SELLER

During the term of this Agreement and so long as any Transaction is in effect hereunder (for purposes hereof, all references to the term “Seller” in this Section 11 shall be deemed to mean and refer to Master Seller together with each Series Seller which is a party to this Agreement as of the applicable date):

(a) Seller shall notify Buyer of any Material Adverse Effect (as determined by Seller in its commercially reasonable judgment) promptly following Seller’s Knowledge thereof; provided, however, that nothing in this Section 11 shall relieve Seller of its obligations under this Agreement.

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(b) Seller shall provide Buyer with copies of such documents as Buyer may reasonably request evidencing the truthfulness of the representations set forth in Section 9.

(c) Seller (i) shall defend the right, title and interest of Buyer in and to the Collateral against, and take such other action as is necessary to remove, the liens, security interests, claims and demands of all Persons (other than security interests by or through Buyer or liens otherwise permitted under the Purchased Loan Documents), (ii) to the extent any additional limited liability company is formed by division of Seller, shall cause any such additional limited liability company to assign, pledge and grant to Buyer all of its assets, and shall cause any owner of such additional limited liability company to pledge all of the Equity Interests and any rights in connection therewith of such additional limited liability company, to Buyer in support of all Repurchase Obligations in the same manner and to the same extent as the assignment, pledge and grant by Seller of all of Seller’s assets hereunder, and in the same manner and to the same extent as the pledge by each Pledgor of all of each such Pledgor’s right, title and interest in all of the Equity Interests of the applicable Seller and any rights in connection therewith, in each case pursuant to the applicable Pledge Agreement, and (iii) shall, at Buyer’s reasonable request, take all action necessary to ensure that Buyer will have a first priority security interest in the Purchased Loans subject to any of the Transactions in the event such Transactions are recharacterized as secured financings.

(d) Seller shall notify Buyer of the occurrence of any Default or Event of Default of which Seller has Knowledge as soon as possible but in no event later than the second (2nd) Business Day after obtaining Knowledge of such event.

(e) Seller shall give notice to Buyer of the following (except in the case of clause (i) below, 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, as applicable):

(i) with respect to any Purchased Loan subject to a Transaction hereunder, promptly (and in any event within two (2) Business Days) following receipt of any unscheduled Principal Payment (in full or in part);

(ii) with respect to any Purchased Loan sold to Buyer hereunder, promptly (and in any event within two (2) Business Days) following receipt by Seller of notice or 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, in each case, to materially adversely affect the value of such Mortgaged Property;

(iii) promptly (and in any event within two (2) Business Days) following receipt of written notice by Seller or Knowledge of (i) the occurrence of any payment default or other material default under the Purchased Loan Documents for any Purchased Loan, (ii) any material lien or security interest (other than security interests created

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hereby) on, or claim asserted against, any Purchased Loan or, to the Knowledge of Seller, the underlying collateral therefor (other than liens expressly permitted under the Purchased Loan Documents) or (iii) any event or change in circumstances that has or could reasonably be expected to have a material adverse effect on the Market Value of a Purchased Loan as determined by Seller in its commercially reasonable judgment;

(iv) promptly, and in any event within three (3) Business Days after service of process on any of the following, give to Buyer notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened in writing or of which Seller or Sponsor otherwise has Knowledge) or other legal or arbitrable proceedings naming Seller or any of the assets of Seller before any Governmental Authority that (i) 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, or (ii) which, individually or in the aggregate, if adversely determined could reasonably be likely to have a Material Adverse Effect; and

(v) promptly (and in any event within two (2) Business Days) following receipt of written notice by Seller or Seller’s obtaining Knowledge of the occurrence of (i) any breach of a Purchased Loan Representation or (ii) any breach of any other representation or warranty contained herein.

(f) Seller shall deliver to Buyer (i) notice of the occurrence of any Purchased Loan Event of Default promptly (and in any event not later than two (2) Business Days) after the earlier of the date that Seller receives notice or has Knowledge thereof and (ii) any other information Known to Seller with respect to any Purchased Loan as may be reasonably requested by Buyer from time to time.

(g) Seller will permit Buyer or its designated representative to inspect Seller’s records with respect to the Collateral and the conduct and operation of its business related thereto upon reasonable prior written notice from Buyer or its designated representative, at such reasonable times and with reasonable frequency, and to make copies of extracts of any and all thereof, subject to the terms of any confidentiality agreement between Buyer and Seller.

(h) At any time from time to time upon the reasonable request of Buyer, at the sole expense of Seller, Seller will promptly and duly execute and deliver to Buyer such further instruments and documents and take such further actions as Buyer may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement including the security interests granted hereunder and of the rights and powers herein granted (including, among other things, filing such UCC financing statements as Buyer may reasonably request). If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to Buyer or its designee (including the Custodian or a Bailee), duly endorsed in a manner reasonably satisfactory to Buyer, to be held as Collateral pursuant to this Agreement, and the documents delivered in connection herewith.

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(i) Seller (or Servicer on its behalf) shall provide Buyer with the following financial and reporting information:

(i) Within 45 days after the last day of each of the first three fiscal quarters, Sponsor’s consolidated and unaudited and Master Seller’s unaudited statements of income and statements of changes in cash flow for such quarter and balance sheets as of the end of such quarter, in each case presented fairly in accordance with GAAP and certified as being true and correct by an officer’s certificate;

(ii) Within 90 days after the last day of its fiscal year, Sponsor’s consolidated and audited, and Master Seller’s unaudited, statements of income and statements of changes in cash flow for such year and balance sheets as of the end of such year, in each case presented fairly in accordance with GAAP, and accompanied, in all cases, by an unqualified report of a nationally recognized independent certified public accounting firm reasonably acceptable to Buyer;

(iii) Within 45 days after the last day of each calendar month, any and all property level financial information (including without limitation rent rolls and operating statements) received with respect to the Purchased Loan by Seller or an Affiliate during such calendar month; and

(iv) Within 45 days after the last day of each of the first, second and third quarters and within 90 days after the last day of the fourth quarter in any fiscal year, an officer’s certificate from Seller addressed to Buyer certifying that, as of the end of such quarter, (x) Seller is in compliance with all of the terms, conditions and requirements of this Agreement, (y) no Default or Event of Default exists and (z) Sponsor is in compliance with the financial covenants set forth in Section 5 of the Guaranty (including a calculation of each such financial covenant), and shall set forth the details of any exceptions to the foregoing stating what actions Seller has taken or proposes to take with respect thereto, as applicable.

(j) Seller shall at all times comply in all material respects with all 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.

(k) 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.

(l) Seller shall observe, perform and satisfy all the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Transaction Documents, including, without limitation, fees payable to Buyer by Seller pursuant to the Letter Agreement and any Confirmation. Seller shall pay and discharge all Taxes, levies, liens and other charges on its assets and on the Collateral that, in each case, in any manner would create any lien or charge upon the Collateral, 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 in all material respects. Seller shall timely file all Tax returns required to be filed by it.

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(m) Seller shall advise Buyer in writing of the opening of any new chief executive office or the closing of any such office and of any change in Seller’s name or organizational structure or the places where the books and records pertaining to the Purchased Loan are held not less than thirty (30) days prior to taking any such action.

(n) Seller will maintain records with respect to the Collateral and the conduct and operation of its business with no less a degree of prudence than if the Collateral were held by Seller for its own account and will furnish Buyer, upon reasonable request by Buyer or its designated representative, with reasonable information reasonably obtainable by Seller with respect to the Collateral and the conduct and operation of its business.

(o) Seller shall provide Buyer with reasonable access to any operating statements, any occupancy status and any other property level information, with respect to the Mortgaged Properties, plus any such additional reports as Buyer may reasonably request, in each case, to the extent the same is in Seller’s possession or reasonably obtainable by Seller.

(p) Master Seller, and to the extent applicable, each Series Seller, shall maintain its existence as a limited liability company, organized solely and in good standing under the law of the State of Delaware (unless Seller shall have given Buyer at least thirty (30) days’ prior written notice that Seller intends to change the jurisdiction of its organization) and shall not dissolve, liquidate, merge with or into any other Person or otherwise change its organizational structure or documents or incorporate or organize in any other jurisdiction, without the prior written approval of Buyer, which approval shall not be unreasonably withheld, conditioned or delayed.

(q) Seller may propose, and Buyer will consider, but shall be under no obligation to approve, strategies for the foreclosure or other realization upon the security for any Purchased Loan with respect to which a Purchased Loan Event of Default has occurred.

(r) 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 Loan, or otherwise in respect thereof, Seller shall accept the same as Buyer’s agent, hold the same in trust for Buyer and deliver the same forthwith to Buyer (or Custodian, as appropriate) in the exact form received, duly endorsed by Seller in blank, if required, together with all related necessary transfer documents, to be held by Custodian hereunder as additional collateral security for the Transactions. If any sums of money or property are paid or distributed in respect of the Purchased Loans and received by Seller (other than amounts distributed to Seller in accordance with Section 5 hereof), Seller shall, until such money or property is paid or delivered to Buyer, hold such money or property in trust for Buyer, segregated from other funds of Seller, as additional collateral security for the Transactions.

(s) Seller and Sponsor will maintain, or remain subject to, policies and procedures reasonably designed to ensure compliance by such party, its Subsidiaries, and their respective directors, officers, employees and agents with applicable Anti-Corruption Laws.

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(t) Seller shall promptly deliver to Buyer an updated Beneficial Ownership Certification if any “person” or “group” (within the meaning of Section 13(d) or 14(d) of the 1934 Act) acquires or obtains rights to acquire twenty-five percent (25%) or more of the total ownership interests of Sponsor, entitled to vote generally in the election of the directors, which “person” or “group” did not own twenty-five percent (25%) of such ownership interests immediately prior to the applicable acquisition.

12. SINGLE-PURPOSE ENTITY

Seller hereby represents and warrants to Buyer, and covenants with Buyer, that as of the Closing Date, the Amendment and Restatement Date, the Second Amendment and Restatement Date and so long as this Agreement or any of the Transaction Documents shall remain in effect (for purposes hereof, all references to the term “Seller” in this Section 12 shall be deemed to mean and refer to Master Seller together with each Series Seller which is a party to this Agreement as of the applicable date): (a) It is and intends to remain solvent and it has paid and will pay its debts and liabilities (including employment and overhead expenses) from its own assets as the same shall become due.

(b) It has complied and will comply with the provisions of its organizational documents.

(c) It has done or caused to be done and will, to the extent under its control, do all things necessary to observe all material 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, if any, which are required by law (except to the extent consolidation is required or permitted under GAAP or as a matter of law).

(e) It will, and will at all times hold itself out to the public as, in the case of Master Seller, a legal entity separate and distinct from any other entity (including any Affiliate), and, in the case of any Series Seller, distinct from any other entity (including any Affiliate, Master Seller or any other Series), it will correct any known misunderstanding regarding such status, it will conduct business in its own name, it will not identify itself or any of its Affiliates as a division or part of the other (except any Series Seller may refer to itself as a “series” of Master Seller), it will maintain and utilize separate stationery, invoices and checks, and Master Seller or any Series Seller will pay to any Affiliate that incurs costs for office space and administrative services that it uses, the amount of such costs allocable to its use of such office space and administrative services.

(f) It has not owned and will not own any property or any other assets other than the Purchased Loans, cash and other assets including New Collateral incidental to the origination, acquisition, ownership, hedging, administering, financing and disposition of Purchased Loans.

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(g) It has not engaged and will not engage in any business other than the origination, acquisition, ownership, hedging, administering, financing and disposition of the Purchased Loans or New Collateral 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 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) unsecured trade payables, in an aggregate amount not to exceed $250,000 at any one time outstanding, incurred in the ordinary course of originating, acquiring, owning, financing and disposing of Eligible Loans or New Collateral, and (C) contingent or future funding obligations under any Purchased Loan; provided, however, that any such trade payables incurred by Seller shall be paid within sixty (60) days of the date invoiced.

(j) It has not made and will not make any loans or advances (other than Eligible Loans) to any other Person, and shall not acquire obligations or securities of any member or any Affiliate of any member (other than in connection with the acquisition of the Eligible Loans or New Collateral) or any other Person.

(k) It has maintained and intends to 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; provided, that the foregoing shall not require any member, partner or shareholder of Seller to make any additional capital contributions to Seller.

(l) It has not commingled and will not commingle its funds and other assets with those of any of its Affiliates or any other Person (except with Master Seller and other Series Sellers as contemplated under Section 5 hereof).

(m) 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.

(n) Except as contemplated under the Transaction Documents, it has not held and will not hold itself out to be responsible for the debts or obligations of any other Person.

(o) It shall not take any of the following actions without the affirmative vote of the Independent Manager: (i) file any reorganization case or proceeding, 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 Laws, or effect any similar procedure under any similar law, 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 Seller or of any substantial part of its property, or make an assignment for the benefit of creditors, or admit in an external written communication to third parties its inability to pay its debts generally as they become due, or take any action in furtherance of any of the foregoing.

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(p) It has no liabilities, contingent or otherwise, other than those normal and incidental to the origination, acquisition, ownership, hedging, financing and disposition of the Purchased Loans or New Collateral.

(q) It is an entity disregarded as a separate entity or treated as a partnership for U.S. federal income tax purposes and has not made any election under Section 301.7701-3(a) of the Treasury Regulations to be treated as an association taxable as a corporation for U.S. federal income tax purposes.

(r) It has and shall maintain a sufficient number of employees (if any) (or has and shall utilize a sufficient number of employees of its Affiliates pursuant to arm’s length terms) in light of its contemplated business purpose.

(s) Master Seller will have at all times at least one (1) Independent Manager and will provide Buyer with up-to-date contact information for all Independent Manager(s) and a copy of the agreement pursuant to which each Independent Manager consents to and serves as an “Independent Manager” for Master Seller and each Series Seller.

(t) It has not pledged and will not pledge its assets to secure the obligations of any other Person (other than as contemplated by this Agreement with respect to any Master Seller or Series Seller).

(u) It has not and will not guarantee any obligation of any Person, including any Affiliate or become obligated for the debts of any other Person or hold out its credit as being available to pay the obligations of any other Person (other than as contemplated by this Agreement with respect to any Master Seller or Series Seller).

(v) It will not, to the fullest extent permitted by law, engage in any dissolution, liquidation, consolidation, merger, division into two (2) or more limited liability companies or other legal entities, or engage in any sale or transfer of all or substantially all of its assets, except as expressly contemplated by this Agreement.

(w) It has maintained and will maintain separate financial statements, showing its assets and liabilities separate and apart from those of any other Person and not have its assets listed on any financial statement of any other Person; provided, however, that the Seller’s assets may have been and may be included in a consolidated financial statement of its Affiliate provided that (i) appropriate notation shall be made on such consolidated financial statement to indicate the separateness of the Seller from such Affiliate and to indicate that the Seller’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person, and (ii) such assets shall also be listed on the Seller’s own separate balance sheet.

(x) Master Seller has not established and shall not establish, and has not had and shall not have, any series of limited liability company interests, except for series that are intended to be and do become Series Sellers pursuant to this Agreement.

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(y) It has not formed and will not form, acquire or hold any subsidiary (whether corporate, partnership, limited liability company or other) or own any equity interest in any other entity (other than the Master Seller with respect to any Series Seller).

(z) It has not had and will not have any of its obligations guaranteed, other than as contemplated by the Transaction Documents.

(aa) The Master Seller LLC Agreement shall provide that (i) no Independent Manager of Seller may be removed or replaced without Cause, (ii) Buyer be given at least two (2) Business Days prior notice of the removal and/or replacement of the Independent Manager, together with the name and contact information of the replacement Independent Manager and evidence of the replacement’s satisfaction of the definition of Independent Manager and (iii) to the fullest extent permitted by law, and notwithstanding any duty otherwise existing at law or in equity, any Independent Manager of Seller shall consider only the interests of the applicable Seller, including its respective creditors with respect to taking of, or otherwise voting on, any of the actions contemplated by Section 12(o) above and, except for duties to the Seller as set forth in the immediately preceding clause (including duties to the Member and the Seller’s creditors solely to the extent of their economic interests in the Seller but excluding (A) all other interests of the Member, (B) the interests of other Affiliates of the Seller, and (C) the interests of any group of Affiliates of which the Seller is a part), the Independent Manager shall not have any fiduciary duties to the Member, any officer of the Seller or any other Person; provided, that the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing.

13. EVENTS OF DEFAULT; REMEDIES

(a) After the occurrence and during the continuance of an Event of Default, Seller hereby appoints Buyer as attorney-in-fact of Seller for the purpose of carrying out the provisions of this Agreement and taking any action and executing or endorsing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest.

(I) Each of the following shall constitute a “Facility Event of Default”:

(i) an Act of Insolvency occurs with respect to Seller, Sponsor or Member (provided that any Act of Insolvency occurring pursuant to clause (iv) of the definition thereof shall for purposes of this clause (i) be limited to such admissions by any Person described in the definition of “Knowledge”);

(ii) any Person described in the definition of “Knowledge” shall admit in writing (or announce in any public manner, including without limitation, on any earnings call) to any Person in an external communication (whether electronic or otherwise) the inability of either Seller, Sponsor or Member to, or its intention not to, perform any of its material obligations hereunder or under any of the Transaction Documents,

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(iii) either (A) the Transaction Documents shall for any reason not cause, or shall cease to cause, Buyer to be the owner free of any adverse claim (other than the rights of Seller pursuant to this Agreement) of any of the Purchased Loans, and such condition is not cured by Seller within three (3) Business Days after notice thereof from Buyer to Seller, (B) if a Transaction is recharacterized as a secured financing, the Transaction Documents with respect to any Transaction shall for any reason cease to create a valid first priority security interest in favor of Buyer in any of the Purchased Loans or (C) any provision of the Transaction Documents, any right or remedy of Buyer or obligation, covenant, agreement or duty of Seller thereunder, or any lien, security interest or control granted under or in connection with the Transaction Documents or Purchased Loans terminates, is declared null and void, ceases to be valid and effective, ceases to be the legal, valid, binding and enforceable obligation of Seller or any other Person, or the validity, effectiveness, binding nature or enforceability thereof is contested, challenged, denied or repudiated by Seller or any Affiliate thereof, in each case directly, indirectly, in whole or in part;

(iv) failure of Master Seller to make any payment owing to Buyer which has become due under this Agreement or any other Transaction Document (other than any monetary Transaction Event of Default by any Series Seller under Sections 13(a)(II)(i)-(iv) of this Agreement), whether by acceleration or otherwise under the terms of this Agreement or the other Transaction Documents, which failure is not remedied within five (5) Business Days;

(v) any governmental, regulatory, or self-regulatory authority shall have taken any action to remove, limit, restrict, suspend or terminate the rights, privileges, or operations of Seller, which removal, limitation, restriction, suspension or termination results in a Material Adverse Effect;

(vi) a Change of Control shall have occurred that has not been consented to by Buyer in writing;

(vii) any representation made by Seller or Sponsor in this Agreement or the other Transaction Documents shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, which incorrect or untrue representation, to the extent such breach is reasonably susceptible to cure, is not cured within ten (10) Business Days after the earlier of notice thereof from Buyer or Seller obtaining Knowledge of such breach; provided, however, that the breach of Section 9(b)(viii) or any Purchased Loan Representation made by Seller with respect to any Purchased Loan in any Transaction Document shall not be considered a Facility Event of Default if incorrect or untrue unless Seller shall have made any such representation with Knowledge that it was materially incorrect or untrue at the time made, in which case such breach shall constitute an immediate Facility Event of Default;

(viii) either (A) Sponsor shall fail to observe any of the financial covenants set forth in the Guaranty or shall have defaulted or failed to perform any other material covenant under the Guaranty, or Member shall have defaulted or failed to perform any material covenant under the Member Guaranty; provided, that any such default or failure to perform shall not constitute an Event of Default if Sponsor or Member, as applicable, cures such default or failure to perform, as the case may be, within the grace, notice or cure period, if any, provided under the applicable agreement, or (B) the Guaranty or the Member Guaranty, as applicable, shall have been revoked, rescinded or otherwise cease to be in full force and effect;

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(ix) a final non-appealable judgment by any competent court in the United States of America for the payment of money in an amount greater than $250,000 (in the case of Seller) or $25,000,000 (in the case of Sponsor) shall have been rendered against Seller or Sponsor, and remained 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 means acceptable to Buyer;

(x) Sponsor shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, repurchase agreement, short sale, futures contract (including Eurodollar futures) or options contract or any interest rate swap, cap or collar agreement or derivatives transaction to which it is a party (other than a Transaction Document), which default (A) involves the failure to pay a monetary obligation in an amount greater than or equal to $25,000,000, or (B) permits the acceleration of the maturity of obligations, or the declaration of a mandatory early repurchase date or termination date with respect to indebtedness or obligations in an amount greater than or equal to $25,000,000, by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, repurchase agreement, swap agreement or other contract agreement or transaction due to the failure to observe the financial covenants, if any, set forth therein; provided, however, that any such default, failure to perform or breach shall not constitute a Facility Event of Default if Sponsor 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) Seller shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, repurchase agreement, short sale, futures contract (including Eurodollar futures) or options contract or any interest rate swap, cap or collar agreement or derivatives transaction to which it is a party (other than a Transaction Document), which default (A) involves the failure to pay a monetary obligation of $250,000 or more, or (B) permits the acceleration of the maturity of obligations, or the declaration of a mandatory early repurchase date or termination date with respect to indebtedness or obligations of $250,000 or more, by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, repurchase agreement, swap agreement or other contract agreement or transaction; provided, however, that any such default, failure to perform or breach shall not constitute a Facility Event of Default if Sponsor cures such default, failure to perform or breach, as the case may be, within the grace period, if any, provided under the applicable agreement;

(xii) any breach under Sections 10(b), (d), (e), (g), (i), (n) through (p), (r), (u), (x), (y), (z), (aa) or (bb) or Section 11(s);

(xiii) any breach under Section 10(f); provided, however, that any such breach by Seller under Section 10(f) shall not be considered an Event of Default hereunder provided Seller terminates the related Transaction and repurchases the related Purchased Loan(s) pursuant to Section 3(e) no later than two (2) Business Days after notice from Buyer to Seller of such breach;

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(xiv) if Seller or Sponsor or 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 definition of “Facility Event of Default”, and such breach or failure to perform is not remedied within ten (10) Business Days after written notice thereof to Seller by Buyer, or its successors or assigns, or such other (shorter or longer) cure period (if any) as may be expressly provided herein or in such Transaction Document (unless this Agreement or such other Transaction Document expressly provides that such breach or failure constitutes an immediate Facility Event of Default, in which case no notice or cure period shall apply;

(xv) Seller, Member or Sponsor is required to register as an “investment company” under the Investment Company Act of 1940, as amended;

(xvi) other than as provided in Section 13(a)(I)(xiii) above, Seller engages in any conduct or action where Buyer’s prior consent is required by any Transaction Document and Seller fails to obtain such consent;

(xvii) Seller, any Servicer, any Mortgagor under a Purchased Loan or any other Person fails to deposit to the Cash Management Account all Available Income and other amounts as required by Section 5 and other provisions of this Agreement when due and such failure to deposit to the Cash Management Account, as applicable, is not cured within five (5) Business Days; or

(xviii) Sponsor fails to qualify as a REIT (after giving effect to any cure or corrective periods or allowances pursuant to the Code), or Seller becomes treated as an entity other than a disregarded entity or partnership for U.S. federal income tax purposes.

(II) Each of the following, as to a Purchased Loan, shall constitute a “Transaction Event of Default” for such Purchased Loan:

(i) the applicable Series Seller fails to repurchase such Purchased Loan upon the applicable Repurchase Date therefor;

(ii) the applicable Series Seller fails to pay any Margin Deficit with respect to such Purchased Loan when required pursuant to Section 4 hereof;

(iii) the applicable Series Seller fails to repurchase such Purchased Loan which is the subject of a Mandatory Early Repurchase, as and when required pursuant to Section 3(l); or

(iv) Seller, any Servicer, or any Mortgagor under such Purchased Loan, as applicable, fails to deposit to the Cash Management Account all Available Income from such Purchased Loan as required by Section 5 and other provisions of this Agreement when due and such failure to deposit to the Cash Management Account, is not cured within five (5) Business Days.

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(b) If a Facility Event of Default shall occur and be continuing, the following rights and remedies shall be available to Buyer:

(i) At the option of Buyer, exercised by written notice to Seller (which option shall be deemed to have been exercised, even if no written notice is given, automatically and immediately upon the occurrence of an Act of Insolvency with respect to Seller or Sponsor), 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 being referred to hereinafter as the “Accelerated Repurchase Date”).

(ii) If Buyer exercises or is deemed to have exercised the option referred to in Section 13(b)(i) of this Agreement:

(A) Seller’s obligations hereunder to repurchase all Purchased Loans shall become immediately due and payable on and as of the Accelerated Repurchase Date; and

(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 Loan accrued at the Pricing Rate applicable upon the occurrence of an Event of Default; and

(C) the Custodian shall, upon the request of Buyer, deliver to Buyer all Purchased Loan Documents, instruments, certificates and other documents then held by the Custodian relating to the Purchased Loans.

(iii) Upon the occurrence of a Facility Event of Default, Buyer may (A) immediately sell, at a public or private sale on a servicing released basis in a commercially reasonable manner and at such price or prices as Buyer may deem satisfactory in its sole and absolute discretion, in accordance applicable laws, any or all of the Purchased Loans or (B) in its sole and absolute discretion, in accordance applicable laws, elect, in lieu of selling all or a portion of such Purchased Loans, to give Seller credit for such Purchased Loans in an amount equal to the Market Value of such Purchased Loans against the aggregate unpaid Repurchase Price for such Purchased Loans and any other amounts owing by Seller under this Agreement or the Transaction Documents. The proceeds of any disposition of Purchased Loans effected pursuant to this Section 13(b)(iii) shall be applied, (v) first, to the costs and expenses incurred by Buyer in connection with Seller’s default; (w) second, to any and all amounts due under Section 3(h), including, without limitation, costs of cover, if any; (x) third, to the aggregate Repurchase Price of the Purchased Loans; and (y) fourth, to return any excess to Seller.

(iv) The parties acknowledge and agree that (1) the Purchased Loans subject to Transactions hereunder are not instruments traded in a recognized market, and, in the absence of a generally recognized source for prices or bid or offer quotations for any Purchased Loans, Buyer may establish the source therefor in its sole and absolute

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discretion and (2) all prices, bids and offers shall be determined together with accrued Available Income (except to the extent contrary to market practice with respect to the relevant Purchased Loans). The parties recognize that it may not be possible to purchase or sell all of the Purchased Loans on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Loans may not be liquid at such time. In view of the nature of the Purchased Loans, the parties agree that liquidation of a Transaction or the Purchased Loans pursuant to this Section 13(b) or Section 13(c) does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, Buyer may elect, in its sole and absolute discretion, in accordance applicable laws, the time and manner of liquidating any Purchased Loans pursuant to this Section 13(b) or Section 13(c), and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Loans on the occurrence and during the continuance of an Event of Default or to liquidate all of the Purchased Loans in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Buyer.

(v) Seller shall be liable to Buyer for (A) the amount of all expenses, including reasonable legal fees and expenses, actually incurred by Buyer in connection with or as a consequence of an Event of Default, (B) all costs incurred in connection with covering transactions, and (C) any other actual out-of-pocket loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default.

(vi) Buyer shall have, in addition to its rights and remedies under the Transaction Documents, all of the rights and remedies provided by applicable federal, state and local laws (including, without limitation, if the Transactions are characterized 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 Buyer and Seller. Without limiting the generality of the foregoing, Buyer shall be entitled to set off the proceeds of the liquidation of the Purchased Loans against all of Seller’s obligations to Buyer under this Agreement, whether or not such obligations are then due, without prejudice to Buyer’s right to recover any deficiency.

(vii) Subject to the notice and grace periods set forth herein, Buyer may exercise any or all of the remedies available to Buyer immediately upon the occurrence of an Event of Default and at any time during the continuance thereof. Except as expressly required herein or in the other Transaction Documents, Buyer shall not be required, to give notice to Seller or any other Person prior to exercising any remedy in respect of an Event of Default. 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 which Buyer may have.

(viii) Buyer 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 Buyer 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 Loans, 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.

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(ix) Upon the designation of any Accelerated Repurchase Date, Buyer may, without prior notice to Seller, set off any sum or obligation (whether or not arising under this Agreement, whether matured or unmatured, whether or not contingent and irrespective of the currency, place of payment or booking office of the sum or obligation) owed by Seller to Buyer or any Affiliate of Buyer against any sum or obligation (whether or not arising under this Agreement, whether matured or unmatured, whether or not contingent and irrespective of the currency, place of payment or booking office of the sum or obligation) owed by Buyer or any Affiliate of Buyer to Seller. Buyer will give notice to the other party of any set off effected under this Section 13(b)(ix). If a sum or obligation is unascertained, Buyer 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. Nothing in this Section 13(b)(ix) shall be effective to create a charge or other security interest. This Section 13(b)(ix) shall be without prejudice and in addition to any right of set-off, 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).

(x) Seller shall within two (2) Business Days following Buyer’s written request, to execute and deliver to Buyer such documents, instruments, certificates, assignments and other writings, and do such other acts as Buyer may reasonably request for the purposes of assuring, perfecting and evidencing Buyer’s ownership of the Purchased Loans, including without limitation: (i) forwarding, to Buyer or Buyer’s designee (including, if applicable, the Custodian), any payments Seller may hereafter receive on account of the Purchased Loans, in each case promptly upon receipt thereof; (ii) delivering to Buyer or such designee any originals of certificates, instruments, documents, notices or files evidencing or relating to the Purchased Loans which are in Seller’s possession or under its control; (iii) delivering to Buyer underwriting summaries, credit memos, assets summaries, status reports or similar documents relating to the Purchased Loans and in Sellers possession or under its control.

(xi) During the continuance of an Event of Default and from and after any Accelerated Repurchase Date, Buyer may complete and record and/or file, as applicable, any assignments, allonges, endorsements, powers or other documents or instruments executed in blank with respect to any or all of the Purchased Loans and otherwise obtain physical possession of all Purchased Loan Documents and all other instruments, certificates and documents then held by or on behalf of Custodian under the Custodial Agreement. During the continuance of an Event of Default and from and after any Accelerated Repurchase Date, Buyer may obtain physical possession of all Servicing Records, Servicing Agreements and other files and records of Seller or Servicer. During the continuance of an Event of Default and from and after any Accelerated Repurchase Date, Seller shall deliver to Buyer such assignments and other documents with respect thereto as Buyer shall request. It is acknowledged and agreed that Buyer shall not complete, record and/or file, as applicable, any assignments, allonges, endorsements, powers or other documents or instruments executed in blank with respect to any Purchased Loan unless and until a Facility Event of Default has occurred and is continuing or a Transaction Event of Default has occurred and is continuing with respect to such Purchased Loan.

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(c) Without limiting Buyer’s rights and remedies under Section 13(b) of this Agreement or otherwise available under the Transaction Documents, at law or in equity, if a Transaction Event of Default shall occur and be continuing, the following rights and remedies shall be available to Buyer:

(i) At the option of Buyer, exercised by written notice to Seller, the Repurchase Date for the applicable Transaction shall, if it has not already occurred, be deemed immediately to occur (the “Accelerated Transaction Repurchase Date”).

(ii) If Buyer exercises or is deemed to have exercised the option referred to in Section 13(c)(i) of this Agreement:

(A) the applicable Series Seller’s obligations hereunder to repurchase the applicable Purchased Loan shall become immediately due and payable on and as of the Accelerated Transaction Repurchase Date; and

(B) the Repurchase Price with respect to such Transaction (determined as of the Accelerated Transaction Repurchase Date) shall include the accrued and unpaid Price Differential with respect to such Purchased Loan accrued at the Pricing Rate applicable upon the occurrence of a Transaction Event of Default; and

(iii) Upon the occurrence of a Transaction Event of Default, Buyer may (A) immediately sell, at a public or private sale in a commercially reasonable manner and at such price or prices as Buyer may deem satisfactory in its sole and absolute discretion, in accordance applicable laws, the applicable Purchased Loan or (B) in its sole and absolute discretion elect, in lieu of selling all or a portion of such Purchased Loan, to give Seller credit for such Purchased Loan in an amount equal to the Market Value of such Purchased Loan against the aggregate unpaid Repurchase Price for such Purchased Loan and any other amounts owing by Seller under this Agreement or the Transaction Documents. The proceeds of any disposition of Purchased Loan effected pursuant to this Section 13(c)(iii) shall be applied, (v) first, to the costs and expenses incurred by Buyer in connection with Seller’s default; (w) second, to any and all amounts due under Section 3(h), including, without limitation, costs of cover, if any; (x) third, to the Repurchase Price; and (y) fourth, to return any excess to Seller.

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(iv) During the continuance of an Event of Default and from and after any Accelerated Transaction Repurchase Date, Buyer may complete and record and/or file, as applicable, any assignments, allonges, endorsements, powers or other documents or instruments executed in blank with respect to the applicable Purchased Loan and otherwise obtain physical possession of all Purchased Loan Documents and all other instruments, certificates and documents then held by or on behalf of Custodian under the Custodial Agreement relating to such Purchased Loan. During the continuance of an Event of Default and from and after any Accelerated Transaction Repurchase Date, Buyer may obtain physical possession of all Servicing Records, Servicing Agreements and other files and records of Seller or Servicer relating to such Purchased Loan. During the continuance of an Event of Default and from and after any Accelerated Transaction Repurchase Date, Seller shall deliver to Buyer such assignments and other documents with respect to the applicable Purchased Loan as Buyer shall request. It is acknowledged and agreed that Buyer shall not complete, record and/or file, as applicable, any assignments, allonges, endorsements, powers or other documents or instruments executed in blank with respect to any Purchased Loan unless and until a Facility Event of Default has occurred and is continuing or a Transaction Event of Default has occurred and is continuing with respect to such Purchased Loan.

14. LIMITATIONS ON RECOURSE AGAINST SERIES SELLERS

Buyer acknowledges that Master Seller is organized as a series limited liability company under Section 18-215 of the Delaware Limited Liability Company Act. Notwithstanding that this Agreement and the other Transaction Documents have been executed on behalf of Seller without reference to any particular Series Seller, Buyer agrees to treat each Transaction under this Agreement as the obligation of the particular Series Seller of Master Seller that enters into the Transaction for the related Purchased Loan(s). Provided that no Facility Event of Default shall have occurred and be continuing hereunder, the Repurchase Obligations of any Series Seller relating to or arising from the Transaction(s) to which such Series Seller is a party shall be enforceable only against such Series Seller and with respect to the Purchased Loan(s) relating to such Transaction(s) and not against any other Series Seller or any other Purchased Loan. Notwithstanding the foregoing or anything to the contrary contained in this Agreement or any other Transaction Document, Buyer shall be entitled to exercise any and all remedies available to Buyer under Section 13(b) against Seller and any and all Purchased Loans subject to Transactions hereunder upon the occurrence and continuance of a Facility Event of Default.

15. RECORDING OF COMMUNICATIONS

EACH OF BUYER AND SELLER SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) FROM TIME TO TIME TO MAKE OR CAUSE TO BE MADE TAPE RECORDINGS OF COMMUNICATIONS BETWEEN ITS EMPLOYEES, IF ANY, AND THOSE OF THE OTHER PARTY WITH RESPECT TO TRANSACTIONS; PROVIDED, HOWEVER, THAT SUCH RIGHT TO RECORD COMMUNICATIONS SHALL BE LIMITED TO COMMUNICATIONS OF EMPLOYEES TAKING PLACE ON THE TRADING FLOOR OF THE APPLICABLE PARTY. EACH OF BUYER AND SELLER HEREBY CONSENTS TO THE ADMISSIBILITY OF SUCH TAPE RECORDINGS IN ANY COURT, ARBITRATION, OR OTHER PROCEEDINGS, AND AGREE THAT A DULY AUTHENTICATED TRANSCRIPT OF SUCH A TAPE RECORDING SHALL BE DEEMED TO BE A WRITING CONCLUSIVELY EVIDENCING THE PARTIES’ AGREEMENT.

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16. NOTICES AND OTHER COMMUNICATIONS

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 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 telecopy or email provided that such telecopy or email notice must also be delivered by one of the means set forth in (a), (b) or (c) above, to the address 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: (a) in the case of hand delivery, at the time of delivery, (b) in the case of registered or certified mail, when delivered on a Business Day, (c) in the case of expedited prepaid delivery upon delivery on a Business Day, or (d) in the case of telecopy or email, upon delivery; provided that (i) such telecopy or email notice was also delivered by one of the means set forth in (a), (b) or (c) above (which may arrive after such telecopy or email), and (ii) the transmitting party did not receive an electronic notice of a transmission failure. A party receiving a notice which does not comply with the technical requirements for notice under this Section 16 may elect to waive any deficiencies and treat the notice as having been properly given.

17. ENTIRE AGREEMENT; SEVERABILITY

This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

18. ASSIGNABILITY

(a) The rights and obligations of Seller under this Agreement and the other Transaction Documents and under any Transaction shall not be assigned by Seller without the prior written consent of Buyer, which consent may be granted or withheld in Buyer’s sole discretion.

(b) Buyer may assign its rights and obligations under this Agreement and the other Transaction Documents and/or under any Transaction or may issue one or more participation interests with respect to any or all of the Transactions, without the consent of, and without prior notice to, Seller, to any other Person, and, in connection therewith, may bifurcate or allocate (i.e. senior/subordinate) amounts owed to Buyer; provided, however, that, with respect to any such participation or assignment, so long as no monetary Default, material non-monetary Default or Event of Default has occurred and is continuing (i) unless Buyer has

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assigned one hundred percent (100%) of its interests under this Agreement, Seller shall not be obligated to deal directly with any party other than Buyer or its Affiliate in connection with such Transactions and Buyer or an Affiliate thereof shall retain final authority to enforce remedies and provide consents, waivers or approvals (including, without limitation, approving any Eligible Loan as a Purchased Loan or any disapproval of extension of the Revolving Period) under this Agreement and to determine the Market Value for any Purchased Loan and the occurrence of a Mandatory Early Repurchase Event under this Agreement, and (ii) Buyer shall not assign or grant participations in its rights and obligations hereunder to any Prohibited Transferee without Seller’s prior written consent. In addition to the foregoing, so long as no monetary Default, material non-monetary Default or Event of Default has occurred and is continuing, Buyer shall not assign (but, for avoidance of doubt, may sell participation interests in) its rights and obligations in this Agreement to any Person without Seller’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, unless such Person is an Eligible Assignee. Notwithstanding the foregoing, if a monetary Default, material non-monetary Default or Event of Default has occurred and is continuing, Buyer may assign and/or grant participations in any and all of its rights and obligations to any Prohibited Transferee, without notice to or consent of the Seller. Seller shall reasonably cooperate at Buyer’s sole cost and expense with Buyer in connection with any assignment or participation, provided Seller’s obligations under the Transaction Documents are not increased and its rights under the Transaction Documents are not impaired. Seller agrees that any assignee or participant shall be entitled to the benefits of Section 3(i) and Section 29 (subject to the limitations and requirements under Section 29 (it being understood that the applicable documentation required under Section 29(c) shall be delivered to the participating Buyer)); provided that, no assignee or participant will be entitled to any greater payment of Additional Amounts under Section 3(i) or Section 29, than its assignor or participating Buyer would have been entitled to receive with respect to the applicable assigned or participated rights and obligations, except to the extent such entitlement to receive a greater payment or Additional Amounts results from a change in law that occurs after the date such assignee or participant acquired its interest in the Transaction Documents.

(c) Buyer shall, acting for this purpose as a non-fiduciary agent of Seller (the “Registrar”), maintain a record of ownership (the “Register”) on which is entered the name and address of all assignees of Buyer and each such assignee’s interest in the rights and obligations under this Agreement and the other Transaction Documents. All assignments pursuant to Section 18 hereof shall be recorded on the Register. This provision is intended to be interpreted so that the indebtedness (for federal income tax purposes, as set forth in Section 22(e)) evidenced by the Transaction Documents is treated as being in registered form in accordance with Section 5f.103-1(c) of the Treasury Regulations. The Register shall be available for inspection by Seller at any reasonable time and from time to time upon reasonable prior notice. The entries in the Register shall be conclusive absent manifest error, and Buyer and Seller shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Buyer hereunder for all purposes of this Agreement. Buyer may, at any time, designate any other Person, including Seller, to be the successor Registrar.

(d) Each Buyer that sells a participation shall, acting for this purpose as a non-fiduciary agent of Seller, maintain a register on which is entered the name and address of each participant and such participant’s interest in the rights and obligations under this Agreement and the other Transaction Documents (the “Participant Register”); provided that, no Buyer shall

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have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any rights or obligations under this Agreement and the other Transaction Documents) to any Person except to the extent that such disclosure is necessary to establish that such rights or obligations are in registered form in accordance with Section 5f.103-1(c) of the Treasury Regulations. The entries in each Participant Register shall be conclusive absent manifest error, and the applicable Buyer shall treat each Person whose name is recorded in such Participant Register as the owner of the related rights and obligations for all purposes of this Agreement notwithstanding notice to the contrary.

(e) Subject to the foregoing, this Agreement and the other Transaction Documents and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. Nothing in this Agreement or the other Transaction Documents, express or implied, shall give to any Person, other than the parties to the Transaction Documents and their respective successors and permitted assigns, any benefit or any legal or equitable right, power, remedy or claim under the Transaction Documents.

19. GOVERNING LAW

This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof.

20. NO WAIVERS, ETC.

No express or implied waiver of any Default or Event of Default by Buyer shall constitute a waiver of any other Default or Event of Default and no exercise of any right or remedy hereunder by Buyer shall constitute a waiver of its right to exercise any other right or remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation of the foregoing, the failure to give a notice pursuant to Section 4(b) or 4(c) hereof will not constitute a waiver of any right to do so at a later date.

21. USE OF EMPLOYEE PLAN ASSETS

(a) No plan assets within the meaning of 29 C.F.R. § 2510.3-101 as modified in operation by Section 3(42) of ERISA (“Plan Assets”) of any Plan subject to any provision of ERISA or Section 4975 of the Code shall be used in connection with any Transaction. If any such assets are intended to be used by either party hereto (the “Plan Party”) in the Transaction, the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed.

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(b) Subject to the last sentence of subparagraph (a) of this Section 21, if assets of Seller are deemed to be Plan Assets, any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition.

(c) By entering into a Transaction pursuant to this Section 21, if assets of Seller are deemed to be Plan Assets, Seller shall be deemed (i) to represent to Buyer that since the date of Seller’s latest such financial statements, there has been no material adverse change in Seller’s financial condition which Seller has not disclosed to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as it is a Seller in any outstanding Transaction involving a Plan Party.

(d) During the term of this Agreement and so long as any Transaction is in effect hereunder, the assets of the Sponsor shall not constitute Plan Assets.

22. INTENT

(a) The parties intend, agree and acknowledge that: (i) this Agreement together with all Transactions, constitutes a single agreement, (ii) this Agreement and each Transaction involving a Purchased Loan, to the extent that it has a Repurchase Date less than one year after the Purchase Date or may be repurchased on demand, qualifies for the safe harbor treatment provided by the Bankruptcy Code and for Buyer to be entitled to all of the rights, benefits and protections afforded to Persons under the Bankruptcy Code with respect to a “repurchase agreement” as defined in Section 101(47) of the Bankruptcy Code, (iii) this Agreement and each Transaction involving a Purchased Loan qualifies for the safe harbor treatment provided by the Bankruptcy Code and for Buyer to be entitled to all of the rights, benefits and protections afforded to Persons under the Bankruptcy Code with respect to a “securities contract” as that term is defined in Section 741(7) of the Bankruptcy Code, (iv) certain payments under this Agreement are deemed “margin payments” or “settlement payments,” as defined in Section 101 of the Bankruptcy Code, (v) each payment to Buyer under this Agreement has been made by, to or for the benefit of a financial institution as defined in section 101(22) of the Bankruptcy Code, a financial participant as defined in section 101(22A) of the Bankruptcy Code or repo participant as defined in section 101(46) of the Bankruptcy Code, and thus Buyer (for so long as Buyer is a “financial institution,” “financial participant” or other entity listed in Section 555, 559 or 362(b)(6) of the Bankruptcy Code) shall be entitled to the “safe harbor” benefits and protections afforded under the Bankruptcy Code with respect to a “repurchase agreement” a “securities contract,” and a “master netting agreement” including (x) the rights, set forth in Section 13 and in Sections 555, 559 and 561 of the Bankruptcy Code, to liquidate the Purchased Loans and terminate this Agreement, and (y) the right to offset or net out as set forth in Section 13 and in Sections 362(b)(6), 362(b)(7), 362(b)(27), 362(o) and 546 of the Bankruptcy Code, (vi) the grant of a security interest set forth in Sections 6 and 28(b) hereof to secure the rights of Buyer hereunder also constitutes a “repurchase agreement” (where applicable) as contemplated by Section 101(47)(A)(v) of the Bankruptcy Code and a “securities contract” as contemplated by Section 741(7)(A)(xi) of the Bankruptcy Code and are a part of this Agreement and (vii) each of the Purchased Loans shall constitute a “security” as defined in Section 101(49) of the Bankruptcy Code, a mortgage loan or an interest in a mortgage loan. It is further understood that this Agreement is intended to constitute a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code, as amended, with respect to each Transaction so constituting a “repurchase agreement” (where applicable), or “securities contract”. Each party hereto hereby further agrees that it shall not challenge the characterization of this Agreement as a “repurchase agreement,” “securities contract” and/or “master netting agreement” within the meaning of the Bankruptcy Code.

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(b) The parties intend, agree and acknowledge that either party’s right to accelerate or terminate this Agreement or to liquidate Purchased Loans delivered to it in connection with the Transaction hereunder or to exercise any other remedies pursuant to Section 13 hereof is a contractual right to liquidate, terminate or accelerate such Transaction as described in Sections 555 and 559 of the Bankruptcy Code. 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 any Transaction 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.

(c) The parties intend, agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in 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).

(d) It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“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).

(e) Each party intends, agrees and acknowledges that it is its intent for U.S. federal, state and local income and franchise tax purposes to treat the Transactions as indebtedness of Seller that is secured by the Purchased Loans, and the Purchased Loans as owned by Seller for such purposes, that each Series Seller shall be disregarded as a separate entity from the Master Seller and each other Series Seller for such purposes, and each party agrees to take no action inconsistent with such treatment, unless required by applicable law, in which case such party shall promptly notify the other party of such requirement.

(f) In light of the intent set forth above in this Section 22, Seller agrees that, from time to time upon the written request of Buyer, Seller will execute and deliver any supplements, modifications, addendums or other documents as may be necessary, in Buyer’s sole and absolute discretion, in order to cause this Agreement and the Transactions contemplated hereby to qualify for, comply with the provisions of, or otherwise satisfy, maintain or preserve the criteria for safe harbor treatment under the Bankruptcy Code for “repurchase agreements” (where applicable), “securities contracts” and “master netting agreements”; provided, however, that Buyer’s failure to request, or Buyer’s or Seller’s failure to execute, such supplements, modifications, addendums or other documents does not in any way alter or otherwise change the intention of the parties hereto that this Agreement and the Transactions hereunder constitute “repurchase agreements” (where applicable), “securities contracts” and/or a “master netting agreement” as such terms are defined in the Bankruptcy Code.

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23. 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 Securities and Exchange Commission (“SEC”) under Section 15 of the Securities Exchange Act of 1934 (“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 one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.

24. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

(a) Each party irrevocably and unconditionally (i) submits to the non-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 and (ii) 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.

(b) 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.

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(c) The parties hereby irrevocably waive, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding and irrevocably consent to the service of any summons and complaint and any other process by the mailing of copies of such process to them at their respective address specified herein. The parties hereby agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section 24 shall affect the right of Buyer to serve legal process in any other manner permitted by law or affect the right of Buyer to bring any action or proceeding against Seller or its property in the courts of other jurisdictions.

(d) EACH OF THE PARTIES 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.

25. NO RELIANCE

(a) Each of Buyer and Seller hereby acknowledges, represents and warrants to the other that, in connection with the negotiation of, the entering into, and the performance under, this Agreement and the Transaction Documents and each Transaction hereunder and 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 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 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; and

(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.

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(b) Each determination by Buyer of the Market Value with respect to each Purchased Loan or the communication to Seller of any information pertaining to Market Value under this Agreement shall be subject to the following disclaimers; provided, however, that Buyer hereby agrees that none of the disclaimers contained in this Section 25(b) shall be construed as expanding or modifying the method by which Buyer must determine Market Value as set forth in the definition of Market Value herein:

(i) Buyer has assumed and relied upon, with Seller’s consent and without independent verification, the accuracy and completeness of the information provided by Seller and reviewed by Buyer. Buyer has not made any independent inquiry of any aspect of the New Collateral or Purchased Loans or the underlying collateral. Buyer’s view is based on economic, market and other conditions as in effect on, and the information made available to Buyer 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 Buyer’s view of the value of one or more loans or other assets at a particular point in time and neither (A) constitute a bid for a particular trade, (B) indicate a willingness on the part of Buyer or any Affiliate thereof to make such a bid, nor (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 Buyer, which consent Buyer may withhold or delay in its sole and absolute discretion.

(v) Buyer makes no representations or warranties with respect to any Market Value determinations or other information provided to Seller. Buyer 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 therewith are only indicative of the initial Market Value of the Purchased Loan submitted to Buyer for consideration hereunder, and may change without notice to Seller prior to, or subsequent to, the Purchase Date for the applicable Transaction. No indication is provided as to Buyer’s expectation of the future value of such Purchased Loan or the underlying collateral.

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(vii) Initial Market Value determinations and other information provided to Seller in connection therewith 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.

26. INDEMNITY

(a) Seller hereby agrees to indemnify, defend and hold harmless Buyer, Buyer’s Affiliates and each of its officers, directors, employees and agents (“Indemnified Parties”) from and against any and all liabilities, obligations, actual out-of-pocket losses, actual out-of-pocket damages, actual out-of-pocket penalties, actions, judgments, suits, actual out-of-pocket fees, actual out-of-pocket costs, actual out-of-pocket expenses (including reasonable attorneys fees and disbursements) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) which 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, the Transaction Documents or any Transactions hereunder or 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 gross negligence or willful misconduct of any Indemnified Party. Without limiting the generality of the foregoing, Seller agrees to indemnify, defend and hold Buyer and the other Indemnified Parties harmless from and indemnify Buyer against all Indemnified Amounts with respect to all Purchased Loans relating to or arising out of any (A) breach of any representation or warranty relating to Environmental Law or Hazardous Materials made by Seller hereunder or under any Transaction Document or any violation or alleged violation of any Environmental Law arising prior to Buyer or any third party taking title to, or ownership of (free and clear of any repurchase or redemption rights of Seller, or obligations of Buyer with respect to such rights under this Agreement) the Purchased Assets in connection with Buyer’s exercise of remedies following the occurrence of an Event of Default or (B) any violation or alleged violation of any consumer credit laws, including without limitation ERISA, the Truth in Lending Act and/or the Real Estate Settlement Procedures Act, except to the extent such violation or alleged violation results from Buyer’s bad faith, gross negligence or willful misconduct. In any suit, proceeding or action brought by Buyer in connection with any Purchased Loan for any sum owing thereunder, or to enforce any provisions of any Purchased Loan, Seller will save, indemnify and hold Buyer harmless from and against all actual out-of-pocket costs and expenses (including reasonable attorneys’ fees), losses or damages suffered 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 Buyer as and when billed by Buyer for (i) all Buyer’s actual out-of-pocket costs and expenses incurred in connection with the initial preparation and negotiation of this Agreement and the Transaction Documents and the closing of the transactions contemplated hereby and thereby and (ii) all Buyer’s actual out-of-pocket costs and expenses incurred in connection with Buyer’s due diligence reviews with respect to the Purchased Loans or any loan which is proposed by Seller as a Purchased Loan, including without limitation, those incurred under Section 27 and the reasonable fees and disbursements of its counsel, subject in all cases

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under this clause (ii), to the terms and conditions of Section 27. Additionally, Seller also agrees to reimburse Buyer as and when billed by Buyer for all of Buyer’s actual out-of-pocket costs and expenses incurred in connection with the enforcement or the preservation of Buyer’s rights under this Agreement and the Transaction Documents or any Transaction contemplated hereby or thereby, including, without limitation, the reasonable fees and disbursements of its counsel. Seller hereby acknowledges that, the obligation of Seller hereunder is a recourse obligation of Seller. Except as otherwise provided, this Section 26 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim, which shall be as set forth in Section 29.

(b) In addition to any rights now or hereafter granted under the Transaction Documents, Requirements of Law, Seller hereby grants to Buyer and each of the Indemnified Parties, to secure repayment of the Repurchase Obligations, and Sponsor hereby grants to Buyer and each of the Indemnified Parties, to secure repayment of the Guaranteed Obligations (as defined in the Guaranty), a right of set-off during the continuance of an Event of Default upon any and all of the following: monies, securities, collateral or other property of Seller and Sponsor and any proceeds from the foregoing, now or hereafter held or received by Buyer, any Affiliate of Buyer or any Indemnified Party, for the account of Seller or Sponsor, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general, specified, special, time, demand, provisional or final) and credits, claims or indebtedness of Seller or Sponsor at any time existing, and any obligation owed by Buyer or any Affiliate of Buyer to Seller or Sponsor and to set–off against any Repurchase Obligations or indebtedness owed by Seller or Sponsor and any indebtedness owed by Buyer or any Affiliate of Buyer to Seller or Sponsor, in each case whether direct or indirect, absolute or contingent, matured or unmatured, whether or not arising under the Transaction Documents and irrespective of the currency, place of payment or booking office of the amount or obligation and in each case at any time held or owing by Buyer, any Affiliate of Buyer or any Indemnified Party to or for the credit of Seller or Sponsor, without prejudice to Buyer’s right to recover any deficiency. Each of Buyer, each Affiliate of Buyer and each Indemnified Party is hereby authorized during the continuance of an Event of Default, without notice to Seller or Sponsor, any such notice being expressly waived by Seller and each such Affiliate to the extent permitted by any Requirements of Law, to set–off, appropriate, apply and enforce such right of set–off against any and all items hereinabove referred to against any amounts owing to Buyer or any Indemnified Party by Seller or Sponsor under the Transaction Documents and the Repurchase Obligations, irrespective of whether Buyer, any Affiliate of Buyer or any Indemnified Party shall have made any demand under the Transaction Documents and regardless of any other collateral securing such amounts, and in all cases without waiver or prejudice of Buyer’s rights to recover a deficiency. ANY AND ALL RIGHTS TO REQUIRE BUYER OR OTHER INDEMNIFIED PARTIES TO EXERCISE THEIR RIGHTS OR REMEDIES WITH RESPECT TO THE PURCHASED LOANS OR OTHER INDEMNIFIED PARTIES UNDER THE TRANSACTION DOCUMENTS, PRIOR TO EXERCISING THE FOREGOING RIGHT OF SET–OFF, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED BY SELLER AND SPONSOR. Buyer shall give written notice to Seller and Sponsor of any set-off effected under this Article 15 promptly thereafter, to the extent Buyer is not prohibited from doing so by applicable law.

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27. DUE DILIGENCE

Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to the Purchased Loans, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and Seller agrees that upon reasonable prior notice to Seller, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Purchased Loan Files, Servicing Records and any and all documents, records, agreements, instruments or information relating to such Purchased Loans in the possession or under the control of Seller, any other servicer or subservicer and/or the Custodian. Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Purchased Loan Files and the Purchased Loans. Seller acknowledges that (A) Buyer has the right to request, at Seller’s expense, one (1) new and updated Appraisal for each Mortgaged Property securing any Purchased Loan during any consecutive thirty-six (36) month period, and (B) in addition, upon any determination by Buyer that a decrease in the Market Value of the Purchased Loan has occurred, Buyer has the right to request, at Seller’s expense, an additional Appraisal for any Mortgaged Property securing the Purchased Loan, not more frequently than once in any calendar year; provided, however, that, with respect to this clause (B), Buyer shall have the right to request an additional Appraisal in the same calendar year, and, if such Appraisal results in a determination by Buyer that a decrease in the Market Value of the Purchased Loan has occurred, Seller shall reimburse Buyer for the costs and expenses related to such additional Appraisal. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may enter into Transactions with Seller based solely upon the information provided by Seller to Buyer and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Loans. Buyer may underwrite such Purchased Loans itself or engage a third party underwriter to perform such underwriting. Seller agrees to reasonably cooperate with Buyer and any third party underwriter reasonably acceptable to Seller in connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, financial models, agreements, instruments or information relating to such Purchased Loans in the possession, or under the control, of Seller. Seller further agrees that Seller shall reimburse Buyer for any and all reasonable out-of-pocket costs and expenses incurred by Buyer in connection with Buyer’s activities pursuant to this Section 27 on or before the Purchase Date for any Purchased Loan or within ten (10) days after Buyer shall reject any prospective New Collateral.

28. SERVICING

(a) Master Seller, on behalf of itself and each Series Seller, and Buyer agree that ownership of all Servicing Rights with respect to the Purchased Loans will be transferred hereunder to Buyer on the applicable Purchase Date and such ownership of Servicing Rights shall be transferred by Buyer to Master Seller or the applicable Series Seller upon the applicable Series Seller’s payment of the Repurchase Price for such Purchased Loans, in each case subject to the terms of the applicable Servicing Agreement. Without limiting the generality of the foregoing, Buyer shall have the right to hire or engage any Person to service or subservice all or any portion of the Purchased Loans. Buyer hereby grants to Master Seller, on behalf of itself and

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each Series Seller, prior to the occurrence of an Event of Default, the right to exercise all discretion with respect to any directions or consents to be given to the Servicer of the Purchased Loans (other than modifications of the Purchased Loans) and to appoint a servicer for each Purchased Loan subject to the prior written consent of Buyer, which consent may be given by Buyer in its sole and absolute discretion; provided, however, that upon the occurrence and during the continuance of an Event of Default, Master Seller’s and each Series Seller’s rights to exercise such discretion with respect to all of the Purchased Loans shall automatically terminate and be of no further force and effect. Any amendment, modification or termination, or waiver of any term or provision, of any Purchased Loan or Purchased Loan Documents shall require Buyer’s prior written consent to the extent required and in accordance with Section 7(e) of this Agreement. Buyer hereby agrees that Midland Loan Services, a division of PNC Bank, National Association, a national banking association, or any other third party servicer otherwise approved by Buyer in writing (a “Servicer”) may service the Purchased Loans for the benefit of Buyer in accordance with the terms and conditions of the servicing agreement in effect for each such Servicer, provided that each such servicing agreement shall have been approved in writing by Buyer in its commercially reasonable discretion, exercised in good faith (each such servicing agreement or subservicing agreement that has been approved by Buyer (or, if applicable, Buyer’s assigns), a “Servicing Agreement” and, collectively, the “Servicing Agreements”); and provided, further, that any such Servicer shall have entered into a Servicer Notice and Agreement substantially in the form of Exhibit IX attached hereto (a “Servicer Notice and Agreement”) acknowledging Buyer’s interests in the related Purchased Loans and its rights to sell such Purchased Loans on a servicing-released basis and to terminate the term of such Servicing Rights with respect to any Purchased Loans from and after an Event of Default; provided, however, that Midland Loan Services, as the initial Servicer, and as a party to the Initial Servicing Agreement, shall not be required to enter into a Servicer Notice and Agreement. Master Seller shall cause the Purchased Loans to be serviced in accordance with Accepted Servicing Practices approved by Buyer in its reasonable discretion and practiced by other prudent mortgage lenders with respect to mortgage loans similar to the Purchased Loans; provided, further, that Buyer shall have the right to hire or engage any Person (whose services shall be, prior to the occurrence and continuance of an Event of Default, at Buyer’s sole cost and expense, and following the occurrence and during the continuance of an Event of Default, at Seller’s sole but reasonable cost and expense) to perform confirmatory calculations of all amounts determined by Servicer for all or any portion of the Transactions and to interface with Servicer in connection with such confirmatory calculations.

(b) Master Seller, on behalf of itself and each Series Seller, agrees that Buyer is the owner of all servicing records, including but not limited to Seller’s rights in and 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 Loans (collectively, the “Servicing Records”) so long as the Purchased Loans are subject to this Agreement. Master Seller, on behalf of itself and each Series Seller, grants Buyer a security interest in all of Seller’s interest (if any) in servicing fees and rights relating to the Purchased Loans and all Servicing Records to secure the obligation of Seller or its designee to service in conformity with this Section 28 and any other obligation of Seller to Buyer. Seller covenants to safeguard such Servicing Records (if any are in Seller’s possession) and to deliver them promptly to Buyer or its designee (including the Custodian) upon the occurrence and during the continuance of an Event of Default.

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(c) Upon the occurrence and during the continuance of an Event of Default, Buyer may, in its sole and absolute discretion, subject to Section 13 and any terms in the applicable Servicing Agreements approved by Buyer (i) in the case of a Facility Event of Default, sell its rights to any or all of the Purchased Loans (or in the case of a Transaction Event of Default, sell its rights to the affected Purchased Loan(s)) on a servicing released basis or (ii) in the case of a Facility Event of Default, terminate any Servicer or sub-servicer of any or all of the Purchased Loans (or in the case of a Transaction Event of Default, terminate the Servicer and sub-servicer, if any, for the affected Purchased Loan(s)), with or without cause, in each case without payment of any termination fee. Seller shall cause each Servicer to cooperate with Buyer in effecting such termination and transferring all authority to service such Purchased Loans to the successor servicer, including requiring such Servicer to (i) promptly transfer all data in its possession relating to the applicable Purchased Loans to the successor servicer in such electronic format as the successor servicer may reasonably request, (ii) promptly transfer to the successor servicer, Buyer or Buyer’s designee, the Purchased Loan File and all other files, records, correspondence and documents in its possession relating to the applicable Purchased Loans and (iii) use commercially reasonable efforts to cooperate and coordinate with the successor servicer and/or Buyer to comply with any applicable so-called “goodbye” letter requirements or other applicable requirements of the Real Estate Settlement Procedures Act or other applicable legal or regulatory requirement associated with the transfer of the servicing of the applicable Purchased Loans. Seller agrees that if either Seller or any such Servicer fails to cooperate with Buyer or any successor servicer in effecting the termination of such Servicer as servicer of any Purchased Loan or the transfer of all authority to service such Purchased Loan to such successor servicer in accordance with the terms hereof and the applicable Servicing Agreement, Buyer shall be entitled to injunctive relief.

(d) If Servicer is an Affiliate of Seller or Sponsor, the payment of servicing fees shall be subordinate to payment of amounts outstanding under any Transaction and this Agreement.

29. TAXES

(a) For the avoidance of doubt, for purposes of this Section 29, the term “applicable law” includes FATCA.

(b) Any and all payments by or on account of any obligation of Seller under any Transaction Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of the applicable withholding agent) requires the deduction or withholding of any Tax from any such payment, then Seller shall make (or cause to be made) such deduction or withholding and shall 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 by Seller shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 29) Buyer receives an amount equal to the sum it would have received had no such deduction or withholding been made.

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(d) Seller shall indemnify Buyer, within ten (10) Business Days after written demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under Section 29) payable or paid by Buyer or required to be withheld or deducted from a payment to Buyer, 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 Buyer shall be conclusive absent manifest error.

(e) As soon as practicable after any payment of Taxes by Seller to a Governmental Authority pursuant to this Section 29, Seller shall deliver to Buyer 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 Buyer.

(f) (i) If Buyer is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Transaction Document, Buyer shall deliver to Seller, at the time or times reasonably requested by Seller, such properly completed and executed documentation reasonably requested by Seller as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, Buyer, if reasonably requested by Seller, shall deliver such other documentation prescribed by applicable law or reasonably requested by Seller as will enable Seller to determine whether or not 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 Section 29(f)(ii)(A), Section 29(f)(ii)(B) and Section 29(f)(ii)(D) below) shall not be required if in Buyer’s reasonable judgment such completion, execution or submission would subject Buyer to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of Buyer.

(ii) Without limiting the generality of the foregoing:

(A) if Buyer is a U.S. Person, it shall deliver to Seller on or prior to the date on which Buyer becomes a party under this Agreement (and from time to time thereafter upon the reasonable request of Seller), executed copies of IRS Form W-9 certifying that Buyer is exempt from U.S. federal backup withholding tax;

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(B) if Buyer is a Foreign Buyer, it shall, to the extent it is legally entitled to do so, deliver to Seller (in such number of copies as shall be requested by Seller) on or prior to the date on which 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:

(I) in the case of a Foreign Buyer claiming the benefits of an income tax treaty to which the United States is a party, (x) with respect to payments of interest under any Transaction Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Transaction Document, IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable) 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;

(II) executed copies of IRS Form W-8ECI;

(III) in the case of a Foreign Buyer claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate to the effect that such Foreign 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 (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E (as applicable); or

(IV) to the extent a Foreign Buyer is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form 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 the Foreign Buyer is a partnership and one or more direct or indirect partners of such Foreign Buyer are claiming the portfolio interest exemption, such Foreign Buyer may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner;

(C) if Buyer is a Foreign Buyer, it shall, to the extent it is legally entitled to do so, deliver to Seller (in such number of copies as shall be requested by Seller) on or prior to the date on which Buyer becomes a under this Agreement (and from time to time thereafter upon the reasonable request of Seller), executed copies 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 to determine the withholding or deduction required to be made; and

(D) if a payment made to Buyer under any Transaction Document would be subject to U.S. federal withholding Tax imposed by FATCA if Buyer were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Buyer shall deliver to Seller at the time or times prescribed by law

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and at such time or times reasonably requested by Seller 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 as may be necessary for Seller to comply with its obligations under FATCA and to determine that Buyer has complied with Buyer’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Buyer agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification, provide such successor form, or promptly notify the Seller in writing of its legal inability to do so.

(g) If any party 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 29 (including by the payment of additional amounts pursuant to this Section 29), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 29 with respect to the Taxes giving rise to such refund), net of all out of pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 29(g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 29(g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 29(g) the payment of which would place the indemnified party in a less favorable net after Tax position than the indemnified party 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 Section 29(g) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(h) Each party’s obligations under this Section 29 shall survive any assignment of rights by, or the replacement of the Buyer, the termination of this Agreement and the repayment, satisfaction or discharge of all obligations under any Transaction Document.

30. MISCELLANEOUS

(a) All rights, remedies and powers of 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 Buyer whether under law, equity or agreement. In addition to the rights and remedies granted to it in this Agreement, to the extent this Agreement is determined to create a security interest, Buyer shall have all rights and remedies of a secured party under the UCC.

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(b) This Agreement 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. Delivery by electronic transmission (including a pdf e-mail transmission) of an executed counterpart of a signature page to this Agreement or any other Transaction Document shall be effective as delivery of an original executed counterpart of such Transaction Document.

(c) The headings in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of this Agreement.

(d) Without limiting the rights and remedies of Buyer under this Agreement or the other Transaction Documents, Seller shall pay Buyer’s actual out-of-pocket costs and expenses, including reasonable fees and expenses of accountants, attorneys, underwriters, consultants and advisors, incurred in connection with the preparation, negotiation, execution and consummation of and any amendment, supplement or modification to, this Agreement and/or the other Transaction Documents and the Transactions thereunder. Seller agrees to pay Buyer on demand all actual out-of-pocket costs and expenses (including reasonable attorneys’ fees and disbursements) (i) reasonably incurred in connection with the consummation and administration of the transactions contemplated hereby and (ii) of any subsequent enforcement of any of the provisions of this Agreement and/or the other Transaction Documents, or of the performance by Buyer of any obligations of Seller in respect of the Purchased Loans, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of the Collateral and for the custody, care or preservation of the Collateral (including insurance costs) and defending or asserting rights and claims of Buyer in respect thereof, by litigation or otherwise. In addition, Seller agrees to pay Buyer on demand all actual out-of-pocket costs and expenses (including reasonable attorneys’ fees and disbursements) incurred in connection with the maintenance of the Cash Management Account. All such expenses shall be recourse obligations of Seller to Buyer under this Agreement.

(e) 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.

(f) This Agreement together with the Transaction Documents contain 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.

(g) The parties understand that this Agreement is a legally binding agreement that may affect such party’s rights. Each party represents to the other that it 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.

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(h) 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.

(i) Buyer and Seller hereby agree that neither party shall assert any claims against the other or against any Affiliate of the other for special, indirect, consequential or punitive damages under this Agreement, any Transaction Document or any Transaction, all such damages and claims being hereby waived.

(j) All information regarding the terms set forth in any of the Transaction Documents or the Transactions shall be kept confidential and shall not be disclosed by either party hereto to any Person except (i) to the Affiliates of such Party or its or their respective directors, officers, employees, agents, advisors, attorneys, accountants and other representatives, (ii) to the extent requested by any regulatory authority or required by applicable law, including but not limited to, interrogatories, requests for information or documents, subpoena or other similar legal process, (iii) to the extent required to be included in the financial statements of either party hereto or an Affiliate thereof, (iv) to the extent required to exercise any rights or remedies under the Transaction Documents, Purchased Loans or related Mortgaged Properties, (v) to the extent required to consummate and administer a Transaction, (vi) to any actual or prospective third party service provider in respect of the Purchased Loans, any investor or potential investor in Sponsor, any participant or any assignee which, in each case, agrees to comply with this Section 30(j); provided, that no such disclosure made with respect to any Transaction Document shall include a copy of such Transaction Document to the extent that a summary would suffice, but if it is necessary for a copy of any Transaction Document to be disclosed, all pricing and other economic terms set forth therein shall be redacted before disclosure.

(k) From and after the date hereof, the Existing Repurchase Agreement is hereby amended, restated and superseded in its entirety by this Agreement. The parties hereto acknowledge and agree that the liens and security interests granted under the Existing Repurchase Agreement are, in each case, continuing in full force and effect and, upon the amendment and restatement of the Existing Repurchase Agreement, such liens and security interests secure and continue to secure the payment of the Repurchase Obligations.

[NO FURTHER TEXT ON THIS PAGE]

-103-

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first written above.


MASTER SELLER:

PARLEX 15 FINCO, LLC, a Delaware limited liability company

By:		/s/ Douglas N. Armer
Name:		Douglas N. Armer
Title:		Executive Vice President, Capital Markets, and Treasurer

[Signatures Continue on Following Page]

Second Amended and Restated Master Repurchase Agreement

BXMT


Buyer:

DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH

By:	/s/ Thomas Rugg
	Name:	Thomas Rugg
	Title:	Managing Director

By:	/s/ James Rolison
	Name:	James Rolison
	Title:	Managing Director

Confidential

Second Amended and Restated Master Repurchase Agreement

BXMT

ANNEXES, EXHIBITS AND SCHEDULES


ANNEX I		Names and Addresses for Communications between Parties

EXHIBIT I		Form of Confirmation
EXHIBIT II		Authorized Representatives of Seller
EXHIBIT III		[Reserved]
EXHIBIT IV		Form of Custodial Delivery
EXHIBIT V		Form of Power of Attorney
EXHIBIT VI		Representations and Warranties Regarding Individual Purchased Loans
EXHIBIT VII		Organizational Chart
EXHIBIT VIII		Transaction Procedures
EXHIBIT IX		Form of Servicer Notice and Agreement
EXHIBIT X		[Reserved.]
EXHIBIT XI		Form of Joinder Agreement
EXHIBIT XII		Form of Bailee Agreement

ANNEX I

Names and Addresses for Communications Between Parties

Buyer:


Deutsche Bank AG, Cayman Islands Branch
60 Wall Street
New York, New York 10005
Attention:		Tom Rugg
Telephone:		(212) 250-3541
Telecopy:		(212) 797-5630
Email:		tom.rugg@db.com

With copies to:

Deutsche Bank AG, Cayman Islands Branch
60 Wall Street
New York, New York 10005
Attention:		General Counsel

and

Deutsche Bank AG, Cayman Islands Branch
60 Wall Street
New York, New York 10005
Attention:		Robert W. Pettinato Jr.
Telephone:		(212) 797-0286
Telecopy:		(212) 797-5630
Email:		robert.pettinato@db.com

and

Cadwalader, Wickersham & Taft LLP
One World Financial Center
New York, NY 10281
Attention:		Y. Jeffrey Rotblat
Telephone:		(212) 504-6401
Telecopy:		(212) 504-6666

Seller:


Parlex 15 Finco, LLC
c/o Blackstone Mortgage Trust, Inc.
345 Park Avenue
New York, New York 10154
Attention:		Douglas Armer
Telephone:		(212) 583-5000
Email:		BXMTDeutscheRepo@blackstone.com

With copies to:

Ropes & Gray LLP
1211 Avenue of the Americas
New York, NY 10036-8704
Attention:		Daniel L. Stanco
Telephone:		(212) 841-5758
Email:		daniel.stanco@ropesgray.com

EXHIBIT I

CONFIRMATION STATEMENT

DEUTSCHE BANK AG,

Cayman Islands Branch

Ladies and Gentlemen:

Deutsche Bank AG, Cayman Islands Branch, is pleased to deliver our written CONFIRMATION of our agreement to enter into the Transaction pursuant to which Deutsche Bank AG, Cayman Islands Branch shall purchase from you the Purchased Loans identified on Schedule 1 attached hereto, pursuant to the terms of that certain Second Amended and Restated Master Repurchase Agreement, dated as of December 16, 2019 (as amended, modified and/or restated, the “Agreement”), between Deutsche Bank AG, Cayman Islands Branch (“Buyer”) and Parlex 15 Finco, LLC, a Delaware limited liability company (“Master Seller”; together with the Series Seller (as defined in the Agreement) identified below, collectively, “Seller”). Capitalized terms used herein without definition have the meanings given in the Agreement.


		Series Seller:		[______________________]

		Purchase Date:		[______________________]

		Repurchase Date:		[______________________] (provided, if the Facility Termination Date is extended as described in Section 3(p) of the Agreement, the Repurchase Date shall be automatically extended to the date determined in accordance with Section 3(p) of the Agreement)

		Purchased Loan:		[______________________]

		Annual Purchased Loan Fee:		[______________________]

		Annual Purchased Loan
		Fee Percentage		[______________________]

		Initial Principal Balance of Purchased Loan:		[______________________]

		Purchase Date Market Value:		[______________________]

		Actual Original Purchase
		Percentage:		[______________________]

		Maximum Original Purchase
		Percentage:		[______________________]

		Purchase Price:		[______________________]

		Recourse Reference Amount:		[______________________]

		Extended Purchased Loan
		Maturity Date:		[______________________]



		Initial Pricing Rate:		[______________________]

		Applicable Spread:		[______________________]

		[Subject to Approved Transaction (Y/N):]		[______________________]

		Financing Fee Rate:		[______________________]

		Financing Fee Cap:		[______________________]

		Financing Fee Payee:		[______________________].

		Wiring Instructions of Financing Fee Payee:		[______________________]

		Representations and		See Schedule 2 attached hereto
		Warranties:

		Exceptions to Representations		See Schedule 3 attached hereto
		and Warranties:

		Name and address for
		communications:


				Buyer:

				Deutsche Bank AG, Cayman Islands Branch
				60 Wall Street
				New York, New York 10005
				Attention:		Tom Rugg
				Telephone:		(212) 250-3541
				Telecopy:		(212) 797-5630
				Email:		tom.rugg@db.com

				With copies to:

				Deutsche Bank AG, Cayman Islands Branch
				60 Wall Street
				New York, New York 10005
				Attention: General Counsel

				and

				Deutsche Bank AG, Cayman Islands Branch
				60 Wall Street
				New York, New York 10005
				Attention:		Robert W. Pettinato Jr.
				Telephone:		(212) 250-5579
				Telecopy:		(212) 797-0286
				Email: robert.pettinato@db.com


				Seller:

				Parlex 15 Finco, LLC
				c/o Blackstone Mortgage Trust, Inc.
				345 Park Avenue
				New York, New York 10154
				Attention: Douglas Armer
				Telephone: (212) 583-5000
				Email:
				BXMTDeutscheRepo@blackstone.com

				With copies to:

				Ropes & Gray LLP
				1211 Avenue of the Americas
				New York, NY 10036-8704
				Attention: Daniel L. Stanco
				Telephone: (212) 841-5758
				Email: daniel.stanco@ropesgray.com

[SIGNATURE PAGES FOLLOW]


BUYER:

DEUTSCHE BANK AG, CAYMAN
ISLANDS BRANCH

By:
		Name:
		Title:

By:
		Name:
		Title:


AGREED AND ACKNOWLEDGED:

MASTER SELLER:

PARLEX 15 FINCO, LLC, a Delaware limited liability company



By:


		Name:
		Title:

SERIES SELLER:

[____________________________]



By:
		Name:
		Title:

SCHEDULE 1 TO CONFIRMATION

(PURCHASED LOAN)

SCHEDULE 2 TO CONFIRMATION

(REPRESENTATIONS AND WARRANTIES)


Purchased Loan Name:		Extended Purchased Loan Maturity Date:
640 Broadway		1/9/2022
Aston Hotel Waikiki Beach		4/9/2025
CBS Television City		2/1/2024
Park Central New York		12/9/2023
Park Central San Francisco		12/9/2023
Terminal Stores		10/23/2021
Uptown Station		8/9/2022

SCHEDULE 3 TO CONFIRMATION

(EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES)

EXHIBIT II

AUTHORIZED REPRESENTATIVES OF SELLER


Name	Office	Specimen Signature
Stephen D. Plavin	Chief Executive Officer and President	/s/ Stephen D. Plavin

Douglas N. Armer	Executive Vice President, Capital Markets, and Treasurer	/s/ Douglas N. Armer

Anthony F. Marone, Jr.	Managing Director and Chief Financial Officer	/s/ Anthony F. Marone, Jr.

Leon Volchyok	Managing Director, Secretary and Head of Legal and Compliance	/s/ Leon Volchyok

Thomas C. Ruffing	Managing Director, Head of Asset Management	/s/ Thomas C. Ruffing

Weston Tucker	Senior Managing Director, Head of lnvestor Relations	/s/ Weston Tucker

Katharine Keenan	Executive Vice President, Investments	/s/ Katharine Keenan

EXHIBIT III

[Reserved]

Master Repurchase Agreement

Exhibit III-1

EXHIBIT IV

FORM OF CUSTODIAL DELIVERY CERTIFICATE

On this ______ day of _______, 20__, Parlex 15 Finco, LLC, a Delaware limited liability company, on behalf of itself and [SERIES SELLER] (collectively, “Seller”), pursuant to (i) that certain Custodial Agreement, dated as of August 2, 2016, among Seller, U.S. Bank National Association, as Custodian, and Deutsche Bank AG, Cayman Islands Branch (“Buyer”) (as amended, modified or supplemented from time to time, the “Custodial Agreement”) and (ii) that certain Second Amended and Restated Master Repurchase Agreement, dated as of December 16, 2019, between Seller and Buyer (as amended, modified or supplemented from time to time, the “Repurchase Agreement”), does hereby deliver the documents comprising the Purchased Loan File(s) (and listed on Exhibit B hereto with respect to the Purchased Loan(s) identified in Exhibit A hereto) to (a) the Bailee pursuant to that certain Bailee Agreement dated as of [_______________] by and among Seller, Buyer, and Bailee (the “Bailee Agreement”), for Bailee to hold and deliver to Custodian as set forth therein, and (b) the Custodian (through the Bailee aforesaid). Seller hereby instructs Bailee to comply with the terms of the Bailee Agreement, and hereby instructs Custodian to comply with the terms of the Custodial Agreement, in each case, holding the Purchased Loan File(s) for the benefit of Buyer.

With respect to the Purchased Loan File(s) delivered herewith, for purposes of issuing its Trust Receipt, Custodian shall review the Purchased Loan File(s) to confirm receipt of each of the documents identified on Exhibit B hereto.

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Custodial Agreement.

[Remainder of this page intentionally left blank.]

IN WITNESS WHEREOF, Seller has caused this Custodial Delivery Certificate to be executed and delivered by its duly authorized officer as of the day and year first above written.


PARLEX 15 FINCO, LLC,
a Delaware limited liability company

By:
		Name:
		Title:

Exhibit A

PURCHASED LOAN SCHEDULE

For each Purchased Loan set forth below, Seller shall provide, as applicable, the following information:

(a)

Loan Number

(b)

Obligor Name

(c)

Property Name and Address

(d)

Original Balance

(e)

Loan type

(f)

Maturity Date

Exhibit B

PURCHASED LOAN FILE CHECKLIST


DOCUMENT NAME	REQ’D¹	DEL’D²	STATUS³	COMMENTS⁴

¹	Seller to indicate whether the document is required to be delivered.

²	Seller to indicate whether the document is being delivered (applies to this delivery only – do not mark if documents were previously delivered).

³	Seller to indicate whether the document is an original, certified copy or copy. For recordable documents, indicate if document is recorded, sent for recordation, not sent for recordation.

⁴	Seller may indicate any relevant comments.

-2-

EXHIBIT V

FORM OF POWER OF ATTORNEY

“Know All Men by These Presents, that Parlex 15 Finco, LLC, a Delaware limited liability company (“Master Seller”), on behalf of itself and each Series Seller (as defined in the Repurchase Agreement (hereinafter defined)) (Master Seller together with each Series Seller which may hereafter be a party to the Repurchase Agreement, collectively, “Seller”) does hereby appoint Deutsche Bank AG, Cayman Islands Branch (“Buyer”), its attorney-in-fact, during the continuance of an Event of Default, to act in Seller’s name, place and stead in any way which Seller could do with respect to (i) the completion of the endorsements of the Mortgage Notes and the Assignments of Mortgages, (ii) the recordation of the Assignments of Mortgages and (iii) the enforcement of Seller’s rights under the Purchased Loans purchased by Buyer pursuant to that certain Master Repurchase Agreement, dated as of August 2, 2016 (as amended, modified and/or restated, the “Repurchase Agreement”), between Buyer and Master Seller, and to take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Loans, the related Purchased Loan Files and the Servicing Records to the extent that Seller is permitted by law to act through an agent; provided, however, that, in the case of a Transaction Event of Default, such appointment shall be limited to actions to be taken only with respect to the applicable Purchased Loan which is the subject of such Transaction Event of Default. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto 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.

IN WITNESS WHEREOF, Master Seller has caused this Power of Attorney to be executed as of August 2, 2016.


PARLEX 15 FINCO, LLC, a Delaware limited liability company

By:
		Name:
		Title:

EXHIBIT VI

REPRESENTATIONS AND WARRANTIES

REGARDING INDIVIDUAL PURCHASED LOANS⁵

With respect to each Purchased Loan, Seller hereby represents and warrants, as of the date herein specified or, if no such date is specified, as of the Purchase Date, and in either case at all times while such Purchased Loan is subject to a Transaction, that:

1. Whole Loan; Ownership of Purchased Loans. Except with respect to any Purchased Loan that is a Senior Interest, each Purchased Loan is a whole loan and not a participation interest in a mortgage loan. Each Senior Interest is a senior or pari passu portion of a whole loan evidenced by a senior or pari passu note. At the time of the sale, transfer and assignment to Buyer, no Mortgage Note or Mortgage was subject to any assignment (other than assignments to Seller), participation (other than with respect to any Purchased Loan that is a Participation Interest) or pledge, and Seller had good title to, and was the sole owner of, each Purchased Loan free and clear of any and all liens, charges, pledges, encumbrances, participations (other than with respect to a Purchased Loan that is a Participation Interest), any other ownership interests (other than with respect to a Purchased Loan that is a Senior Interest) on, in or to such Purchased Loan other than any servicing rights appointment or similar agreement. Seller has full right and authority to sell, assign and transfer each Purchased Loan, and, upon the completion of the assignee information therein and Buyer’s countersignature where applicable, the assignment to Buyer constitutes a legal, valid and binding assignment of such Purchased Loan free and clear of any and all liens, pledges, charges or security interests of any nature encumbering such Purchased Loan.

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 Loan 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 or market value limit deficiency legislation), as applicable, and is enforceable in accordance with its terms, except (i) as such enforcement may be limited by (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (ii) those certain provisions in such Purchased Loan Documents (including, without limitation, provisions requiring the payment of default interest, late fees or prepayment/yield maintenance 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 (i) above) such limitations or unenforceability will not render such Purchased Loan Documents invalid as a whole or materially interfere with the mortgagee’s realization of the principal benefits and/or security provided thereby (clauses (i) and (ii) collectively, the “Standard Qualifications”).

⁵	Comments to reps under review.

Master Repurchase Agreement

Exhibit VI-1

Except as set forth in the immediately preceding sentence, there is no valid offset, defense, counterclaim or right of rescission available to the related Mortgagor with respect to any of the related Mortgage Notes, Mortgages or other Purchased Loan 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 Loan, that would deny the mortgagee the principal benefits intended to be provided by the Mortgage Note, Mortgage or other Purchased Loan Documents.

3. Mortgage Provisions. The Purchased Loan Documents for each Purchased Loan 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, nonjudicial foreclosure subject to the limitations set forth in the Standard Qualifications.

4. Mortgage Status; Waivers and Modifications. Since origination and except by written instruments set forth in the related Purchased Loan File or as otherwise provided in the related Purchased Loan Documents (a) the material terms of such Mortgage, Mortgage Note, Purchased Loan guaranty, and related Purchased Loan Documents have not been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect; (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 Mortgagor nor the related guarantor has been released from its material obligations under the Purchased Loan. With respect to each Purchased Loan File, except as contained in a written document included in the Purchased Loan File, there have been no modifications, amendments or waivers, that could be reasonably expected to have a material adverse effect on such Purchased Loan consented to by Seller on or after the related Purchase Date.

5. Hospitality Provisions. The Purchased Loan Documents for each Purchased Loan that is secured by a hospitality property operated pursuant to a franchise or license agreement includes an executed comfort letter or similar agreement signed by the related Mortgagor and franchisor or licensor of such property that, subject to the applicable terms of such franchise or license agreement and comfort letter or similar agreement, is enforceable by the holder of the Purchased Loan against such franchisor or licensor either (A) directly or as an assignee of the originator, or (B) upon Seller’s or its designee’s providing notice of the transfer of the Purchased Loan in accordance with the terms of such executed comfort letter or similar agreement. The Mortgage or related security agreement for each Purchased Loan secured by a hospitality property creates a security interest in the revenues of such Mortgaged Property for which a UCC financing statement has been filed in the appropriate filing office. For the avoidance of doubt, no representation is made as to the perfection of any security interest in revenues to the extent that possession or control of such items or actions other than the filing of Uniform Commercial Code financing statements is required to effect such perfection.

Master Repurchase Agreement

Exhibit VI-2

6. Lien; Valid Assignment. Subject to the Standard Qualifications, each assignment of Mortgage and assignment of Assignment of Leases from Seller will constitute a legal, valid and binding assignment from Seller. 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 Loan or allocated loan amount (subject only to Permitted Encumbrances (as defined below) and the exceptions to paragraph (7) (each such exception, a “Title Exception”)), except as the enforcement thereof may be limited by the Standard Qualifications. Such Mortgaged Property (subject to and excepting Permitted Encumbrances and the Title Exceptions) as of origination was, and as of the Purchase Date, to the Knowledge of Seller, is free and clear of any recorded mechanics’ liens, recorded materialmen’s liens and other recorded encumbrances which are 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), and, to the Knowledge of Seller and subject to the rights of tenants (as tenants only) (subject to and excepting Permitted Encumbrances and the Title Exceptions), 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). 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.

7. Permitted Liens; Title Insurance. Each Mortgaged Property securing a Purchased Loan is covered by an American Land Title Association loan title insurance policy or a comparable form of loan title insurance policy approved for use in the applicable jurisdiction (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) (the “Title Policy”) in the original principal amount of such Purchased Loan (or with respect to a Purchased Loan 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 (a) the lien of current real property taxes, water charges, sewer rents and assessments due and payable but not yet delinquent; (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record; (c) the exceptions (general and specific) and exclusions set forth in such Title Policy; (d) other matters to which like properties are commonly subject; (e) the rights of tenants (as tenants only) under leases (including subleases) pertaining to the related Mortgaged Property and condominium declarations; (f) if the related Purchased Loan is cross-collateralized and cross-defaulted with another Purchased Loan (each a “Crossed Mortgage Loan”), the lien of the Mortgage for another Purchased Loan that is cross-collateralized and cross-defaulted with such Crossed Mortgage Loan; and (g) if the related

Master Repurchase Agreement

Exhibit VI-3

Purchased Loan is part of a whole loan, the rights of the holder(s) of any related whole loan(s) pursuant to the related co-lender agreement, provided that none of which items (a) through (f), individually or in the aggregate, materially and adversely interferes with the value or current use of the Mortgaged Property or the security intended to be provided by such Mortgage or the Mortgagor’s ability to pay its obligations when they become due (collectively, the “Permitted Encumbrances”). Except as contemplated by clause (f) of the preceding sentence, 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 the Knowledge of Seller, any other holder of the Purchased Loan, has done, by act or omission, anything that would materially impair the coverage under such Title Policy.

8. Junior Liens. It being understood that B notes secured by the same Mortgage as a Purchased Loan are not subordinate mortgages or junior liens, except for any Crossed Mortgage Loan, there are, as of origination, and to the Knowledge of Seller, as of the Purchase Date, no subordinate mortgages or junior liens securing the payment of money encumbering the related Mortgaged Property (other than Permitted Encumbrances and the Title Exceptions, taxes and assessments, mechanics and materialmen’s liens (which are the subject of the representation in paragraph (5) above), and equipment and other personal property financing. Seller has no knowledge of any mezzanine debt secured directly by interests in the related Mortgagor, other than any applicable Related Interest.

9. Assignment of Leases and Rents. There exists as part of the related Purchased Loan File an Assignment of Leases (either as a separate instrument or incorporated into the related Mortgage). Subject to the Permitted Encumbrances and the Title Exceptions, 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. The related Mortgage or related Assignment of Leases, subject to applicable law, provides that, upon an event of default under the Purchased Loan, 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. If the related Mortgaged Property is operated as a hospitality property, 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 financing statements in the appropriate public filing and/or recording offices necessary at the time of the origination of the Purchased Loan 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 Loan

Master Repurchase Agreement

Exhibit VI-4

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 financing statements are required in order to effect such perfection.

11. Condition of Property. Seller or the originator of the Purchased Loan inspected or caused to be inspected each related Mortgaged Property within six (6) months of origination of the Purchased Loan and within twelve (12) months of the Purchase Date.

An engineering report or property condition assessment was prepared in connection with the origination of each Purchased Loan no more than twelve (12) months prior to the Purchase Date. To the Knowledge of Seller, based solely upon due diligence customarily performed in connection with the origination of comparable mortgage loans, as of the Purchase Date, each related Mortgaged Property was free and clear of any material damage (other than (i) any damage or deficiency that is estimated to cost less than $50,000 to repair, (ii) any deferred maintenance for which escrows were established at origination and (iii) any damage fully covered by insurance) that would affect materially and adversely the use or value of such Mortgaged Property as security for the Purchased Loan.

12. Taxes and Assessments. All taxes, governmental assessments and other 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 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 representation and warranty, 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 the Knowledge of Seller as of the Purchase Date, there is no proceeding pending, and, to the Knowledge of Seller as of the date of origination and as of the Purchase 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 Loan. As of the date of origination and to the Knowledge of Seller as of the Purchase Date, there was no pending or filed action, suit or proceeding, arbitration or governmental investigation involving any Mortgagor, guarantor, or Mortgagor’s interest in 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

Master Repurchase Agreement

Exhibit VI-5

Property, (b) the validity or enforceability of the Mortgage, (c) such Mortgagor’s ability to perform under the related Purchased Loan, (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 Loan Documents or (f) the current principal use of the Mortgaged Property.

15. Escrow Deposits. All escrow deposits and payments required to be escrowed with lender pursuant to each Purchased Loan 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 Loan Documents are being conveyed by Seller to Buyer or its servicer.

16. No Holdbacks. Except for Purchased Loans identified to Buyer as having future advances and only to the extent of scheduled future advances in the related Confirmation, the principal amount of the Purchased Loan stated on the Purchased Loan 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 Loan 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).

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 Loan Documents and having a claims-paying or financial strength rating of any one of the following: (i) at least “A-:VIII” from A.M. Best Company, (ii) at least “A3” (or the equivalent) from Moody’s or (iii) at least “A-” from S&P (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 Loan 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 Purchased Loan Documents, by business interruption or rental loss insurance which (subject to a customary deductible) covers a period of not less than 12 months (or with respect to each Purchased Loan on a single asset with a principal balance of $50 million or more, 18 months).

Master Repurchase Agreement

Exhibit VI-6

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 insurance 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 Seller for comparable mortgage loans intended for securitization.

If the Mortgaged Property is located within 25 miles of the coast of the Gulf of Mexico or the Atlantic coast of Florida, Georgia, South Carolina or North Carolina, the related Mortgagor is required to maintain coverage for windstorm and/or windstorm related perils and/or “named storms” 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 not less than the lesser of (1) the original principal balance of the Purchased Loan and (2) the full insurable value on a replacement cost basis of the improvements and personalty and fixtures owned by the Mortgagor and included in the related Mortgaged Property by an insurer meeting the Insurance Rating Requirements.

The Mortgaged Property is covered, and required to be covered pursuant to the related Purchased Loan 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 Seller 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 (“SEL”) or the probable maximum loss (“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:VIII” by A.M. Best Company or “A3” (or the equivalent) from Moody’s or “A-” by S&P in an amount not less than 100% of the SEL or PML, as applicable.

The Purchased Loan 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 Loan (or whole loan, if applicable) 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 payment of the outstanding principal balance of such Purchased Loan (or whole loan, if applicable) together with any accrued interest thereon.

Master Repurchase Agreement

Exhibit VI-7

All premiums on all insurance policies referred to in this section required to be paid as of the Purchase Date have been paid, and such insurance policies name the lender under the Purchased Loan 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 Buyer. Each related Purchased Loan 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. 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) 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 Loan requires 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.

19. No Encroachments. To the Knowledge of Seller based solely on surveys obtained in connection with origination 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 Loan, 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 Loan 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 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 obtained with respect to the Title Policy.

20. No Contingent Interest or Equity Participation. No Purchased Loan has a shared appreciation feature, any other contingent interest feature or a negative amortization feature (except that an ARD Loan (as defined below) may provide for the accrual of the portion of interest in excess of the rate in effect prior to the Anticipated Repayment Date (as defined below)) or an equity participation by Seller.

Master Repurchase Agreement

Exhibit VI-8

21. REMIC. The representations in this paragraph 20 are made by Seller only to the extent that the related Purchased Loan has been identified to Buyer I writing as being REMIC eligible. The Purchased Loan is a “qualified mortgage” within the meaning of Code Section 860G(a)(3) (but determined without regard to the rule in the U.S. Department of Treasury Regulations (the “Treasury Regulations”) Section 1.860G-2(f)(2) that treats certain defective Purchased Loans as qualified mortgages), and, accordingly, (A) the issue price of the Purchased Loan to the related Mortgagor at origination did not exceed the non-contingent principal amount of the Purchased Loan and (B) either: (a) such Purchased Loan is secured by an interest in real property (including permanently affixed buildings and structural components, such as wiring, plumbing systems and central heating and air conditioning systems, that are integrated into such buildings, serve such buildings in their passive functions and do not produce or contribute to the production of income other than consideration for the use or occupancy of space, but excluding personal property) having a fair market value (i) at the date the Purchased Loan (or related whole loan, if applicable) was originated at least equal to 80% of the adjusted issue price of the Purchased Loan (or related whole loan, as applicable) on such date or (ii) at the Purchase Date at least equal to 80% of the adjusted issue price of the Purchased Loan (or whole loan, if applicable) on such date, provided that for purposes hereof, the fair market value of the real property interest must first be reduced by (A) the amount of any lien on the real property interest that is senior to the Purchased Loan and (B) a proportionate amount of any lien on the real property interest that is in parity with the Purchased Loan (or whole loan, if applicable); or (b) substantially all of the proceeds of such Purchased Loan were used to acquire, improve or protect the real property which served as the only security for such Purchased Loan (other than a recourse feature or other third-party credit enhancement within the meaning of Section 1.860G-2(a)(1)(ii)) of the Treasury Regulations. If the Purchased Loan was “significantly modified” prior to the Purchase Date so as to result in a taxable exchange under Section 1001 of the Code, it either (x) was modified as a result of the default or reasonably foreseeable default of such Purchased Loan or (y) satisfies the provisions of either sub-clause (B)(a)(i) above (substituting the date of the last such modification for the date the Purchased Loan was originated) or sub-clause (B)(a)(ii), including the proviso thereto. Any prepayment premium and yield maintenance charges applicable to the Purchased Loan constitute “customary prepayment penalties” within the meaning of Section 1.860G-1(b)(2) of the Treasury Regulations. All terms used in this paragraph shall have the same meanings as set forth in the related Treasury Regulations.

22. Compliance with Usury Laws. The interest rate (exclusive of any default interest, late charges, yield maintenance charge, or prepayment premiums) of such Purchased Loan 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 or as of the 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 Loan by the trust.

Master Repurchase Agreement

Exhibit VI-9

24. Trustee under Deed of Trust. With respect to each Mortgage which is a deed of trust, as of the date of origination and, to the Knowledge of Seller, as of the Purchase Date, 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.

25. Local Law Compliance. To the Knowledge of Seller, 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 or, if applicable, 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 Loan as of the date of origination of such Purchased Loan and as of the Purchase Date, there are no material violations of applicable zoning ordinances, building codes 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 Seller 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 Loan. The terms of the Purchased Loan 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 Loan Documents that it shall keep all material licenses, permits and applicable governmental authorizations necessary for its operation of the Mortgaged Property in full force and effect, and to the Knowledge of Seller 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 or if applicable, manufactured housing community mortgage loans intended for securitization, all such material licenses, permits and applicable governmental authorizations are in effect. The Purchased Loan requires the related Mortgagor to be qualified to do business in the jurisdiction in which the related Mortgaged Property is located.

27. Recourse Obligations. The Purchased Loan Documents for each Purchased Loan provide that (a) the related Mortgagor and at least one individual or entity shall be fully liable for actual losses, liabilities, costs and damages arising from certain acts of the related Mortgagor and/or its principals specified in the related Purchased Loan Documents, which acts generally include the following: (i) acts of fraud or intentional material misrepresentation, (ii) misapplication or misappropriation of rents, insurance proceeds or condemnation awards, (iii) intentional material physical waste of the Mortgaged Property

Master Repurchase Agreement

Exhibit VI-10

(provided that the Mortgaged Property generates sufficient cash flow to prevent such waste), and (iv) any breach of the environmental covenants contained in the related Purchased Loan Documents, and (b) the Purchased Loan shall become full recourse to the related Mortgagor and at least one individual or entity, if the related Mortgagor files a voluntary petition under federal or state bankruptcy or insolvency law.

28. Mortgage Releases. The terms of the related Mortgage or related Purchased Loan 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, or partial Defeasance (as defined in paragraph (33)), in each case, 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 Loan, (b) upon payment in full of such Purchased Loan, (c) upon a Defeasance (as defined in paragraph (33)), (d) 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 Loan and are not necessary for physical access to the Mortgaged Property or compliance with zoning requirements, or (e) as required pursuant to an order of condemnation or taking by a state or any political subdivision or authority thereof. To the extent that the Purchased Loan has been identified to Buyer in writing as being REMIC eligible, with respect to any partial release (including in connection with any partial Defeasance) under the preceding clauses (a) or (d), either: (x) such release of collateral (i) would not constitute a “significant modification” of the subject Purchased Loan within the meaning of Section 1.860G-2(b)(2) of the Treasury Regulations and (ii) would not cause the subject Purchased Loan to fail to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3)(A); or (y) the mortgagee or servicer can, in accordance with the related Purchased Loan Documents, condition such release of collateral on the related Mortgagor’s delivery of an opinion of tax counsel to the effect specified in the immediately preceding clause (x). To the extent that the Purchased Loan has been identified to Buyer in writing as being REMIC eligible, for purposes of the preceding clause (x), if the fair market value of the real property constituting such Mortgaged Property after the release (reduced by (A) the amount of any lien on the real property interest that is senior to the Purchased Loan and (B) a proportionate amount of any lien on the real property interest that is in parity with the Purchased Loan or whole loan, if applicable) after the release is not equal to at least 80% of the principal balance of the Purchased Loan (or Senior Interest) outstanding after the release, the Mortgagor is required to make a payment of principal in an amount not less than the amount required by the REMIC Provisions (as defined below).

To the extent that the Purchased Loan has been identified to Buyer in writing as being REMIC eligible, in the event of a condemnation or taking of any portion of a Mortgaged Property by a state or any political subdivision or authority thereof, whether by legal proceeding or by agreement, the Mortgagor can be required to pay down the principal balance of the Purchased Loan in an amount not less than the amount required by the REMIC Provisions and, to such extent, condemnation proceeds may not be required to be applied to the restoration of the Mortgaged Property or released to the Mortgagor, if, immediately after the release of such

Master Repurchase Agreement

Exhibit VI-11

portion of the Mortgaged Property from the lien of the Mortgage (but taking into account the planned restoration) the fair market value of the real property constituting the remaining Mortgaged Property (reduced by (A) the amount of any lien on the real property that is senior to the Purchased Loan and (B) a proportionate amount of any lien on the real property interest that is in parity with the Purchased Loan or whole loan, if applicable) not equal to at least 80% of the remaining principal balance of the Purchased Loan (or Senior Interest).

No Purchased Loan, to the extent that such Purchased Loan has been identified to Buyer in writing as being REMIC eligible, that is secured by more than one Mortgaged Property or that is a Crossed Mortgage Loan permits the release of cross-collateralization of the related Mortgaged Properties or a portion thereof including due to a partial condemnation, other than in compliance with the loan-to-value ratio and other requirements of the REMIC Provisions.

29. Financial Reporting and Rent Rolls. The Purchased Loan Documents 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 Loan 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 Loan 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, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (collectively referred to as “TRIA”), from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy. With respect to each other Purchased Loan, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) did not, as of the date of origination of the Purchased Loan, and, to the Knowledge of Seller, do not, as of the Purchase Date, 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 Loan, the related Purchased Loan Documents do not expressly waive or prohibit the mortgagee from requiring coverage for Acts of Terrorism, as defined in 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 TRIA or a similar or subsequent statute is not in effect, then, provided that terrorism insurance is commercially available, the Mortgagor under each Purchased Loan 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

Master Repurchase Agreement

Exhibit VI-12

required under the related Purchased Loan Documents (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance) at such time, and if the cost of terrorism insurance exceeds such amount, the Mortgagor 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 Loan contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Purchased Loan 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 Loan Documents (which provide for transfers without the consent of the lender which are customarily acceptable to Seller lending 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 Loan 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 Loan Documents, (iii) transfers of less than, or other than, a controlling interest in the related Mortgagor, (iv) transfers to another holder of direct or indirect equity in the Mortgagor, a specific Person designated in the related Purchased Loan Documents or a Person satisfying specific criteria identified in the related Purchased Loan Documents, such as a qualified equityholder, (v) transfers of stock or similar equity units in publicly traded companies, (vi) a substitution or release of collateral within the parameters of paragraphs (28) and (33) herein or (vii) by reason of any mezzanine debt that existed at the origination of the related Purchased Loan or future permitted mezzanine debt (and which is disclosed in writing to Buyer and approved by Buyer in its sole discretion prior to the Purchase Date of such Purchased Loan), or (b) the related Mortgaged Property is encumbered with a subordinate lien or security interest against the related Mortgaged Property, other than (i) any subordinate debt that existed at origination and is permitted under the related Purchased Loan Documents, (ii) purchase money security interests, (iii) any Crossed Mortgage Loan, or (iv) Permitted Encumbrances. The Mortgage or other Purchased Loan 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.

32. Single-Purpose Entity. Each Purchased Loan requires the Mortgagor to be a Single-Purpose Entity for at least as long as the Purchased Loan is outstanding. Both the Purchased Loan Documents and the organizational documents of the Mortgagor with respect to each Purchased Loan with a Purchase Date Principal Balance in excess of $5 million provide that the Mortgagor is a Single-Purpose Entity, and each Purchased Loan with a Purchase Date Principal Balance of $20 million or more has a counsel’s opinion regarding non-consolidation of the Mortgagor. For this purpose, a “Single-Purpose Entity” shall mean an entity, other than an individual, whose organizational documents (or if the Purchased Loan has a Purchase Date

Master Repurchase Agreement

Exhibit VI-13

Principal Balance equal to $5 million or less, its organizational documents or the related Purchased Loan 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 Properties securing the Purchased Loans 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 Loan 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 Loan Documents, that it has its own books and records and accounts separate and apart from those of any other person (other than a Mortgagor for a Crossed Mortgage Loan), and that it holds itself out as a legal entity, separate and apart from any other person or entity.

33. Defeasance. With respect to any Purchased Loan that, pursuant to the Purchased Loan Documents, can be defeased (a “Defeasance”), (i) the Purchased Loan Documents provide for Defeasance as a unilateral right of the Mortgagor, subject to satisfaction of conditions specified in the Purchased Loan Documents; (ii) the Purchased Loan cannot be defeased within two years after the Closing Date; (iii) the Mortgagor is permitted to pledge only United States “government securities” within the meaning of Section 1.860G-2(a)(8)(ii) of the Treasury Regulations, the revenues from which will, in the case of a full Defeasance, be sufficient to make all scheduled payments under the Purchased Loan when due, including the entire remaining principal balance on the maturity date or, if the Purchased Loan is an ARD Loan, the entire principal balance outstanding on the Anticipated Repayment Date (or on or after the first date on which payment may be made without payment of a yield maintenance charge or prepayment penalty), and if the Purchased Loan permits partial releases of real property in connection with partial Defeasance, the revenues from the collateral will be sufficient to pay all such scheduled payments calculated on a principal amount equal to a specified percentage at least equal to the lesser of (a) 110% of the allocated loan amount for the real property to be released and (b) the outstanding principal balance of the Purchased Loan; (iv) the Mortgagor is required to provide a certification from an independent certified public accountant that the collateral is sufficient to make all scheduled payments under the Mortgage Note as set forth in clause (iii) above; (v) if the Mortgagor would continue to own assets in addition to the Defeasance collateral, the portion of the Purchased Loan secured by Defeasance collateral is required to be assumed (or the mortgagee may require such assumption) by a Single-Purpose Entity; (vi) the Mortgagor is required to provide an opinion of counsel that the mortgagee has a perfected security interest in such collateral prior to any other claim or interest; and (vii) the Mortgagor is required to pay all rating agency fees associated with Defeasance (if rating confirmation is a specific condition precedent thereto) and all other reasonable expenses associated with Defeasance, including, but not limited to, accountant’s fees and opinions of counsel.

34. Floating Interest Rates. Each Purchased Loan bears interest at a floating interest rate in reference to an index rate.

Master Repurchase Agreement

Exhibit VI-14

35. Ground Leases. For purposes of this Agreement, 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, or with respect to air rights leases, the air, 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 Loan where the Purchased Loan 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)

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. 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;

(b)

The lessor under such Ground Lease has agreed in a writing included in the related Purchased Loan File (or in such Ground Lease) that the Ground Lease may not be amended or modified, or canceled or terminated by agreement of lessor and lessee, without the prior written consent of the lender, and no such consent has been granted by Seller since the origination of the Purchased Loan except as reflected in any written instruments which are included in the related Purchased Loan 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 borrower or the mortgagee) that extends not less than 20 years beyond the stated maturity of the related Purchased Loan, or 10 years past the stated maturity if such Purchased Loan fully amortizes by the stated maturity (or with respect to a Purchased Loan 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 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;

Master Repurchase Agreement

Exhibit VI-15

(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 Loan 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 Loan 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. To the Knowledge of Seller, 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 the Knowledge of Seller, such Ground Lease is in full force and effect as of the Purchase Date;

(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 Seller in connection with loans originated for securitization;

(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 clause (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 Loan 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 Loan, 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 Loan, together with any accrued interest; and

Master Repurchase Agreement

Exhibit VI-16

(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 lender upon termination of the Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding.

36. Servicing. The servicing and collection practices used by Seller with respect to the Purchased Loan have been, in all respects, legal and have met customary industry standards for servicing of commercial loans for conduit loan programs.

37. Origination and Underwriting. The origination practices of Seller (or the related originator if Seller was not the originator) with respect to each Purchased Loan have been, in all material respects, legal and as of the date of its origination, such Purchased Loan and the origination thereof complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the origination of such Purchased Loan; provided that such representation and warranty does not address or otherwise cover any matters with respect to federal, state or local law otherwise covered in this Exhibit VI; provided further that this representation shall not be applicable in respect of any Purchased Loan originated by Buyer or any Affiliate of Buyer.

38. No Material Default; Payment Record. No Purchased Loan 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 date hereof, no Purchased Loan is more than 30 days delinquent (beyond any applicable grace or cure period) in making required payments as of the Purchase Date. To the Knowledge of Seller, there is (a) no material default, breach, violation or event of acceleration existing under the related Purchased Loan, 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 clause (b), materially and adversely affects the value of the Purchased Loan or the value, use or operation of the related Mortgaged Property, provided, however, that this representation and warranty 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 this Exhibit VI (including, but not limited to, the prior sentence). No person other than the holder of such Purchased Loan may declare any event of default under the Purchased Loan or accelerate any indebtedness under the Purchased Loan Documents.

39. Bankruptcy. As of the date of origination of the related Purchased Loan and to the Knowledge of Seller as of the Purchase Date, no Mortgagor, guarantor or tenant occupying a single-tenant property is a debtor in state or federal bankruptcy, insolvency or similar proceeding.

Master Repurchase Agreement

Exhibit VI-17

40. Organization of Mortgagor. With respect to each Purchased Loan, in reliance on certified copies of the organizational documents of the Mortgagor delivered by the Mortgagor in connection with the origination of such Purchased Loan (or whole loan, as applicable), 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. Except with respect to any Crossed Mortgage Loan, no Purchased Loan has a Mortgagor that is an Affiliate of another Mortgagor under another Purchased Loan. (An “Affiliate” for purposes of this paragraph (40) means, a Mortgagor that is under direct or indirect common ownership and control with another Mortgagor.)

41. Environmental Conditions. 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 Loans, a Phase II environmental site assessment (collectively, an “ESA”) meeting ASTM requirements was conducted by a reputable environmental consultant in connection with such Purchased Loan 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, hereinafter “Environmental Condition”) 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 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 lender’s 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, S&P and/or Fitch; (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 the Knowledge of Seller, 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.

Master Repurchase Agreement

Exhibit VI-18

42. Appraisal. The Servicer File contains an Appraisal of the related Mortgaged Property with an appraisal date within six (6) months of the Purchased Loan origination date, and within twelve (12) months of the Purchase Date. The Appraisal is signed by an appraiser who is either a member of the Appraisal Institute (“MAI”) and/or has been licensed and certified to prepare appraisals in the state where the Mortgaged Property is located. 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 Mortgagor or in any loan made on the security thereof, and its compensation is not affected by the approval or disapproval of the Purchased Loan.

43. Purchased Loan Schedule. The information pertaining to each Purchased Loan which is set forth in the Purchased Loan Schedule is true and correct in all material respects as of the Purchase Date.

44. Cross-Collateralization. Except with respect to a Purchased Loan that is part of a whole loan, no Purchased Loan is cross-collateralized or cross-defaulted with any other mortgage loan that is not a Purchased Loan.

45. 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 Loan Documents, and, to the Knowledge of Seller, 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 Loan (other than as contemplated by the Purchased Loan 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 Loan Documents). Neither Seller nor any affiliate thereof has any obligation to make any capital contribution to any Mortgagor under a Purchased Loan, other than contributions made on or prior to the date hereof.

46. Compliance with Anti-Money Laundering Laws. Seller has complied in all material respects with all applicable anti-money laundering laws and regulations, including without limitation the USA Patriot Act of 2001 with respect to the origination of the Purchased Loan, the failure to comply with which would have a material adverse effect on the Purchased Loan.

47. Seller has obtained a copy of the related Mortgagor’s general construction contract and/or construction management agreement and each construction contract and/or subcontract, as applicable, sufficient to complete the project consistent with the Plans and Specifications (as defined below) in compliance with all restrictive covenants of record applicable to such underlying Mortgaged Property and all applicable local, state and federal laws, and regulations, including, without limitation, all applicable zoning laws, and there is a collateral assignment of the general construction contract and/or construction management agreement and each construction contract and/or subcontract, as applicable, to Seller as additional collateral for the Construction Loan.

Master Repurchase Agreement

Exhibit VI-19

48. Seller has obtained copies of the related Mortgagor’s plans and specifications for the design and construction of the project (the “Plans and Specifications”) and the architect, engineering and other applicable contracts with respect thereto, which Plans and Specifications are in all material respects in compliance with restrictive covenants of record applicable to such underlying Mortgaged Property and all applicable local, state and federal laws, and regulations, including, without limitation, all applicable zoning laws, and there is a collateral assignment of the Plans and Specifications, and all applicable contracts with respect thereto, to Seller as additional collateral for the related Mortgage Loan or Senior Interest, as applicable, and shall have the right to use the Plans and Specifications upon any transfer of the underlying Mortgaged Property to Buyer by foreclosure or otherwise.

49. Mortgagor has obtained all material licenses, permits, including, without limitation, building permits, and approvals required by all applicable local, state and federal laws, and regulations to be obtained for the construction of the improvements in accordance with the Plans and Specifications, all such material licenses and permits for the project are in full force and effect, and there is a collateral assignment of the licenses, permits and approvals to Seller as additional collateral for the Construction Loan.

50. Seller has obtained a copy of the related Mortgagor’s development or construction services agreement related to the development of the project, and any such service provider has executed an assignment and subordination agreement with respect thereto.

51. Seller has obtained a project budget which sets forth all hard and soft costs and expenses (with a specific allocation of the maximum advance for hard and soft costs and expenses) which will be incurred by Mortgagor in the design and construction of the project as shown on the Plans and Specifications. The unfunded principal amount of the Purchased Loan stated on the Purchased Loan Schedule to be disbursed is equal to or in excess of the remaining budget to complete the project and on each date of the determination thereof the related Mortgage Loan, or Senior Interest is “in balance”.

52. Seller has obtained a project completion schedule which sets forth the date which project is scheduled to be completed, and the related loan documents require the project to be completed by the project deadline, which deadline shall be at least one (1) year prior to the maturity date of the Purchased Loan.

53. Adequate sums to pay interest, insurance, taxes and other assessments for the term of the Construction Loan were reserved in connection with the origination of the Purchased Loan or included in the project budget.

Master Repurchase Agreement

Exhibit VI-20

54. All releases for future advance to fund project costs are conditioned upon (i) no existing defaults, (ii) Mortgagor’s submission of a draw request, (iii) minimum disbursements of $25,000, (iv) maximum disbursement requests of once per month, (v) at lender’s option, an inspection and approval of the improvements by lender’s independent consultant, (vi) Mortgagor’s certification that there are no existing defaults, that all work covered by the draw request has been completed in a good and workmanlike manner in accordance with the Plans and Specifications, and that all such work has been in compliance with all applicable local, state and federal laws, and regulations, including, without limitation, all applicable zoning laws, (vii) receipt of lien waivers, sworn statements and other documentation as lender shall reasonably request, (viii) Mortgagor causing to be delivered, at Mortgagor’s sole cost and expense, a “Date-Down Endorsement” to the Title Policy showing no new title exceptions other than the Permitted Encumbrances, and (ix) evidence that the project is proceeding on schedule in accordance with the construction timeline, Mortgagor’s and Sponsor’s representations being true and correct on the date of the advance, the loan being “in balance”.

55. The final funding of project costs are conditioned upon: (i) Mortgagor’s certification that there are no existing defaults; (ii) that all work has been completed in a good and workmanlike manner in accordance with the Plans and Specifications, and that all such work has been in compliance with all applicable local, state and federal laws, and regulations, including, without limitation, all applicable zoning laws; (iii) of a certification by the contractor, architect or engineer and, at lender’s option, a report from lender’s architect or engineer that all work (including, without limitation, all punchlist items) has been completed in a good and workmanlike manner and has been in compliance with all applicable local, state and federal laws, and regulations; (iv) lender’s receipt of evidence reasonably satisfactory to lender that all construction costs associated with the project shall, upon making the final funding, have been paid in full, (v) final, unconditional lien waivers from the general contractor and/or construction manager and all trade contractors; (vi) receipt of “as built” survey; (vii) receipt of “as built” Plans and Specifications; and (viii) the filing by Mortgagor of a notice of completion, as applicable.

56. Lender shall not be obligated to fund project costs for (i) deposits or other payments for materials or services or in respect of labor and materials that have not yet been incorporated into the project, (ii) any amounts retained or permitted to be retained by Mortgagor from payments to any contractor or any subcontractor, (iii) any item in excess of the amount shown for that item on the project budget, taking into account reasonable permitted reallocations from any contingency line item in the project budget, or (iv) if after such disbursement the related Mortgage Loan or Senior Interest, as applicable, would not be “in balance” (i.e., the unfunded principal amount of the Purchased Loan to be disbursed is equal to or in excess of the remaining budget to complete the project). If at any time the Construction Loan is not “in balance” the Mortgagor is required to deposit additional funds with Buyer in an amount necessary to cause the Construction Loan to be “in balance”.

57. Each disbursement for hard costs of the construction work whether or not designated in the project budget as a hard cost of the construction work (but excluding the general contractor’s “general conditions,” insurance and bonding costs and other expenses approved in writing by lender) shall be subject to a holdback (the “Retainage”) of at least five percent (5%) of the amounts due to the general contractor, construction manager, contractor or any subcontractor (on a line item basis) until such time as the applicable portion of the project (i.e. - the particular trade line item or an individual trade subcontractor’s work on the project) reaches substantial completion, subject to customary disbursement and release provisions.

Master Repurchase Agreement

Exhibit VI-21

58. Mortgagor must obtain lender’s prior written approval of (i) any proposed changes to the Plans and Specifications, (ii) any proposed changes to any construction contract, architect’s contract or design professional contracts held by Mortgagor, (ii) any new or additional contract held by Mortgagor related to the construction or design of the project (each such instance in (i), (ii) or (iii), a “Project Change”), which Project Change would have the effect of (a) increasing project budget line items (including line items set forth in the general construction contract) in the aggregate by more than five percent (5%) thereof, or (b) decreasing project budget line items (including line items set forth in the general construction contract) in the aggregate by more than five percent (5%) thereof, (c) changing in a material way the overall aesthetic appearance of the project or any significant services or amenities to be provided in connection with the project, or (v) diminishing the overall quality, functionality or marketability of the project in any material respect or (vi) causing the related Mortgage Loan or Senior Interest, as applicable, to be not “in balance” after taking into account any reallocations of the project budget which do not require lender’s consent. If as a result of any such Project Change (whether or not lender’s approval of such Project Change is required or has been obtained) the Loan will no longer be in balance, then Mortgagor must also comply with paragraph 56 above.

59. Each Purchased Loan meets the following requirements for exemption from the definition of a high volatility commercial real estate (“HVCRE”) under the U.S. Basel III-based regulatory capital rules for banking organizations: (a) the amount of the Purchased Loan was no greater than 80% of the appraised value of the underlying Mortgaged Property(ies) at origination; (b) Mortgagor contributed capital to the project in the form of cash or unencumbered readily marketable assets (or paid development costs out of pocket) of at least 15% of the project’s “as completed” appraised value and is required to satisfy such requirement at all times during the term of the related Mortgage Loan, or Senior Interest, as applicable, and (c) Mortgagor made its 15% contribution to the project before Seller advanced any funds under the underlying Mortgage Loan and the related loan documents provide that all contributed or internally generated capital must remain in the project and that the Mortgagor has no ability to withdraw either the capital contribution or the capital generated internally by the project until the underlying Mortgage Loan is converted to a permanent loan or paid in full.

60. At all times during which structural construction, repairs, or alterations are being made with respect to the project, including demolition, the underlying Mortgaged Property is covered by insurance policies providing the coverage described below and the Purchased Loan Documents permit the mortgagee to require the coverage described below:

the comprehensive general liability insurance shall include; (i) XCU coverage with regard to the contemplated demolition; and (ii) include three (3) years extended completed operations coverage, after completion of the contemplated demolition.

Master Repurchase Agreement

Exhibit VI-22

Umbrella and excess liability insurance in lender’s customary amounts, including, but not limited to, supplemental coverage for employer liability and automobile liability.

Mortgagor’s construction manager or general contractor, and contractors and sub-contractors are required to maintain similar coverage to that which is required by Mortgagor.

Builder’s risk “all risk” insurance (i) be written on a completed value form, (ii) include all the terms required in the required comprehensive general liability insurance; (iii) include foundations, excavations, underground machinery or equipment, retaining walls, and all paved surfaces; (iv) limits equivalent to 100% of the hard costs and soft costs for all recurring expenses in the event of damage or destruction; (v) maintain customary deductibles; and (vi) allow for permission to occupy.

Automobile liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of $1,000,000.

Such other insurance and in such amounts as lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to the properties located in or around the region in which the Mortgaged Property is located.

61. A construction consultant report by a reputable construction consultant relating to each underlying Mortgaged Property was obtained and reviewed by Seller in connection with the origination of such Purchased Loan and a copy is included in the Purchased Loan File, including an equity analysis, sources and uses analysis, and feasibility study.

62. There are no collective bargaining agreements applicable to the construction of the project.

63. The Purchased Loan Documents for each Purchased Loan provide that at least one creditworthy individual or entity shall be fully liable for the lien-free completion of the project in accordance with the Plans and Specifications, the related loan documents and all applicable local, state and federal laws, and regulations, including, without limitation, all applicable zoning laws, by the project deadline and for carrying costs related to the property.

64. Construction of the project has commenced and all construction has proceeded and continues to proceed in accordance with the schedule set forth in the related Purchased Loan Documents and the Business Plan in all material respects.

65. Mortgagor is required to cause payment and performance bonds to be issued with respect to the obligations of the general contractor, construction manager and all material trade contractors or, in the alternative, has obtained subguard insurance.

Master Repurchase Agreement

Exhibit VI-23

66. As of the Purchase Date, there is no payment default, giving effect to any applicable notice and/or grace period, and there is no other material default under any of the related Purchased Loan Documents, giving effect to any applicable notice and/or grace period; no such material default or breach has been waived by Seller or on its behalf or, by Seller’s predecessors in interest with respect to the Purchased Loan; and no event has occurred that, with the passing of time or giving of notice would constitute a material default or breach under the related Purchased Loan Documents. No Purchased Loan has been accelerated and no foreclosure or power of sale proceeding has been initiated in respect of the related Mortgage. Seller has not waived any material claims against the related Mortgagor under any non-recourse exceptions contained in the Mortgage Note.

For purposes of this Exhibit VI, the following terms shall have the following meanings:

“Anticipated Repayment Date”: With respect to any Purchased Loan that is indicated on the Purchased Loan Schedule as having a Revised Rate, the date upon which such Purchased Loan commences accruing interest at such Revised Rate.

“ARD Loan”: Any Purchased Loan the terms of which provide that if, after an Anticipated Repayment Date, Mortgagor has not prepaid such Purchased Loan in full, any principal outstanding on that date will accrue interest at the Revised Rate rather than the Initial Rate.

“REMIC Provisions”: Provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at Section 860A through 860G of Subchapter M of Chapter 1 of the Code, and related provisions, and regulations (including any applicable proposed regulations) and rulings promulgated thereunder, as the foregoing may be in effect from time to time.

“Revised Rate”: With respect to those Purchased Loans on the Purchased Loan File indicated as having a revised rate, the increased interest rate after the Anticipated Repayment Date (in the absence of a default) for each applicable Purchased Loan, as calculated and as set forth in the related Purchased Loan Documents.

Master Repurchase Agreement

Exhibit VI-24

EXHIBIT VII

ORGANIZATIONAL CHART

Seller Structure Chart

LOGO

EXHIBIT VIII

TRANSACTION PROCEDURES

I. Preliminary Approval of New Collateral Which is an Eligible Loan.

(a) Seller may, from time to time, submit to Buyer a Preliminary Due Diligence Package for Buyer’s review and approval in

order to enter into discussions regarding a Transaction with respect to any New Collateral that Seller proposes to be included as Collateral under the Agreement.

(b) Upon Buyer’s receipt of a complete Preliminary Due Diligence Package, Buyer shall have the right to request (one or more times), additional diligence materials and deliveries that Buyer shall specify on a Supplemental Due Diligence List. Upon Buyer’s receipt of all of the Diligence Materials or Buyer’s waiver thereof, Buyer shall within ten (10) Business Days, or if later, following receipt of internal credit approval, either (i) notify Seller of Buyer’s preliminary determination of Purchase Price and Market Value for the New Collateral or (ii) deny, in Buyer’s sole and absolute discretion, Seller’s request for a Transaction. Buyer’s failure to respond to Seller within ten (10) Business Days shall be deemed to be a denial of Seller’s request to enter into a Transaction.

II. Final Approval of New Collateral which is an Eligible Loan. Upon Buyer’s notification to Seller of Buyer’s preliminary determination of Purchase Price and the Market Value for any New Collateral which is an Eligible Loan, Seller shall, if Seller desires to enter into a Transaction with respect to such New Collateral, satisfy the conditions set forth below (in addition to satisfying the conditions precedent to obtaining each advance, as set forth in Section 3(b) of this Agreement) as a condition precedent to Buyer’s approval of such New Collateral as Collateral, all in a manner and pursuant to documentation in form and substance satisfactory to Buyer in its sole and absolute discretion:

(a) Delivery of Purchased Loan Documents. Buyer shall have received, reviewed and approved each of the Purchased Loan Documents (including for any Senior Interest, the Senior Interest Documents), except Purchased Loan Documents that Seller expressly and specifically disclosed in the Diligence Materials were not in Seller’s possession;

(b) Environmental and Engineering. Buyer shall have received, reviewed and approved a “Phase 1” (and, if necessary, “Phase 2”) environmental report, an asbestos survey and operation and maintenance plan, if applicable, an engineering report, and a seismic/PML report, if applicable, each in form reasonably satisfactory to Buyer, by an engineer or environmental consultant as may be approved by Buyer, in its sole discretion, applied in good faith.

(c) Appraisal. Buyer shall have received, reviewed and approved an Appraisal from an Independent Appraiser as may be approved by Buyer in its sole discretion, applied in good faith, dated within three (3) months of the proposed Purchase Date.

(d) Insurance. Buyer shall have received, reviewed and approved certificates or other evidence of insurance demonstrating insurance coverage in respect of the Mortgaged Property of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in the Purchased Loan Documents. Such certificates or other evidence shall indicate that Seller (or its Affiliate) 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 Loan Documents.

(e) Survey. Buyer shall have received, reviewed and approved all surveys of the Mortgaged Property that are in Seller’s possession, and which surveys shall contain flood zone certification.

(f) Lien, Judgment and Litigation Search Reports. Buyer or Buyer’s counsel shall have received, reviewed and approved, satisfactory reports of UCC, tax lien, judgment, litigation searches and title updates as Buyer may reasonably require from Seller conducted by search firms and/or title companies acceptable to Buyer with respect to the Eligible Loan, Mortgaged Property, and Mortgagor, and their respective affiliates, such searches to be conducted in each location Buyer shall reasonably designate.

(g) Credit and “Know Your Client” Searches. Buyer shall have received from Seller, reviewed and approved a credit agency report, Lexis-Nexis (or similar) searches and OFAC and “Know Your Client” searches conducted by search firms and/or title companies acceptable to Buyer with respect to Mortgagor and any guarantor (if applicable).

(h) Opinions of Counsel. Buyer shall have received copies of all legal opinions in Seller’s possession with respect to the Eligible Loan which shall be in form and substance reasonably satisfactory to Buyer.

(i) Additional Real Estate Matters. Seller shall have delivered to Buyer, in each case to the extent in Seller’s possession, such other real estate related certificates and documentation as may have been requested by Buyer, such as: (i) certificates of occupancy issued by the appropriate Governmental Authority and either letters certifying that the Mortgaged Property is in compliance with all applicable zoning laws issued by the appropriate Governmental Authority or evidence that the related title policy includes a zoning endorsement, (ii) abstracts of any ground leases and all space leases in effect at the Mortgaged Property (including a description of any co-tenancy/go-dark clauses, if applicable) and estoppel certificates, in form and substance acceptable to Buyer, from any ground lessor and from any tenant that occupies 7.5% or more of the rentable space at the Mortgaged Property, and in any event from tenants whose occupancies aggregate not less than 70% of the occupied rentable square footage at the Mortgaged Property, (iii) copies of any management agreements and service agreements in effect relating to the Mortgaged Property, (iv) a copy of the title policy (or, if the final printed version of the title policy has not been issued, the marked pro forma attached to the Purchased Loan closing escrow letter) together with copies of all reciprocal easement agreements and operating agreements, if applicable, and all other recorded documents and agreements

-2-

affecting title to the Mortgaged Property, (v) a copy of the purchase and sale agreement for the Mortgaged Property in connection with a Purchased Loan used to acquire a Mortgaged Property, if applicable, (vi) a copy of the marketing and leasing plan for the Mortgaged Property, if applicable, (vii) copies of tenant sales reports, if applicable, (viii) a copy of any franchise agreement relating to the Mortgaged Property, if applicable; and (ix) STR/PACE reports, if applicable; (x) LIHTL/HUD information, if applicable, and all of the foregoing documents and information shall be in form and substance satisfactory to Buyer.

(j) Other Documents. Buyer shall have received such other documents as Buyer or its counsel shall reasonably deem necessary.

Within five (5) Business Days of Seller’s satisfaction of all of the conditions enumerated in clauses (a) through (j) above, Buyer shall either (i) if the Purchased Loan Documents with respect to the New Collateral are not satisfactory in form and substance to Buyer, notify Seller that Buyer has not approved the New Collateral as Collateral or (ii) notify Seller that Buyer has approved the New Collateral as Collateral (which notice shall specify any changes in the Purchase Price resulting from such further review). Buyer’s failure to respond to Seller within five (5) Business Days shall be deemed to be a denial of Seller’s request that Buyer approve the New Collateral, unless Buyer and Seller have agreed otherwise in writing.

-3-

EXHIBIT IX

FORM OF SERVICER NOTICE AND AGREEMENT⁶

[__________], 20__

[Servicer]

RE:

Second Amended and Restated Master Repurchase Agreement, dated as of December 16, 2019 (as amended, modified and/or restated, the “Repurchase Agreement”) between Parlex 15 Finco, LLC, a Delaware limited liability company, as Master Seller (“Master Seller”), and Deutsche Bank AG, Cayman Islands Branch, as Buyer (“Buyer”)

Ladies and Gentlemen:

[____________________] (“Servicer”) has entered into that certain Servicing Agreement, dated as of [__________] (the “Servicing Agreement”), with Master Seller (together with any Series Seller (as defined in the Repurchase Agreement) party thereto, collectively, “Seller”) pursuant to which Servicer will be servicing certain commercial mortgage loans which loans are subject to Transactions with Buyer under the Repurchase Agreement. Capitalized terms used but not defined herein shall have the meaning set forth in the Repurchase Agreement. Servicer is hereby notified of, and agrees to comply with, the following:

The Purchased Loan Documents of each Purchased Loan provide, or Seller or Servicer has delivered a notice to the Mortgagor under each Purchased Loan which provides, that such Mortgagor or other obligor under a Purchased Loan shall pay all amounts payable under the related Purchased Loan to that certain account of Servicer more particularly described on Exhibit A hereof (the “Servicer Account”). Notwithstanding anything contained in the Servicing Agreement to the contrary, Servicer hereby acknowledges and agrees that Servicer shall cause all Available Income received by the Servicer on account of the Purchased Loans to be remitted to that certain account held at PNC Bank, National Association, a national banking association, entitled “ Parlex 15 Finco, LLC, as Master Seller, for the benefit of Deutsche Bank AG, Cayman Islands Branch, as Buyer”, which account is more particularly described on Exhibit A hereof (the “Cash Management Account”), by no later than two (2) Business Days following the date upon which such funds are received in the Servicer Account. Servicer acknowledges that all Income collected on account of the Purchased Loans, whether or not deposited into the Servicer Account is held for the benefit of Buyer.

⁶	To be used in connection with third-party Servicers (if applicable) other than Midland in its capacity as Initial Servicer under the Repurchase Agreement.

Master Repurchase Agreement

[_______]

Exhibit IX-1

Servicer agrees to deliver directly to Buyer, at the notice address provided herein, all servicing statements, reports and other information with respect to the Purchased Loans that Servicer is required to deliver to Seller under the Servicing Agreement, on the same date such information is required to be delivered to Seller.

Buyer 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 Loans (the “Servicing Records”) so long as the Purchased Loans are subject to the Repurchase Agreement. Pursuant to the Repurchase Agreement, Seller has granted Buyer a security interest in all servicing fees and rights relating to the Purchased Loans and all Servicing Records to secure the obligation of Seller or its designee to service in conformity with the Repurchase Agreement and any other obligation of Seller to Buyer. Seller has covenanted to safeguard such Servicing Records and to deliver them promptly to Buyer or its designee at Buyer’s request.

Upon the occurrence and continuance of a Facility Event of Default (or a Transaction Event of Default affecting the Purchased Loans under the Servicing Agreement) under the Repurchase Agreement, Buyer may, in its sole discretion, (i) sell its right to the Purchased Loans (or for a Transaction Event of Default, the affected Purchased Loans) on a servicing released basis or (ii) terminate Servicer as the servicer of the Purchased Loans (or for a Transaction Event of Default, the affected Purchased Loans), with or without cause, in each case without payment of any termination fee. Upon receipt of a notice of a Facility Event of Default or Transaction Event of Default from Buyer, Servicer shall follow the instructions of Buyer, without any further consent from Seller or any other Person, with respect to the Purchased Loans (or affected Purchased Loans) and shall deliver to Buyer any information with respect to the Purchased Loans requested by Buyer.

Notwithstanding any contrary information or direction which may be delivered to Servicer by Seller, Servicer may conclusively rely on any information, direction or notice of an Event of Default delivered by Buyer, and Seller shall indemnify and hold Servicer harmless for any and all claims asserted against Servicer for any actions taken in good faith by Servicer in connection with the delivery of such information or notice of an Event of Default.

No provision of this Servicer Notice and Agreement or the Servicing Agreement may be amended, countermanded or otherwise modified without the prior written consent of Buyer. Buyer is an intended third party beneficiary of this letter.

Please acknowledge receipt and your agreement to the terms of this instruction letter by signing in the signature block below and forwarding an executed copy to Buyers promptly upon receipt. Any notices should be delivered to the following address:

(a) if to Buyer:

Master Repurchase Agreement

[_______]

Exhibit IX-2


	Deutsche Bank AG, Cayman Islands Branch
	60 Wall Street
	New York, New York 10005
	Attention:	Tom Rugg
	Telephone:	(212) 250-3541
	Telecopy:	(212) 797-5630
	Email:	tom.rugg@db.com

	with a copy to:

	Deutsche Bank AG, Cayman Islands Branch
	60 Wall Street
	New York, New York 10005
	Attention:	Robert W. Pettinato Jr.
	Telephone:	(212) 250-5579
	Telecopy:	(212) 797-0286
	Email:	robert.pettinato@db.com

	and

	Cadwalader, Wickersham & Taft LLP
	One World Financial Center
	200 Liberty Street
	New York, New York 1010281
	Attention:	Y. Jeffrey Rotblat, Esq.
	Telephone:	(212) 504-6401
	Email:	jeffrey.rotblat@cwt.com

(b)	if to Servicer:

	[____________]
	[____________]
	[____________]
	[____________]

with a copy to:

	[____________]
	[____________]
	[____________]
	[____________]

In the event of a conflict between the terms and conditions of this Servicer Notice and Agreement and the Servicing Agreement, this Servicer Notice and Agreement shall prevail. Except as specifically set forth in this Servicer Notice and Agreement with respect to the Purchased Loans, all terms and conditions of the Servicing Agreement shall remain in full force and effect.

Master Repurchase Agreement

[_______]

Exhibit IX-3

This Servicer Notice and Agreement 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. Delivery by telecopier or other electronic transmission (including a .pdf e-mail transmission) of an executed counterpart of a signature page to this Servicer Notice and Agreement shall be effective as delivery of an original executed counterpart of this Servicer Notice and Agreement.

This Servicer Notice and Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof.

[Reminder of page intentionally blank]

Master Repurchase Agreement

[_______]

Exhibit IX-4


Very truly yours,

[_____________]



By:
		Name:
		Title:


ACKNOWLEDGED AND AGREED TO:

[*Servicer*]



By:
		Name:
		Title:

Master Repurchase Agreement

[_______]

Exhibit IX-1

EXHIBIT A

Description of Accounts

Servicer Account


Bank:		[_________________]
City/State:		[_________________]
ABA:		[_________________]
Account Name:		[_________________]
Account #:		[_________________]
Attention:		[_________________]

Cash Management Account

Bank: PNC Bank, National Association

ABA # 043000096

Deposit Acct No.: 1029151413

Deposit Account Name: Midland Loan Services, a Division of PNC Bank, National Association on behalf of Parlex 15 Finco, LLC for the benefit of Deutsche Bank AG, Cayman Islands Branch

Master Repurchase Agreement

[_______]

Exhibit A to IX

EXHIBIT X

[Reserved.]

EXHIBIT X

[Reserved.]

EXHIBIT XI

FORM OF JOINDER AGREEMENT

JOINDER AND MODIFICATION AGREEMENT

This JOINDER AND MODIFICATION AGREEMENT (this “Agreement”), dated as of ____________, 20__ by [_____________________] (“New Series Seller”) and Parlex 15 Finco, LLC, a Delaware limited liability company (“Master Seller”).

BACKGROUND

A. Master Seller and Deutsche Bank AG, Cayman Islands Branch, a branch of a foreign banking institution (“Buyer”), entered into that certain Second Amended and Restated Master Repurchase Agreement, dated as of December 16, 2019 (as amended, modified and/or restated from time to time, the “Repurchase Agreement”), pursuant to which Master Seller, on behalf of each Series Seller (as defined therein) heretofore or hereafter established thereunder (Master Seller, together with each such Series Seller, collectively, “Seller”), agreed to sell to Buyer certain Eligible Loans upon the terms and subject to the conditions set forth therein (each such transaction, a “Transaction”). Capitalized terms used but not otherwise defined herein shall have the respective meanings given to such terms in the Repurchase Agreement.

B. Pursuant to Section 3(n) of the Repurchase Agreement, on or prior to the Purchase Date for any Transaction, Member is required to establish a new Series Seller to enter into such Transaction and Master Seller and such new Series Seller are required to execute and deliver a Joinder Agreement pursuant to which such new Series Seller shall be added as a party to the Repurchase Agreement and the other Transaction Documents.

C. On or prior to the date hereof, Member has established New Series Seller in accordance with the terms of the Master Seller LLC Agreement and applicable Delaware law for the purpose of entering into a Transaction with Buyer with respect to the Purchased Loan[s] described on Exhibit A attached hereto and New Series Seller wishes to execute and deliver this Agreement pursuant to which New Series Seller shall become a party to and agree to be bound as a Series Seller for all purposes under the Repurchase Agreement and the other Transaction Documents.

AGREEMENT

NOW, THEREFORE, in order to induce Buyer to enter into a Transaction with New Series Seller, and in consideration of the substantial benefit New Series Seller will derive from Buyer entering into such Transaction, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, New Series Seller hereby agrees as follows:

1. In consideration of New Series Seller becoming a Series Seller entitled to enter into a Transaction with Buyer under and subject to the terms and conditions of the Repurchase Agreement, New Series Seller hereby agrees that, effective as of the date hereof,

New Series Seller is, and shall be deemed to be, a Series Seller under the Repurchase Agreement and each of the other Transaction Documents to which the Seller is a party, and agrees that from the date hereof and so long as the Repurchase Obligations remain outstanding, New Series Seller hereby assumes the obligations of a Series Seller under, and New Series Seller shall perform, comply with and be subject to and bound by each of the terms, covenants and conditions of the Repurchase Agreement and each of the other Transaction Documents which are stated to apply to or are made by a Series Seller. Without limiting the generality of the foregoing, New Series Seller hereby represents and warrants that (i) each of the representations and warranties set forth in Section 9(b) of the Repurchase Agreement are true and correct as to New Series Seller and its related Purchased Loan on and as of the date hereof and (ii) New Series Seller has heretofore received true and correct copies of the Repurchase Agreement and each of the other Transaction Documents as in effect on the date hereof. Master Seller hereby confirms, on behalf of itself and the New Series Seller, its pledge and grant of a security interest in the Collateral.

2. Without limiting the foregoing, New Series Seller agrees that it is and shall be obligated to pay the Repurchase Price applicable to its Purchased Loan on the Repurchase Date therefor and perform and pay all of the other Repurchase Obligations applicable to New Series Seller and such Purchased Loan as if it were an original party to the Repurchase Agreement and agrees to execute and deliver such documents, instruments and other things as Buyer may reasonably request in connection with such New Series Seller’s obligations hereunder and under the Repurchase Agreement and the other Transaction Documents.

3. In furtherance of the foregoing, New Series Seller shall execute and deliver or cause to be executed and delivered, at any time and from time to time, such further instruments and documents, and shall do or cause to be done such further acts, as may be reasonably necessary or proper in the opinion of Buyer to carry out more effectively the provisions and purposes of this Agreement and the Repurchase Agreement.

4. Master Seller, on behalf of itself and each Series Seller that has become a party to the Repurchase Agreement on or prior to the date hereof, and New Series Seller acknowledge and agree that, except as modified hereby, the Repurchase Agreement and each of the other Transaction Documents remains unmodified and in full force and effect and all of the terms, covenants and conditions thereof are hereby ratified and confirmed in all respects.

5. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to conflicts of law principles.

[SIGNATURES ON FOLLOWING PAGES]

-2-

IN WITNESS WHEREOF, each of New Seller and Master Seller, on behalf of itself and each Series Seller that has heretofore become a party to the Repurchase Agreement, has duly executed this Agreement and delivered the same to the Buyer, as of the date and year first above written.


NEW SERIES SELLER:

[_______________]

By:
		Name:
		Title:

MASTER SELLER:

PARLEX 15 FINCO, LLC,
		a Delaware limited liability company, on behalf of itself and each Series Seller that has become a party to the Repurchase Agreement prior to the date hereof

By:
		Name:
		Title:

EXHIBIT A

NEW SERIES SELLER/PURCHASED LOAN


New Series Seller:

Purchased Loan:

EXHIBIT XII

FORM OF BAILEE AGREEMENT

PARLEX 15 FINCO, LLC

c/o Blackstone Mortgage Trust, Inc.

345 Park Avenue

New York, NY 10154

[_____] [_], 201[_]

U.S. Bank National Association

1133 Rankin Street, Suite 100

St. Paul, Minnesota 55116

Attention: Commercial Review Team

Telecopier No.: (615) 695-5967

Email: stp.cmbs.request@usbank.com

[BAILEE]

[Address]

[City], [State] [Zip]

Attn: [______]

Email: [______]

Re:

Bailee Agreement (the “Bailee Agreement”) in connection with the sale of the [___] Purchased Loan(s) by Parlex 15 Finco, LLC, a Delaware limited liability company (“Master Seller”), on behalf of itself and [SERIES SELLER] (collectively, “Seller”), to Deutsche Bank AG, Cayman Islands Branch, as buyer (“Buyer”).

Ladies and Gentlemen:

Reference is made to that certain Second Amended and Restated Master Repurchase Agreement, dated as of December 16, 2019, by and between Buyer and Seller (as the same may have been, and may hereafter be, amended, restated, extended, or otherwise modified from time to time, the “Repurchase Agreement”). In consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller, Buyer and [BAILEE] (the “Bailee”) hereby agree as follows:

(a) Seller shall deliver to the Bailee, in connection with the Purchased Loan delivered to the Bailee hereunder, the Purchased Loan File Checklist attached hereto as Attachment 1.

(b) On or prior to [___], 201[] (the “Funding Date”), Seller shall have delivered to the Bailee, as bailee for hire, the original documents set forth thereon (collectively, the “Purchased Loan Documents”) for the Purchased Loan identified on Exhibit A to the Purchased Loan File Checklist attached hereto as Attachment 1 (the “Purchased Loan(s)”).

(c) The Bailee shall issue and deliver to Buyer and U.S. Bank National Association, as custodian (the “Custodian”), on or prior to the Funding Date by electronic mail, in the name of Buyer, a certification which shall state that the Bailee has received the Purchased Loan Documents.

(d) On [___], 201[] (the “Purchase Date”), in the event that Buyer fails to purchase the Purchased Loan(s) from Seller, Buyer shall deliver by electronic mail to the Bailee to the attention of [BAILEE] at [BAILEE EMAIL], an authorization (the “Electronic Authorization”) to release the Purchased Loan File with respect to the Purchased Loan(s) to Seller. Upon receipt of such Electronic Authorization, the Bailee shall release the Purchased Loan Documents to Seller in accordance with Seller’s instructions.

(e) Following the Purchase Date and the funding of the Purchase Price, the Bailee shall forward the Purchased Loan Documents to the Custodian at U.S. Bank National Association, 1133 Ranking Street, Suite 100, St. Paul, Minnesota 55116, Attention: Commercial Review Team, by insured overnight courier for receipt by the Custodian no later than the third (3^rd) Business Day following the applicable Purchase Date (the “Delivery Date”), and in connection therewith, shall notify Buyer by e-mail of each such delivery as soon as the courier receives the underlying documents, which notice shall include the appropriate tracking number.

(f) From and after the applicable Funding Date until the time of receipt of the Electronic Authorization or the Delivery Date, as applicable, the Bailee (a) shall maintain continuous custody (and will forward in accordance with clause (e) above) and control of the related Purchased Loan Documents as bailee for Buyer and (b) is holding the related Purchased Loan(s) as sole and exclusive bailee for Buyer unless and until otherwise instructed in writing by Buyer.

(g) Seller agrees to indemnify and hold the Bailee and its partners, directors, officers, agents and employees harmless against any and all 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 this Bailee Agreement or any action taken or not taken by it or them hereunder (but excluding special, indirect, punitive or consequential damages) unless such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements were imposed on, incurred by or asserted against the Bailee because of the breach by the Bailee of its obligations hereunder, which breach was caused by gross

negligence or willful misconduct on the part of the Bailee or any of its partners, directors, officers, agents or employees. The foregoing indemnification shall survive any resignation or removal of the Bailee or the termination or assignment of this Bailee Agreement (h) Seller hereby represents, warrants and covenants that the Bailee is not an affiliate of or otherwise controlled by Seller. Notwithstanding the foregoing, the parties hereby acknowledge that the Bailee hereunder may act as counsel to Seller in connection with a proposed transaction and Ropes & Gray LLP, has represented Seller in connection with negotiation, execution and delivery of the Repurchase Agreement.

(i) The agreement set forth in this Bailee Agreement may not be modified, amended or altered, except by written instrument, executed by all of the parties hereto.

(j) This Bailee Agreement may not be assigned by Seller or the Bailee without the prior written consent of Buyer.

(k) 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. Electronically transmitted signature pages shall be binding to the same extent.

(l) 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.

(m) Capitalized terms used herein and defined herein shall have the meanings ascribed to them in the Repurchase Agreement.

[SIGNATURES COMMENCE ON FOLLOWING PAGE]


Very truly yours,

PARLEX 15 FINCO, LLC, a Delaware limited liability company, as Seller

By:
		Name: Douglas Armer
		Title: Managing Director, Head of Capital
		Markets and Treasurer

[Signature Page – Bailee Agreement]


ACKNOWLEDGED AND AGREED:

[BAILEE], as Bailee



By:
		Name:
		Title:

[Signature Page – Bailee Agreement]


DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH, as Buyer

By:
		Name:
		Title:

[Signature Page – Bailee Agreement]

Schedule A to Bailee Agreement

Purchased Loan File Checklist

[see attached]

FORM OF BAILEE’S TRUST RECEIPT

[______] [__], [____]

Deutsche Bank AG, Cayman Islands Branch

60 Wall Street

New York, New York 10005

Attention: Tom Rugg

Telephone: (212) 250-3541

Telecopy: (212) 797-5630

Email: tom.rugg@db.com

Re:

Bailee Agreement, dated [______] [__], [____] (the “Bailee Agreement”) among Parlex 15 Finco, LLC, a Delaware limited liability company (“Master Seller”), on behalf of itself and [SERIES SELLER] (collectively, “Seller”), and Deutsche Bank AG, Cayman Islands Branch (“Buyer”), and [BAILEE] (“Bailee”)

Ladies and Gentlemen:

In accordance with the provisions of the Bailee Agreement, the undersigned, as Bailee, hereby certifies that as to the Purchased Loan(s) referred to therein, it has reviewed the Purchased Loan Documents identified on the Purchased Loan File Checklist for each of the Purchased Loan(s) referred to therein and has determined that (i) all documents listed in Schedule A 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 Loan(s).

Bailee hereby confirms that it is holding the Purchased Loan Documents as agent and bailee for the exclusive use and benefit of Buyer 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.

Signature page follows.


[BAILEE],
Bailee

By:
		Name:
		Title:

[Signature Page to Bailee Trust Receipt]

cc:	U.S. Bank National Association

1133 Rankin Street, Suite 100

St. Paul, Minnesota 55116

Attention: Commercial Review Team

Telecopier No.: (615) 695-5967

Email: stp.cmbs.request@usbank.com

Deutsche Bank AG, Cayman Islands Branch

60 Wall Street

New York, New York 10005

Attention: General Counsel

Deutsche Bank AG, Cayman Islands Branch

60 Wall Street

New York, New York 10005

Attention: Robert W. Pettinato Jr.

Cadwalader, Wickersham & Taft LLP

One World Financial Center

New York, New York 10281

Attention: Y. Jeffrey Rotblat

EXHIBIT XIII

FORM OF CERTIFICATE OF AUTHORIZED REPRESENTATIVE

[Date]

Reference is made to that certain Second Amended and Restated Master Repurchase Agreement, dated as of December 16, 2019 (as amended, amended and restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), by and among Parlex 15 Finco, LLC, as master seller (“Master Seller”), and Deutsche Bank AG, Cayman Islands Branch, as buyer (“Buyer”). This Certificate is delivered pursuant to Section 4(c) of the Agreement in connection with the Purchased Loan commonly known as “[___]”.

The undersigned Authorized Representative of Master Seller hereby certifies as of the date hereof that he/she is the [___] of Master Seller, and that, as such, he/she is authorized to execute and deliver this Certificate to Buyer on behalf of Master Seller and further certifies in such capacity, and not in any personal capacity, that, to Master Seller’s Knowledge, no Default or Event of Default, and no Purchased Loan Default or Purchased Loan Event of Default relating to the Purchased Loan has occurred and is continuing as of the date hereof.

[Signature page follows.]

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the date first referenced above.


PARLEX 15 FINCO, LLC



By:
Name:
Title:

[Signature Page to Bailee Trust Receipt]

Exhibit 10.68

EXECUTION VERSION

MEMBER GUARANTY

This MEMBER GUARANTY (the “Guaranty”) is made and entered into as of December 16, 2019, by PARLEX 15 HOLDCO, LLC, a Delaware limited liability company (“Guarantor”) having an address at 345 Park Avenue, New York, New York 10154, for the benefit of DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH, a branch of a foreign banking institution, whose address is 60 Wall Street, 10th Floor, New York, New York 10005 (“Buyer”). This Guaranty is made with reference to the following facts:

A. Parlex 15 Finco, LLC, a Delaware limited liability company (“Master Seller”; Master Seller and each Series Seller (as defined in the Repurchase Agreement (defined below)) formed by Master Seller under the Repurchase Agreement, collectively, “Seller”), and Buyer have entered into that certain Second Amended and Restated Master Repurchase Agreement, dated as of the date hereof (as amended, modified and/or restated, the “Repurchase Agreement”), pursuant to which Buyer may purchase Purchased Loans (as defined in the Repurchase Agreement) from Seller with a simultaneous agreement from Seller to repurchase such Purchased Loans at a date certain or on demand (the “Transactions”);

B. Buyer has requested, as a condition of entering into the Transaction Documents, that Guarantor deliver to Buyer this Guaranty;

C. Guarantor is the parent of Seller and directly controls Seller;

D. Guarantor expects to benefit if Buyer enters into the Transaction Documents with Seller, and desires that Buyer enter into the Transaction Documents with Seller; and

E. Buyer would not enter into the Transaction Documents with Seller unless Guarantor executed this Guaranty. This Guaranty is therefore delivered to Buyer to induce Buyer to enter into the Transaction Documents.

NOW, THEREFORE, in exchange for good, adequate, and valuable consideration, the receipt of which Guarantor acknowledges, and to induce Buyer to enter into the Transaction Documents, Guarantor agrees as follows:

1. Definitions. For purposes of this Guaranty, the following terms shall be defined as set forth below. In addition, any capitalized term used herein which is defined in the Repurchase Agreement but not defined in this Guaranty shall have the meaning ascribed to such term in the Repurchase Agreement.

(a) “Costs” means all reasonable and documented out-of-pocket costs and expenses actually incurred by Buyer in any Proceeding or in obtaining legal advice and assistance in connection with any Proceeding, any Guarantor Litigation, or any default by Seller under the Transaction Documents or by Guarantor under this Guaranty (including any breach of a representation or warranty contained in this Guaranty), including, without limitation, reasonable attorneys’ fees of Buyer’s outside counsel, disbursements, court costs and expenses.

(b) “Guarantied Obligations” means Seller’s obligations to fully and promptly pay all sums owed to Buyer under the Repurchase Agreement and the other Transaction Documents, at the times and according to the terms required by the Transaction Documents, including the Repurchase Price for each Purchased Loan, accrued interest, default interest, costs or fees (including any such interest, costs or fees arising from and after the filing of an Insolvency Proceeding against Seller) without regard to any modification, suspension, or limitation of such terms not agreed to by Buyer, such as a modification, suspension, or limitation arising in or pursuant to any Insolvency Proceeding affecting Seller.

(c) “Guarantor Litigation” means any litigation, arbitration, investigation, or administrative proceeding of or before any court, arbitrator, or governmental authority, bureau or agency that relates to or affects this Guaranty or any asset(s) or property(ies) of Guarantor.

(d) “Insolvency Proceeding” means any voluntary or involuntary case or proceeding under the Bankruptcy Code or any other insolvency, bankruptcy, reorganization, liquidation, or like proceeding under any Bankruptcy Laws.

(e) “Lien” means any mortgage, lien, encumbrance, charge or other security interest, whether arising under contract, by operation of law, judicial process or otherwise.

(f) “Proceeding” means any action, suit, arbitration, or other proceeding arising out of or relating to the interpretation or enforcement of, this Guaranty or the Transaction Documents, including (a) an Insolvency Proceeding; (b) any proceeding in which Buyer endeavors to realize upon any Security or to enforce any Transaction Document(s) (including this Guaranty) against Seller or Guarantor, whether or not Buyer prevails; and (c) any proceeding commenced by Seller or Guarantor against Buyer.

(g) “Security” means any security or collateral held by or for Buyer for the Transactions or the Guarantied Obligations, whether real or personal property, including any mortgage, deed of trust, financing statement, security agreement, and other security document or instrument of any kind securing the Transactions in whole or in part. “Security” shall include all assets and property of any kind whatsoever pledged or mortgaged to Buyer pursuant to the Transaction Documents.

(h) “Seller” has the meaning set forth in recital A to this Guaranty and shall include: (a) any estate created by the commencement of an Insolvency Proceeding affecting Seller; (b) any trustee, liquidator, sequestrator, or receiver of Seller or any of its property; and (c) any similar person duly appointed pursuant to any law governing any Insolvency Proceeding of Seller.

(i) “Sponsor” means Blackstone Mortgage Trust, Inc., a Maryland corporation.

(j) “State” means the State of New York.

-2-

(k) “Transaction Document” means each “Transaction Document” (as defined in the Repurchase Agreement) other than this Guaranty.

2. Absolute Guaranty of All Guarantied Obligations. (a) Guarantor hereby unconditionally and irrevocably guarantees to Buyer the prompt and complete payment and performance by Seller when due (whether at the stated maturity, by acceleration or otherwise) of the Guarantied Obligations.

(b) Guarantor further agrees to pay all reasonable and documented out-of-pocket expenses (including, without limitation, all reasonable out-of-pocket fees and disbursements of outside counsel) which are actually incurred by Buyer in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Guarantied 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 Guarantied Obligations are paid in full, notwithstanding that from time to time prior thereto Seller may be free from any Guarantied Obligations.

(c) No payment or payments made by Seller or any other Person or received or collected by Buyer from Seller 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 Guarantied 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 then-outstanding Guarantied Obligations until the Guarantied Obligations are paid in full.

(d) Guarantor agrees that whenever, at any time, or from time to time, Guarantor shall make any payment to Buyer on account of Guarantor’s liability hereunder, Guarantor will notify Buyer in writing that such payment is made under this Guaranty for such purpose.

3. Nature of Liability. Guarantor’s liability under this Guaranty is primary and not secondary.

4. Changes in Transaction Documents. Until the Guarantied Obligations have been paid in full, without notice to, or consent by, Guarantor, and in Buyer’s sole and absolute discretion and without prejudice to Buyer or in any way limiting or reducing Guarantor’s liability under this Guaranty, Buyer may: (a) grant extensions of time, renewals or other indulgences or modifications to Seller or any other party under any of the Transaction Document(s), (b) change, amend or modify any Transaction Document(s), (c) authorize the sale, exchange, release or subordination of any Security, (d) accept or reject additional Security, (e) discharge or release any party or parties liable under the Transaction Documents, (f) foreclose or otherwise realize on any Security, or attempt to foreclose or otherwise realize on any Security, whether such attempt is successful or unsuccessful, (g) accept or make compositions or other arrangements or file or refrain from filing a claim in any Insolvency Proceeding, (h) enter into other Transactions with Seller in such amount(s) and at such time(s) as Buyer may determine, (i) credit payments in such manner and order of priority to Repurchase Prices, or other obligations as Buyer may determine in its discretion, and (j) otherwise deal with Seller and any other party

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related to the Transactions or any Security as Buyer may determine in its sole and absolute discretion. Without limiting the generality of the foregoing, Guarantor’s liability under this Guaranty shall continue even if Buyer alters any obligations under the Transaction Documents in any respect or Buyer’s or Guarantor’s remedies or rights against Seller are in any way impaired or suspended without Guarantor’s consent. If Buyer performs any of the actions described in this paragraph, then Guarantor’s liability shall continue in full force and effect even if Buyer’s actions impair, diminish or eliminate Guarantor’s subrogation, contribution, or reimbursement rights (if any) against Seller, or otherwise adversely affect Guarantor or expand Guarantor’s liability hereunder.

5. [Reserved].

6. Nature of Guaranty. Guarantor’s liability under this Guaranty is a guaranty of payment of the Guarantied Obligations, and is not a guaranty of collection or collectability. Guarantor’s liability under this Guaranty is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of any of the Transaction Documents. Guarantor’s liability under this Guaranty is a continuing, absolute, and unconditional obligation under any and all circumstances whatsoever (except as expressly stated, if at all, in this Guaranty), without regard to the validity, regularity or enforceability of any of the Guarantied Obligations. Guarantor acknowledges that Guarantor is fully obligated under this Guaranty even if Seller had no liability at the time of execution of the Transaction Documents or later ceases to be liable under any Transaction Document, whether pursuant to Insolvency Proceedings or otherwise. Guarantor shall not be entitled to claim, and irrevocably covenants not to raise or assert, any defenses against any Guarantied Obligation that would or might be available to Seller, other than actual payment and performance of such Guarantied Obligations in full in accordance with their terms. Guarantor waives any right to compel Buyer to proceed first against Seller or any Security before proceeding against Guarantor. Guarantor agrees that if any of the Guarantied Obligations are or become void or unenforceable (because of inadequate consideration, lack of capacity, Insolvency Proceedings, or for any other reason), then Guarantor’s liability under this Guaranty shall continue in full force with respect to all Guarantied Obligations as if they were and continued to be legally enforceable, all in accordance with their terms and, in the case of Insolvency Proceedings, before giving effect to the Insolvency Proceedings. Guarantor waives any defense that might otherwise be available to Guarantor based on the proposition that a guarantor’s liability cannot exceed the liability of the principal. Guarantor intends to be fully liable under the Guarantied Obligations, regardless of the scope of Seller’s liability thereunder. Guarantor waives any defenses to this Guaranty arising or purportedly arising from the manner in which Buyer disburses the Purchase Price for any Purchased Loan to Seller or otherwise, or any waiver of the terms of any Transaction Document by Buyer or other failure of Buyer to require full compliance with the Transaction Documents. Except as expressly provided otherwise in this Guaranty, Guarantor’s liability under this Guaranty shall continue until the later of (i) all sums due under the Transaction Documents having been paid in full and (ii) the termination of the Repurchase Agreement, notwithstanding that from time to time prior thereto, Seller may be free from any Guarantied Obligations. Guarantor’s liability under this Guaranty shall not be limited or affected in any way by any impairment or any diminution or loss of value of any Security whether caused by (a) hazardous substances, (b) Buyer’s failure to perfect a security interest in any Security, (c) any disability or other defense(s) of Seller, or (d) any breach by Seller of any representation or warranty contained in any Transaction Document.

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7. Waivers of Rights and Defenses. Guarantor waives any right to require Buyer to (a) proceed against Seller, (b) proceed against or exhaust any Security, or (c) pursue any other right or remedy for Guarantor’s benefit. Guarantor agrees that Buyer may proceed against Guarantor with respect to the Guarantied Obligations without taking any actions against Seller and without proceeding against or exhausting any Security. Guarantor agrees that Buyer may unqualifiedly exercise in its sole discretion (or may waive or release, intentionally or unintentionally) any or all rights and remedies available to it against Seller without impairing Buyer’s rights and remedies in enforcing this Guaranty, under which Guarantor’s liabilities shall remain independent and unconditional. Guarantor agrees and acknowledges that Buyer’s exercise (or waiver or release) of certain of such rights or remedies may affect or eliminate Guarantor’s right of subrogation or recovery against Seller (if any) and that Guarantor may incur a partially or totally nonreimbursable liability in performing under this Guaranty. Guarantor has assumed the risk of any such loss of subrogation rights, even if caused by Buyer’s acts or omissions. If Buyer’s enforcement of rights and remedies, or the manner thereof, limits or precludes Guarantor from exercising any right of subrogation that might otherwise exist, then the foregoing shall not in any way limit Buyer’s rights to enforce this Guaranty. Without limiting the generality of any other waivers in this Guaranty, Guarantor expressly waives any statutory or other right (except as set forth herein) that Guarantor might otherwise have to: (i) limit Guarantor’s liability after a nonjudicial foreclosure sale to the difference between the Guarantied Obligations and the fair market value of the property or interests sold at such nonjudicial foreclosure sale or to any other extent, (ii) otherwise limit Buyer’s right to recover a deficiency judgment after any foreclosure sale, or (iii) require Buyer to exhaust its Security before Buyer may obtain a personal judgment for any deficiency. Any proceeds of a foreclosure or similar sale may be applied first to any obligations of Seller that do not also constitute Guarantied Obligations within the meaning of this Guaranty. Guarantor acknowledges and agrees that any nonrecourse or exculpation provided for in any Transaction Document, or any other provision of a Transaction Document limiting Buyer’s recourse to specific Security or limiting Buyer’s right to enforce a deficiency judgment against Seller or any other person, shall have absolutely no application to Guarantor’s liability under this Guaranty. To the extent that Buyer collects or receives any sums or payments from Seller or any proceeds of a foreclosure or similar sale, Buyer shall have the right, but not the obligation, to apply such amounts first to that portion of Seller’s indebtedness and obligations to Buyer (if any) that is not covered by this Guaranty, regardless of the manner in which any such payments and/or amounts are characterized by the person making the payment.

8. Additional Waivers. Guarantor waives diligence and all demands, protests, presentments and notices of every kind or nature, including notices of protest, dishonor, nonpayment, acceptance of this Guaranty and the creation, renewal, extension, modification or accrual of any of the Guarantied Obligations; provided, however, that the foregoing shall not constitute a waiver by Guarantor of any notice that Buyer is expressly required to provide to Seller or Guarantor hereunder or under the Transaction Documents. Guarantor further waives the right to plead any and all statutes of limitations as a defense to Guarantor’s liability under this Guaranty or the enforcement of this Guaranty. No failure or delay on Buyer’s part in exercising any power, right or privilege under this Guaranty shall impair or waive any such power, right or privilege.

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9. Other Actions Taken or Omitted. Notwithstanding any other action taken or omitted to be taken with respect to the Transaction Documents, the Guarantied Obligations, or the Security, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guarantied Obligations, pursuant to the terms hereof, it is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guarantied Obligations, when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied as to any Guarantied Obligation only upon the full and final payment and satisfaction of such Guarantied Obligations.

10. No Duty to Exhaust Rights or Remedies. To the extent that Guarantor at any time incurs any liability under this Guaranty, Guarantor shall immediately pay Buyer (to be applied on account of the Guarantied Obligations) the amount provided for in this Guaranty, without any requirement that Buyer demonstrate that the Security is inadequate for the Transactions; or that Buyer has otherwise exercised (to any degree) or exhausted any of Buyer’s rights or remedies with respect to Seller or any Security.

11. Full Knowledge. Guarantor acknowledges, represents, and warrants that Guarantor has had a full and adequate opportunity to review the Transaction Documents, the transactions contemplated by the Transaction Documents, and all underlying facts relating to such transactions. Guarantor represents and warrants that Guarantor fully understands: (a) the remedies Buyer may pursue against Seller and/or Guarantor in the event of a default under the Transaction Documents, (b) the value (if any) and character of any Security, and (c) Seller’s financial condition and ability to perform under the Transaction Documents. Guarantor agrees to keep itself fully informed regarding all aspects of the foregoing and the performance of Seller’s obligations to Buyer. Buyer has no duty, whether now or in the future, to disclose to Guarantor any information pertaining to Seller, the Transactions or any Security. At any time provided for in the Transaction Documents, Guarantor agrees and acknowledges that an Insolvency Proceeding affecting Guarantor, or other actions or events relating to Guarantor (including Guarantor’s failure to comply with the covenants in Section 5 of this Guaranty), in each case, as set forth in the Transaction Documents, may be event(s) of default under the Transaction Documents.

12. Representations and Warranties. Guarantor acknowledges, represents and warrants as of the date hereof and as of each Purchase Date as follows, and acknowledges that Buyer is relying upon the following acknowledgments, representations, and warranties by Guarantor in entering into the Transactions:

(a) Due Execution; Enforceability. The Guaranty has been duly executed and delivered by Guarantor, for good and valuable consideration. The Guaranty constitutes the legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its respective terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

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(b) No Conflict. The execution, delivery, and performance of this Guaranty will not conflict with or result in a breach of any of the terms, conditions or provisions of (i) the organizational documents of Guarantor, (ii) any contractual obligation to which Guarantor is now a party or by which it is otherwise bound or to which the assets of Guarantor are subject or constitute a default thereunder, or result in the creation or imposition of any Lien upon any of the assets of Guarantor thereunder, other than pursuant to this Guaranty, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to Guarantor, or (iv) any applicable requirement of law, in each case under the foregoing clauses (ii), (iii) and (iv), to the extent that such conflict or breach would have a material adverse effect upon Guarantor’s ability to perform its obligations hereunder. Guarantor has all necessary licenses, permits and other consents from Governmental Authorities necessary for the performance of its obligations under this Guaranty, except to the extent the failure to have any such licenses, permits or consents would not result in a Material Adverse Effect.

(c) Litigation; Requirements of Law. Except as otherwise disclosed in writing to Buyer prior to the Closing Date, there is no action, suit, proceeding, investigation, or arbitration pending or threatened against Guarantor, Seller or their respective assets, nor is there any action, suit, proceeding, investigation, or arbitration pending or, to Guarantor’s knowledge, threatened in writing against Guarantor which is reasonably likely to result in any Material Adverse Effect. Guarantor is in compliance in all material respects with all requirements of law applicable to Guarantor. Neither Guarantor nor Seller is in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

(d) No Third Party Consent Required. No consent of any person (including creditors or partners, members, stockholders, or other owners of Guarantor), except those consents provided as of this date hereof, is required in connection with Guarantor’s execution of this Guaranty or performance of Guarantor’s obligations under this Guaranty. Guarantor’s execution of, and obligations under, this Guaranty are not contingent upon any consent, license, permit, approval, or authorization of, exemption by, notice or report to, or registration, filing, or declaration with, any governmental authority, bureau, or agency, whether local, state, federal, or foreign.

(e) Authority and Execution. Guarantor is duly formed and validly existing under the laws of the State of Delaware and has full power, authority, and legal right to execute, deliver and perform its obligations under this Guaranty. Guarantor has taken all necessary organizational and legal action to authorize this Guaranty.

(f) No Representations by Buyer. Guarantor delivers this Guaranty based solely upon Guarantor’s own independent investigation and based in no part upon any representation or statement by Buyer.

(g) Prohibited Person. (i) None of the funds or other assets of Guarantor constitute property of, or are, to Guarantor’s Knowledge, beneficially owned, directly or indirectly, by a Prohibited Person (as defined in the Repurchase Agreement) with the result that the investment in Guarantor (whether directly or indirectly), is prohibited by law or the entering into the Repurchase Agreement or acceptance of this Guaranty by

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Buyer is in violation of law; (ii) to Guarantor’s Knowledge, no Prohibited Person has any interest of any nature whatsoever in Guarantor with the result that the investment in Guarantor (whether directly or indirectly), is prohibited by law or the entering into this Guaranty is in violation of law; (iii) to Guarantor’s Knowledge, none of the funds of Guarantor have been derived from any unlawful activity with the result that the investment in Guarantor (whether directly or indirectly), is prohibited by law or the entering into this Guaranty is in violation of law; (iv) to Guarantor’s Knowledge, Guarantor has not conducted and will not conduct any business and has not engaged and will not engage in any transaction dealing with any Prohibited Person; and (v) Guarantor is not a Prohibited Person and has not been convicted of a felony or a crime which if prosecuted under the laws of the United States of America would be a felony.

(h) Investment Company Act. Guarantor is not required to register as an “investment company” under the Investment Company Act of 1940, as amended.

(i) Taxes. Except as disclosed in writing to Buyer by Guarantor prior to the Closing Date, Guarantor has filed or caused to be filed all federal and other material Tax returns which would be delinquent if they had not been filed on or before the date hereof and has paid all Taxes shown to be due and payable on or before the date hereof on such returns or on any assessments made against it or any of its property and all other Taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority 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; no Tax liens have been filed against any of Guarantor’s assets and, to the best knowledge of Guarantor, no claims are being asserted with respect to any such Taxes, fees or other charges.

Guarantor agrees that the foregoing representations and warranties shall be deemed to have been made by Guarantor on and as of (a) the date of this Guaranty, (b) each Purchase Date, and (c) each date on which any Extension Term, if any, commences, in each case, as though made under this Guaranty on and as of such date.

13. No Misstatements. No information, exhibit, report or certificate furnished by Guarantor to Buyer in connection with the Transactions or any Transaction Document contains any material misstatement of fact nor omits any fact necessary to make such information, exhibit, report, or certificate not materially misleading when taken as a whole and in light of the circumstances under which they were furnished.

14. Reimbursement and Subrogation Rights. Except to the extent that Buyer notifies Guarantor to the contrary in writing from time to time:

(a) General Deferral of Reimbursement. Except to the extent set forth in Section 14(b) below, Guarantor waives any right to be reimbursed by Seller for any payment(s) made by Guarantor on account of the Guarantied Obligations, unless and until all Guarantied Obligations have been paid in full and all periods within which such payments may be set aside or invalidated have expired. Guarantor acknowledges that Guarantor has received adequate consideration for execution of this Guaranty by virtue of Buyer’s entering into the Transactions (which benefit Guarantor, as a direct or indirect owner or principal of Seller) and Guarantor does not require or expect, and is not entitled to, any other right of reimbursement against Seller as consideration for this Guaranty.

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(b) Deferral of Subrogation and Contribution. Guarantor agrees it shall have no right of subrogation against Seller or Buyer and no right of subrogation against any Security unless and until all amounts due under the Transaction Documents have been paid in full and all other performance required under the Transaction Documents has been rendered in full to Buyer (such deferral of Guarantor’s subrogation and contribution rights, the “Subrogation Deferral”). Guarantor further agrees that, if any amount shall be paid to Guarantor on account of any such subrogation rights at any time when all of the Guarantied Obligations shall not have been paid in full, such amount shall be held by Guarantor in trust for Buyer, and shall, forthwith upon receipt by Guarantor, be turned over to Buyer by Guarantor (duly indorsed by Guarantor to Buyer, if required), to be applied against the Guarantied Obligations, whether matured or unmatured, in such order as Buyer may determine.

(c) Effect of Invalidation. To the extent that a court of competent jurisdiction determines that Guarantor’s Subrogation Deferral is void or voidable for any reason, Guarantor agrees, notwithstanding any acts or omissions by Buyer that Guarantor’s rights of subrogation against Seller or Buyer and Guarantor’s right of subrogation against any Security shall at all times be junior and subordinate to Buyer’s rights against Seller and to Buyer’s right, title and interest in such Security.

(d) Claims in Insolvency Proceeding. Guarantor shall not file any claim in any Insolvency Proceeding affecting Seller or Sponsor unless Guarantor simultaneously assigns and transfers such claim to Buyer, without consideration, pursuant to documentation fully satisfactory to Buyer. Guarantor shall automatically be deemed to have assigned and transferred such claim to Buyer whether or not Guarantor executes documentation to such effect, and by executing this Guaranty hereby authorizes Buyer (and grants Buyer a power of attorney coupled with an interest, and hence irrevocable) to execute and file such assignment and transfer documentation on Guarantor’s behalf. Buyer shall have the sole right to vote, receive distributions, and exercise all other rights with respect to any such claim, provided, however, that if and when the Guarantied Obligations have been paid in full Buyer shall release to Guarantor any further payments received on account of any such claim.

15. Waiver Disclosure. Guarantor acknowledges that pursuant to this Guaranty, Guarantor has waived a substantial number of defenses that Guarantor might otherwise under some circumstance(s) be able to assert against Guarantor’s liability to Buyer. Guarantor acknowledges and confirms that Guarantor has substantial experience as a sophisticated participant in substantial commercial real estate transactions (including financings) and is fully familiar with the legal consequences of signing this or any other guaranty. In addition, Guarantor is represented by competent counsel. Guarantor has obtained from such counsel, and understood, a full explanation of the nature, scope, and effect of the waivers contained in this Guaranty (a “Waiver Disclosure”). In the alternative, Guarantor has, with advice from such counsel, knowingly and intentionally waived obtaining a Waiver Disclosure.

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Accordingly Guarantor does not require or expect Buyer to provide a Waiver Disclosure. It is not necessary for Buyer or this Guaranty to provide or set forth any Waiver Disclosure, notwithstanding any principles of law to the contrary. Nevertheless, Guarantor specifically acknowledges that Guarantor is fully aware of the nature, scope, and effect of all waivers contained in this Guaranty, all of which have been fully disclosed to Guarantor. Guarantor acknowledges that as a result of the waivers contained in this Guaranty:

(a) Actions by Buyer. Buyer will be able to take a wide range of actions relating to Seller, the Transactions, and the Transaction Documents, all without Guarantor’s consent or notice to Guarantor. Guarantor’s full and unconditional liability under this Guaranty will continue whether or not Guarantor has consented to such actions. Guarantor may disagree with or disapprove such actions, and Guarantor may believe that such actions should terminate or limit Guarantor’s obligations under this Guaranty, but such disagreement, disapproval, or belief on the part of Guarantor will in no way limit Guarantor’s obligations under this Guaranty.

(b) Interaction with Seller Liability. Guarantor shall be fully liable for all Guarantied Obligations even if Seller has no liability whatsoever under the Transaction Documents or the Transaction Documents are otherwise invalid, unenforceable, or subject to defenses available to Seller. Guarantor acknowledges that Guarantor’s full and unconditional liability under this Guaranty (with respect to the Guarantied Obligations as if they were fully enforceable against Seller) will continue notwithstanding any such limitations on or impairment of Seller’s liability.

(c) Timing of Enforcement. Buyer will be able to enforce this Guaranty against Guarantor even though Buyer might also have available other rights and remedies that Buyer could conceivably enforce against the Security or against other parties. As a result, Buyer may require Guarantor to pay the Guarantied Obligations, earlier than Guarantor would prefer to pay the Guarantied Obligations, including immediately upon the occurrence of a default by Seller. Guarantor will not be able to assert against Buyer various defenses, theories, excuses, or procedural requirements that might otherwise force Buyer to delay or defer the enforcement of this Guaranty against Guarantor. Guarantor acknowledges that Guarantor intends to allow Buyer to enforce the Guaranty against Guarantor in such manner.

(d) Continuation of Liability. Guarantor’s liability for the Guarantied Obligations shall continue at all times until the Guarantied Obligations have actually been paid in full, even if other circumstances have changed such that in Guarantor’s view Guarantor’s liability under this Guaranty should terminate, except to the extent that any express conditions to the termination of this Guaranty, as set forth in this Guaranty, have been satisfied.

16. Buyer’s Disgorgement of Payments. Upon payment of all or any portion of the Guarantied Obligations, Guarantor’s obligations under this Guaranty shall continue and remain in full force and effect at all times until the Guarantied Obligations have actually been paid in full, if all or any part of such payment is, pursuant to any Insolvency Proceeding or otherwise, avoided or recovered directly or indirectly from Buyer as a preference, fraudulent

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transfer, or otherwise, irrespective of (a) any notice of revocation given by Guarantor prior to such avoidance or recovery, or (b) payment in full of the Transactions. Subject to the foregoing, Guarantor’s liability under this Guaranty shall continue until all periods have expired within which Buyer could (on account of any Insolvency Proceedings, whether or not then pending, affecting Seller or any other person) be required to return, repay, or disgorge any amount paid at any time on account of the Guarantied Obligations.

17. Notice of Default and Litigation. Guarantor shall promptly, and in any event within three (3) Business Days after service of process, or other written notice to Guarantor thereof or Guarantor otherwise obtaining Knowledge thereof, notify Buyer of the commencement, or threat in writing of, any action, suit, proceeding, investigation or arbitration involving Guarantor or Seller or assets or any judgment in any action, suit, proceeding, investigation or arbitration involving Guarantor or Seller or assets, which in any of the foregoing cases (i) relates to any Purchased Loan, (ii) questions or challenges the validity or enforceability of any Transaction or Transaction Document, (iii) makes a claim or claims against Guarantor in an aggregate amount in excess of $25,000,000 or (iv) that, individually or in the aggregate, if adversely determined, would be reasonably likely to have a Material Adverse Effect.

18. Right to Set Off. Notwithstanding anything to the contrary contained herein, no provision of this Guaranty shall be deemed to limit, decrease or in any way diminish any rights of set-off Buyer may have with respect to any cash, cash equivalents, certificates of deposit or the like which may now or hereafter be put on deposit with Buyer by Seller or by Guarantor. Upon the occurrence and during the continuance of any Event of Default, Buyer is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any and all amounts owing by Buyer to or for the credit or the account of Guarantor against any and all of the obligations of Guarantor now or hereafter existing under this Guaranty, irrespective of whether or not Buyer shall have made any demand under this Guaranty and although such obligations may be contingent and unmatured. Buyer agrees promptly to notify Guarantor after any set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application or this Guaranty. The rights of Buyer under this Section 18 are in addition to other rights and remedies (including, without limitation, other rights to set-off) which Buyer may have.

19. Consent to Jurisdiction. Guarantor agrees that any Proceeding to enforce this Guaranty may be brought in any state or federal court located in City of New York, New York. By executing this Guaranty, Guarantor irrevocably accepts and submits to the exclusive personal jurisdiction of each of the aforesaid courts, generally and unconditionally with respect to any such Proceeding. Guarantor agrees not to assert any basis for transferring jurisdiction of any such proceeding to another court. Guarantor further agrees that a final judgment against Guarantor in any Proceeding shall be conclusive evidence of Guarantor’s liability for the full amount of such judgment.

20. Merger; No Conditions; Amendments. This Guaranty, as amended from time to time by agreement between Guarantor and Buyer, contains the entire agreement among the parties with respect to the matters set forth in this Guaranty. This Guaranty supersedes all prior agreements among the parties with respect to the matters set forth in this Guaranty. No

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course of prior dealings among the parties, no usage of trade, and no parol or extrinsic evidence of any nature shall be used to supplement, modify, or vary any terms of this Guaranty. This Guaranty is unconditional. There are no unsatisfied conditions to the full effectiveness of this Guaranty. No terms or provisions of this Guaranty may be changed, waived, revoked, or amended without Buyer’s written agreement. If any provision of this Guaranty is determined to be unenforceable, then all other provisions of this Guaranty shall remain fully effective.

21. Enforcement. Guarantor acknowledges that this Guaranty is an “instrument for the payment of money only,” within the meaning of New York Civil Practice Law and Rules Section 3213. In the event of any Proceeding between Seller or Guarantor and Buyer, including any Proceeding in which Buyer enforces or attempts to enforce this Guaranty or the Transactions against Seller or Guarantor, or in the event of any Guarantor Litigation, Guarantor shall reimburse Buyer for all Costs of such Proceeding.

22. Fundamental Changes. Guarantor shall not wind up, liquidate, or dissolve its affairs or enter into any transaction of merger or consolidation, or sell, lease, or otherwise dispose of (or agree to do any of the foregoing) all or substantially all of its property or assets, without Buyer’s prior written consent.

23. Prohibited Person. Guarantor shall not, without prior written consent of Buyer, knowingly conduct any business, nor engage in any transaction or dealing, with any Prohibited Person (as defined in the Repurchase Agreement), including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order 13224 issued on September 24, 2001. Guarantor further covenants and agrees to deliver (from time to time) to Buyer any such certification or other evidence as may be requested by Buyer in its sole and absolute discretion, confirming that Guarantor has not knowingly engaged in any business, transaction or dealings with a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person.

24. Further Assurances. Guarantor shall execute and deliver such further documents, and perform such further acts, as Buyer may request to achieve the intent of the parties as expressed in this Guaranty, provided in each case that any such documentation is consistent with this Guaranty and with the Transaction Documents.

25. Certain Entities. If Seller or Guarantor is a partnership, limited liability company, or other unincorporated association, then: (a) Guarantor’s liability shall not be impaired by changes in the name or composition of Seller or Guarantor; and (b) the withdrawal or removal of any partner(s) or member(s) of Seller or Guarantor shall not diminish Guarantor’s liability or, if Guarantor is a partnership, the liability of any withdrawing general partners of Guarantor.

26. 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. Delivery by telecopier or other electronic transmission (including a .pdf e-mail transmission) of an executed counterpart of a signature page to this Guaranty shall be effective as delivery of an original executed counterpart of this Guaranty.

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27. WAIVER OF TRIAL BY JURY. GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING FROM OR RELATING TO THIS GUARANTY OR THE TRANSACTION DOCUMENTS OR ANY OBLIGATION(S) OF GUARANTOR HEREUNDER OR UNDER THE TRANSACTION DOCUMENTS.

28. Miscellaneous.

(a) Assignability. Buyer may assign the rights under this Guaranty (in whole or in part) together with any one or more of the Transaction Documents in accordance with the Repurchase Agreement without in any way affecting Guarantor’s liability. Upon request in connection with any such assignment Guarantor shall deliver such documentation as Buyer shall reasonably request. Buyer may from time to time designate any Person to hold and exercise any or all of Buyer’s rights and remedies under this Guaranty. This Guaranty shall benefit Buyer and its successors and assigns and shall bind Guarantor and its heirs, executors, administrators, successors and assigns. Guarantor may not assign this Guaranty in whole or in part without the prior written consent of Buyer.

(b) Notices. All notices, requests, and demands to be made under this Guaranty 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 provided that such email notice must also be delivered by one of the means set forth in (a), (b) or (c) above, to the address set forth in Annex I attached to this Guaranty 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 28(b). A notice shall be deemed to have been given: (a) in the case of hand delivery, at the time of delivery, (b) in the case of registered or certified mail, when delivered on a Business Day, (c) in the case of expedited prepaid delivery upon delivery on a Business Day, or (d) in the case of email, upon delivery such email; provided that (i) such email notice was also delivered by one of the means set forth in (a), (b) or (c) above (which may arrive after such email), and (ii) the transmitting party did not receive an electronic notice of a transmission failure. A party receiving a notice which does not comply with the technical requirements for notice under this Section 28(b) may elect to waive any deficiencies and treat the notice as having been properly given.

(c) Interpretation. This Guaranty shall be enforced and interpreted according to the laws of the State, including Section 5-1401 of the General Obligations Law, but otherwise disregarding its rules on conflicts of laws. The word “include” and its variants shall be interpreted in each case as if followed by the words “without limitation.”

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29. Business Purposes. Guarantor acknowledges that this Guaranty is executed and delivered for business and commercial purposes, and not for personal, family, household, consumer, or agricultural purposes. Guarantor acknowledges that Guarantor is not entitled to, and does not require the benefits of, any rights, protections, or disclosures that would or may be required if this Guaranty were given for personal, family, household, consumer, or agricultural purposes. Guarantor acknowledges that none of Guarantor’s obligation(s) under this Guaranty constitute(s) a “debt” within the meaning of the United States Fair Debt Collection Practices Act, 15 U.S.C. § 1692a(5), and accordingly compliance with the requirements of such Act is not required if Buyer (directly or acting through its counsel) makes any demand or commences any action to enforce this Guaranty.

30. No Third-Party Beneficiaries. This Guaranty is executed and delivered for the benefit of Buyer and its successors and permitted assigns, and is not intended to benefit any third party.

31. CERTAIN ACKNOWLEDGMENTS BY GUARANTOR. GUARANTOR ACKNOWLEDGES THAT BEFORE EXECUTING THIS GUARANTY: (A) GUARANTOR HAS HAD THE OPPORTUNITY TO REVIEW IT WITH AN ATTORNEY OF GUARANTOR’S CHOICE; (B) BUYER HAS RECOMMENDED TO GUARANTOR THAT GUARANTOR OBTAIN SEPARATE COUNSEL, INDEPENDENT OF SELLER’S COUNSEL, REGARDING THIS GUARANTY; AND (C) GUARANTOR HAS CAREFULLY READ THIS GUARANTY AND UNDERSTOOD THE MEANING AND EFFECT OF ITS TERMS, INCLUDING ALL WAIVERS AND ACKNOWLEDGMENTS CONTAINED IN THIS GUARANTY AND THE FULL EFFECT OF SUCH WAIVERS AND THE SCOPE OF GUARANTOR’S OBLIGATIONS UNDER THIS GUARANTY.

32. 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 Guarantied Obligations is rescinded or must otherwise be restored or returned by Buyer upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Seller or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or any similar officer or agent under any federal or state law or any such similar law of any other applicable jurisdiction for, Seller or any substantial part of Seller’s property, or otherwise, all as though such payments had not been made.

33. Intentionally Omitted.

34. Safe Harbor. The parties hereto intend (a) for this Guaranty and each Transaction to qualify for the safe harbor treatment provided by the Bankruptcy Code and for Buyer to be entitled to all of the rights, benefits and protections afforded to Persons under the Bankruptcy Code with respect to a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and that payments under the Repurchase Documents are deemed “margin payments,” “settlement payments” or a “transfer,” as defined in Section 101 of the Bankruptcy Code, (b) for the grant of a security interest set forth in Section 6 of the Repurchase Agreement to also be a “securities contract” as defined in Section 741(7)(A)(xi) of the Bankruptcy Code, and (c) that Buyer (for so long as Buyer is a “financial institution,” “financial participant” or other entity listed in Section 555, 559 or 362(b)(6) of the Bankruptcy Code) shall be entitled to

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the “safe harbor” benefits and protections afforded under the Bankruptcy Code with respect to a “securities contract,” including (x) the rights, set forth in Sections 13 and 22 of the Repurchase Agreement and in Section 555, 559 and 561 of the Bankruptcy Code, to liquidate the Purchased Loans and the Trust Interests and terminate the Repurchase Agreement and this Guaranty, and (y) the right to offset or net out as set forth in the Repurchase Agreement, in Section 18 hereof and in Section 362(b)(6) of the Bankruptcy Code.

[NO FURTHER TEXT ON THIS PAGE]

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IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of the day first written above.


GUARANTOR:

PARLEX 15 HOLDCO, LLC, a Delaware limited liability company

By:		/s/ Douglas N. Armer
Name:		Douglas N. Armer
Title:		Executive Vice President, Capital Markets, and Treasurer

Member Guaranty

BXMT

ANNEX I

Address for Notices to Guarantor:

345 Park Avenue

New York, New York 10154

Attention: Douglas Armer

Email: BXMTDeutscheRepo@blackstone.com

Telephone: (212) 583-5000

With a copy to:

Ropes & Gray LLP

1211 Avenue of the Americas

New York, New York 10036

Attention: Daniel L. Stanco

Email: daniel.stanco@ropesgray.com

Telephone: (212) 841-5758

Address for Notices to Buyer:

Deutsche Bank AG, Cayman Islands Branch

60 Wall Street

New York, New York 10005

Attention: Tom Rugg

Telephone: (212) 250-3541

Telecopy: (212) 797-5630

Email: tom.rugg@db.com

With copies to:

Deutsche Bank AG, Cayman Islands Branch

60 Wall Street

New York, New York 10005

Attention: General Counsel

and

Deutsche Bank AG, Cayman Islands Branch

60 Wall Street

New York, New York 10005

Attention: Robert W. Pettinato Jr.

Telephone: (212) 797-0286

Telecopy: (212) 797-5630

Email: robert.pettinato@db.com

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and

Cadwalader, Wickersham & Taft LLP

One World Financial Center

New York, NY 10281

Attention: Y. Jeffrey Rotblat

Telephone: (212) 504-6401

Telecopy: (212) 504-6666

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Exhibit 21.1


	Jurisdiction of	D/B/A
Entity	Incorporation	Jurisdiction
345-1 Partners, LLC	Delaware
345-30 Partners, LLC	Delaware
345-40 Partners, LLC	Delaware
345-50 Partners, LLC	Delaware
345-7501 MM, LLC	Delaware
345-JV Partners, LLC	Delaware
345-Lux EUR Partners, LLC	Delaware
345-Lux GBP Partners, LLC	Delaware
42-16 Partners, LLC	Delaware
42-16 CLO Holdco, LLC	Delaware
42-16 CLO L Sell, LLC	Delaware
Ambassador AUD Holdings, LLC	Delaware
Ambassador CAD Holdings, LLC	Delaware
Ambassador EUR Holdings, LLC	Delaware
Ambassador GBP Holdings, LLC	Delaware
BXMT 2017-FL1, LLC	Delaware
BXMT 2017-FL1, Ltd.	Cayman Islands
Canada Office Portfolio Finco 2014, LLC	Delaware
Capital Trust RE CDO Depositor Corp.	Delaware
CT Legacy Asset, LLC	Delaware
CT Legacy Cayman, Ltd.	Cayman Islands
CT Legacy Holdings, LLC	Delaware
CT Legacy JPM SPV, LLC	Delaware
CT Legacy Manager, LLC	Delaware
CT Legacy REIT Holdings, LLC	Delaware
CT RE CDO 2004-1 Sub, LLC	Delaware
De Vere Resorts Finco 2014, LLC	Delaware
Gloss Finco 1, LLC	Delaware
Gloss Finco 2, LLC	Delaware
Gloss Finco 3, LLC	Delaware
Gloss Holdco 1, LLC	Delaware
Gloss Holdco 2, LLC	Delaware
Gloss Noteco 1, LLC	Delaware
Gloss Noteco 2, LLC	Delaware
Husky Finco, LLC	Delaware
Husky AU Finco, LLC	Delaware
Husky CAD Finco, LLC	Delaware
Husky EUR Finco, LLC	Delaware
Husky UK Finco, LLC	Delaware
KK-RR Finco, LLC	Delaware
LO-JR Finco, LLC	Delaware


Magma Finco 12, LLC		Delaware
Magma Finco 13, LLC		Delaware
Magma Finco 16, LLC		Delaware
Molten Partners, LLC		Delaware
Parlex 1 Finance, LLC		Delaware
Parlex 2 Finance, LLC		Delaware
Parlex 2 CAD Finco, LLC		Delaware
Parlex 2 AU HoldCo, LLC		Delaware
Parlex 2 AU HoldCo II, LLC		Delaware
Parlex 2 AU Sub TC Pty Ltd		Australia
Parlex 2 AU Sub Trust		Australia
Parlex 2 AU TC Pty Ltd		Australia
Parlex 2 AU Trust		Australia
Parlex 2 AU Finco, LLC		Delaware
Parlex 2 EUR Finco, LLC		Delaware
Parlex 2 UK Finco, LLC		Delaware
Parlex 2A Finco, LLC		Delaware
Parlex 3 Finance, LLC		Delaware
Parlex 3 AU Finco, LLC		Delaware
Parlex 3 CAD Finco, LLC		Delaware
Parlex 3 EUR Finco, LLC		Delaware
Parlex 3 UK Finco, LLC		Delaware
Parlex 3A Finco, LLC		Delaware
Parlex 3A EUR Finco, LLC		Delaware
Parlex 3A UK Finco, LLC		Delaware
Parlex 4 Finance, LLC		Delaware
Parlex 4 UK Finco, LLC		Delaware
Parlex 5 Finco, LLC		Delaware
Parlex 5 Ken Finco, LLC		Delaware
Parlex 5 Ken CAD Finco, LLC		Delaware
Parlex 5 Ken EUR Finco, LLC		Delaware
Parlex 5 Ken UK Finco, LLC		Delaware
Parlex 5 Ken ONT Finco, LLC		Delaware
Parlex 6 Finco, LLC		Delaware
Parlex 6 EUR Finco, LLC		Delaware
Parlex 6 UK Finco, LLC		Delaware
Parlex 7 Finco, LLC		Delaware
Parlex 8 Finco, LLC		Delaware
Parlex 8 Lux EUR Finco, S.a r.l.		Luxembourg
Parlex 8 Lux EUR Pledgeco, S.a r.l.		Luxembourg
Parlex 9 Finco, LLC		Delaware
Parlex 10 Finco, LLC		Delaware
Parlex 10 Lux EUR Finco, S.a r.l.		Luxembourg


Parlex 10 Lux EUR Pledgeco, S.a r.l.		Luxembourg
Parlex 10 Lux GBP Finco, S.a r.l.		Luxembourg
Parlex 10 Lux GBP Pledgeco, S.a r.l.		Luxembourg
Parlex 11 Finco, LLC		Delaware
Parlex 14 Finco, LLC		Delaware
Parlex 14 UK Finco, LLC		Delaware
Parlex 14 EUR Finco, LLC		Delaware
Parlex 15 Finco, LLC		Delaware
Parlex 15 Holdco, LLC		Delaware
Parlex 15 AU Finco, LLC		Delaware
Parlex 15 Lux EUR Finco, S.a r.l.		Luxembourg
Parlex 15 Lux EUR Pledgeco, S.a r.l.		Luxembourg
Parlex ONT Partners GP, LLC		Delaware
Parlex ONT Partners, LP		Canada
Q Hotels Finco 2014, LLC		Delaware
Victor Holdings I, LLC		Delaware
WD-BXMT Lending, LLC		Delaware
Wispar 1 Finco, LLC		Delaware
Wispar 2 Finco, LLC		Delaware
Wispar 3 Finco, LLC		Delaware
Wispar 4 Finco, LLC		Delaware

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements on Form S-3 (File No. 333-232852) and on Forms S-8 (File Nos. 333-39743-99, 333-144929, 333-179668, 333-189806, 333-212112 and 333-225774) pertaining to (i) the Amended and Restated 1997 Long Term Incentive Stock Plan and Amended and Restated 1997 Non-Employee Director Stock Plan; (ii) 2007 Long-Term Incentive Plan; (iii) the 2011 Long-Term Incentive Plan; (iv) the 2013 Stock Incentive Plan; (v) the 2016 Stock Incentive Plan; and (vi) the 2018 Stock Incentive Plan of our report dated February 11, 2020 relating to the consolidated financial statements and financial statement schedule of Blackstone Mortgage Trust, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Blackstone Mortgage Trust, Inc. for the year ended December 31, 2019.

/s/ Deloitte & Touche LLP

New York, NY

February 11, 2020

Exhibit 31.1

CERTIFICATION

PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen D. Plavin, certify that:

I have reviewed this annual report on Form 10-K of Blackstone Mortgage Trust, Inc.;

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;

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;

The registrant’s other certifying officer 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

The registrant’s other certifying officer 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.

Date: February 11, 2020

/s/ Stephen D. Plavin

Stephen D. Plavin

Chief Executive Officer

Exhibit 31.2

CERTIFICATION

PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony F. Marone, Jr., certify that:

I have reviewed this annual report on Form 10-K of Blackstone Mortgage Trust, Inc.;

(a)

(b)

(c)

(d)

(a)

(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.

Date: February 11, 2020

/s/ Anthony F. Marone, Jr.

Anthony F. Marone, Jr.

Chief Financial Officer

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 Annual Report of Blackstone Mortgage Trust, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen D. Plavin, 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:

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

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

/s/ Stephen D. Plavin

Stephen D. Plavin

Chief Executive Officer

February 11, 2020

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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 Annual Report of Blackstone Mortgage Trust, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony F. Marone, Jr., 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:

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

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

/s/ Anthony F. Marone, Jr.

Anthony F. Marone, Jr.

Chief Financial Officer

February 11, 2020