Ares Commercial Real Estate Corp (Form: 10-Q, Received: 08/04/2016 06:12:17)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________________

FORM 10-Q

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

For the quarterly period ended June 30, 2016

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

For the transition period to

Commission File No. 001-35517

ARES COMMERCIAL REAL ESTATE CORPORATION

(Exact name of Registrant as specified in its charter)



Maryland		45-3148087
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

245 Park Avenue, 42nd Floor, New York, NY 10167

(Address of principal executive offices) (Zip Code)

(212) 750-7300

(Registrant's telephone number, including area code)

N/A

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

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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý No o

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



Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Outstanding at August 2, 2016
Common stock, $0.01 par value		28,513,137

ARES COMMERCIAL REAL ESTATE CORPORATION

INDEX



Part I.	Financial Information

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015	2

	Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015 (unaudited)	3

	Consolidated Statement of Equity for the six months ended June 30, 2016 (unaudited)	4

	Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50

Item 4.	Controls and Procedures	52

Part II.	Other Information

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3.	Defaults Upon Senior Securities	53

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	54

Item 6.	Exhibits	54

PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)



	As of
	June 30, 2016			December 31, 2015
	(unaudited)
ASSETS
Cash and cash equivalents ($2 and $8 related to consolidated VIEs, respectively)	$	5,309		$	5,066
Restricted cash	11,732			13,083
Loans held for investment ($270,141 and $483,572 related to consolidated VIEs, respectively)	1,142,967			1,174,391
Other assets ($1,518 and $2,695 of interest receivable related to consolidated VIEs, respectively; $35,607 of other receivables related to consolidated VIEs as of December 31, 2015)	12,457			53,191
Assets of discontinued operations held for sale	159,606			133,251
Total assets	$	1,332,071		$	1,378,982
LIABILITIES AND EQUITY
LIABILITIES
Secured funding agreements	$	601,794		$	522,775
Secured term loan	70,205			69,762
Commercial mortgage-backed securitization debt (consolidated VIE)	—			61,815
Collateralized loan obligation securitization debt (consolidated VIE)	104,656			192,528
Due to affiliate	2,073			2,424
Dividends payable	7,413			7,152
Other liabilities ($129 and $299 of interest payable related to consolidated VIEs, respectively)	14,137			14,507
Liabilities of discontinued operations held for sale	77,496			51,531
Total liabilities	877,774			922,494
Commitments and contingencies (Note 7)
EQUITY
Common stock, par value $0.01 per share, 450,000,000 shares authorized at June 30, 2016 and December 31, 2015, 28,513,137 and 28,609,650 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively	283			284
Additional paid-in capital	420,013			421,179
Accumulated deficit	(13,005		)	(11,992		)
Total stockholders' equity	407,291			409,471
Non-controlling interests in consolidated VIEs	47,006			47,017
Total equity	454,297			456,488
Total liabilities and equity	$	1,332,071		$	1,378,982

See accompanying notes to consolidated financial statements.

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)



	For the three months ended June 30,						For the six months ended June 30,
	2016			2015			2016			2015
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net interest margin:
Interest income from loans held for investment	$	18,929		$	21,012		$	37,679		$	44,182
Interest expense	(8,415		)	(8,701		)	(16,940		)	(18,879		)
Net interest margin	10,514			12,311			20,739			25,303
Expenses:
Management fees to affiliate	1,338			1,346			2,690			2,689
Professional fees	535			412			1,025			918
General and administrative expenses	686			647			1,409			1,446
General and administrative expenses reimbursed to affiliate	660			821			1,557			1,751
Total expenses	3,219			3,226			6,681			6,804
Income from continuing operations before income taxes	7,295			9,085			14,058			18,499
Income tax expense (benefit)	3			3			7			(18		)
Net income from continuing operations	7,292			9,082			14,051			18,517
Net income from discontinued operations held for sale, net of income taxes	2,689			2,181			2,355			2,041
Net income attributable to ACRE	9,981			11,263			16,406			20,558
Less: Net income attributable to non-controlling interests	(1,288		)	(2,296		)	(2,577		)	(4,529		)
Net income attributable to common stockholders	$	8,693		$	8,967		$	13,829		$	16,029
Basic earnings per common share:
Net income from continuing operations	$	0.21		$	0.24		$	0.40		$	0.49
Net income from discontinued operations held for sale	0.09			0.08			0.08			0.07
Net income	$	0.31		$	0.31		$	0.49		$	0.56
Diluted earnings per common share:
Net income from continuing operations	$	0.21		$	0.24		$	0.40		$	0.49
Net income from discontinued operations held for sale	0.09			0.08			0.08			0.07
Net income	$	0.31		$	0.31		$	0.48		$	0.56
Weighted average number of common shares outstanding:
Basic weighted average shares of common stock outstanding	28,428,703			28,491,711			28,479,015			28,488,022
Diluted weighted average shares of common stock outstanding	28,495,833			28,585,780			28,548,944			28,585,285
Dividends declared per share of common stock	$	0.26		$	0.25		$	0.52		$	0.50

See accompanying notes to consolidated financial statements.

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(in thousands, except share and per share data)

(unaudited)



	Common Stock					Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity			Non-Controlling Interests			Total Equity
	Shares		Amount			Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity			Non-Controlling Interests			Total Equity
Balance at December 31, 2015	28,609,650		$	284		$	421,179		$	(11,992	)	$	409,471		$	47,017		$	456,488
Stock‑based compensation	33,403		—			269			—			269			—			269
Repurchase and retirement of common stock	(129,916	)	(1		)	(1,435		)	—			(1,436		)	—			(1,436		)
Net income attributable to common stockholders	—					—			13,829			13,829			2,577			16,406
Dividends declared	—					—			(14,842		)	(14,842		)	—			(14,842		)
Contributions from non-controlling interests	—					—			—			—			4			4
Distributions to non-controlling interests	—					—			—			—			(2,592		)	(2,592		)
Balance at June 30, 2016	28,513,137		$	283		$	420,013		$	(13,005	)	$	407,291		$	47,006		$	454,297

See accompanying notes to consolidated financial statements.

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



	For the six months ended June 30,
	2016			2015
	(unaudited)			(unaudited)
Operating activities:
Net income	$	16,406		$	20,558
Adjustments to reconcile net income to net cash provided by (used in) operating activities (inclusive of amounts related to discontinued operations held for sale):
Amortization of deferred financing costs	3,150			5,187
Change in mortgage banking activities	(6,444		)	(7,596		)
Change in fair value of mortgage servicing rights	3,895			5,183
Accretion of deferred loan origination fees and costs	(2,013		)	(2,454		)
Provision for loss sharing	(289		)	(991		)
Cash paid to settle loss sharing obligations	—			(122		)
Originations of mortgage loans held for sale	(282,625		)	(382,693		)
Sale of mortgage loans held for sale to third parties	261,499			524,452
Stock-based compensation	269			414
Depreciation expense	112			109
Deferred tax expense	682			668
Changes in operating assets and liabilities:
Restricted cash	1,350			41,208
Other assets	39,681			20,164
Due to affiliate	(135		)	(59		)
Other liabilities	(2,118		)	(1,037		)
Net cash provided by (used in) operating activities	33,420			222,991
Investing activities:
Issuance of and fundings on loans held for investment	(196,108		)	(116,237		)
Principal repayment of loans held for investment	229,447			228,137
Receipt of origination fees	610			757
Purchases of other assets	(352		)	(62		)
Net cash provided by (used in) investing activities	33,597			112,595
Financing activities:
Proceeds from secured funding agreements	438,721			113,870
Repayments of secured funding agreements	(359,702		)	(105,824		)
Payment of secured funding costs	(1,458		)	(556		)
Repayments of debt of consolidated VIEs	(150,281		)	(197,506		)
Proceeds from warehouse lines of credit	332,703			435,592
Repayments of warehouse lines of credit	(311,078		)	(576,905		)
Repurchase of common stock	(1,436		)	—
Dividends paid	(14,582		)	(14,293		)
Contributions from non-controlling interests	4			5,685
Distributions to non-controlling interests	(2,592		)	(4,095		)
Net cash provided by (used in) financing activities	(69,701		)	(344,032		)
Change in cash and cash equivalents	(2,684		)	(8,446		)
Cash and cash equivalents of continuing operations, beginning of period	5,066			15,045
Cash and cash equivalents of discontinued operations held for sale, beginning of period	3,929			1,506
Cash and cash equivalents, end of period	$	6,311		$	8,105
Cash and cash equivalents of continuing operations, end of period	$	5,309		$	5,033
Cash and cash equivalents of discontinued operations held for sale, end of period	$	1,002		$	3,072

See accompanying notes to consolidated financial statements.

ARES COMMERCIAL REAL ESTATE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2016

(in thousands, except share and per share data, percentages and as otherwise indicated)

(unaudited)

1. ORGANIZATION

Ares Commercial Real Estate Corporation (together with its consolidated subsidiaries, the “Company” or “ACRE”) is a specialty finance company that operates both as a principal lender and as a mortgage banker (with respect to loans collateralized by multifamily and senior-living properties). Through Ares Commercial Real Estate Management LLC (“ACREM” or the Company’s “Manager”), a Securities and Exchange Commission (“SEC”) registered investment adviser and a subsidiary of Ares Management L.P. (NYSE: ARES) (“Ares Management”), a publicly traded, leading global alternative asset manager, it has investment professionals strategically located across the United States and Europe who directly source new loan opportunities for the Company with owners, operators and sponsors of commercial real estate (“CRE”) properties. The Company was formed and commenced operations in late 2011. The Company is a Maryland corporation and completed its initial public offering (the “IPO”) in May 2012. The Company is externally managed by its Manager, pursuant to the terms of a management agreement (the "Management Agreement").

In the Company’s principal lending business, it is primarily focused on directly originating, managing and servicing a diversified portfolio of CRE debt-related investments for the Company’s own account. The Company’s target investments in its principal lending business include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other CRE investments. These investments, which are referred to as the Company’s “principal lending target investments,” are generally held for investment and are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, senior-living and other commercial real estate properties, or by ownership interests therein.

The Company is also engaged in the mortgage banking business through its wholly owned subsidiary, ACRE Capital LLC (“ACRE Capital”). ACRE Capital primarily originates, sells and services multifamily and senior-living related loans under programs offered by government-sponsored enterprises ("GSEs"), such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation ("Freddie Mac") and by government agencies, such as the Government National Mortgage Association (“Ginnie Mae”) and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”). ACRE Capital is approved as a Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender, a Freddie Mac Program Plus® Seller/Servicer, a Multifamily Accelerated Processing and Section 232 LEAN lender for HUD, and a Ginnie Mae issuer. While ACRE Capital earns little interest income from these activities as it generally only holds loans for short periods, ACRE Capital receives origination fees when it closes loans and sale premiums when it sells loans. ACRE Capital also retains the rights to service the loans, which are known as mortgage servicing rights (“MSRs”) and receives fees for such servicing during the life of the loans, which generally last 10 years or more.

On June 28, 2016, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with Cornerstone Real Estate Advisers LLC ("Cornerstone"), a Delaware limited liability company (the “Buyer”), to sell ACRE Capital Holdings LLC (“TRS Holdings”), the holding company that owns the Company's mortgage banking subsidiary, ACRE Capital. Upon the terms and subject to the conditions set forth in the Agreement, at the closing, the Buyer will purchase from the Company (the “Acquisition”) all of the outstanding common units of TRS Holdings. The Acquisition is expected to close in the third or fourth quarter of 2016, subject to the satisfaction or waiver of various closing conditions, as described below.

The Agreement provides that the Buyer will pay $93 million in cash, subject to certain adjustments, as consideration for the Acquisition. The purchase price is subject to certain adjustments, including a working capital adjustment, an adjustment of $1.15 million in respect of certain change of control payments triggered in connection with the Acquisition and a potential adjustment of up to $3 million based on certain 2016 revenue items.

The Company has elected and qualified to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 2012. The Company generally will not be subject to U.S. federal income taxes on its REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, to the extent that it annually distributes all of its REIT taxable income to stockholders and complies with various other requirements as a REIT.

2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the related management's discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC.

Refer to the Company's Annual Report on Form 10-K for a description of the Company's recurring accounting policies. The Company has included disclosure below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly or (ii) the Company views as critical as of the date of this report.

Basis of Presentation

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company, the consolidated variable interest entities (“VIEs”) that the Company controls and of which the Company is the primary beneficiary, and the Company's wholly owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated.

Interim financial statements are prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the year ending December 31, 2016 .

Discontinued Operations

As discussed in Note 1 included in these consolidated financial statements, the Company has entered into an agreement to sell TRS Holdings, the holding company that owns the Company’s mortgage banking subsidiary, ACRE Capital. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-20, Presentation of Financial Statements - Discontinued Operations , defines the criteria required for a disposal transaction to qualify for reporting as a discontinued operation. The Company determined that its plan to sell TRS Holdings met the criteria for discontinued operations. As a result, the operating results and the assets and liabilities of ACRE Capital, which formerly comprised the Mortgage Banking segment, are presented separately in the Company’s consolidated financial statements as discontinued operations held for sale. Net assets and net liabilities related to discontinued operations are included in the line items “Assets of discontinued operations held for sale” and “Liabilities of discontinued operations held for sale” in the consolidated balance sheets for all periods presented. The value of ACRE Capital's assets and liabilities are presented at the lower of carrying value or fair value less cost to sell. The fair value less cost to sell of ACRE Capital's assets and liabilities is greater than the carrying value; therefore, the Company did not recognize any impairment losses when the Company reclassified the assets and liabilities to discontinued operations held for sale. The results of discontinued operations are included in the line item “Net income from discontinued operations held for sale, net of income taxes” in the consolidated statements of operations for all periods presented. Summarized financial information for the discontinued Mortgage Banking segment is shown in Note 16 included in these consolidated financial statements.

Variable Interest Entities

The Company evaluates all of its interests in VIEs for consolidation. When the Company’s interests are determined to be variable interests, the Company assesses whether it is deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. FASB ASC Topic 810, Consolidation , defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. The Company considers its variable interests, as well as any variable interests of its related parties in making this determination. Where both of these factors are present, the Company is deemed to be the primary beneficiary and it consolidates the VIE. Where either one of these factors is not present, the Company is not the primary beneficiary and it does not consolidate the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the

parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests, including debt and equity investments, servicing fees, and other arrangements deemed to be variable interests in the VIE. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

For VIEs of which the Company is determined to be the primary beneficiary, all of the underlying assets, liabilities, equity, revenue and expenses of the structures are consolidated into the Company’s consolidated financial statements.

The Company performs an ongoing reassessment of: (1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore are subject to the VIE consolidation framework, and (2) whether changes in the facts and circumstances regarding its involvement with a VIE cause the Company’s consolidation conclusion regarding the VIE to change. See Note 15 included in these consolidated financial statements for further discussion of the Company’s VIEs.

Segment Reporting

The Company previously had two reportable business segments: Principal Lending and Mortgage Banking. As a result of the expected sale of TRS Holdings, the operations of the Mortgage Banking segment have been reclassified as discontinued operations held for sale in all periods presented. After giving effect to the expected divestiture of TRS Holdings, the Company will no longer provide segment reporting. See Notes 1 and 16 included in these consolidated financial statements for further discussion of the sale of the Mortgage Banking segment.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. Amortization of convertible notes issuance costs and accretion of convertible notes have been reclassified into amortization of deferred financing costs in the consolidated statements of cash flows. As of June 30, 2016 and December 31, 2015, the Company no longer presents amortization of convertible notes issuance costs and accretion of convertible notes in its consolidated statements of cash flows.

The Company presents, in discontinued operations, the results of operations that have either been disposed of or are classified as held for sale and for which the disposition represents a strategic shift that has or will have a significant effect on the Company's operations and financial results. As a result of this presentation, retroactive reclassifications that change prior period numbers have been made. See Notes 1 and 16 included in these consolidated financial statements for further discussion of the sale of the Mortgage Banking segment.

Loans Held for Investment

The Company originates CRE debt and related instruments generally to be held for investment. Loans that are held for investment are carried at cost, net of unamortized loan fees and origination costs, unless the loans are deemed impaired. Impairment occurs when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan. If a loan is considered to be impaired, the Company will record an allowance to reduce the carrying value of the loan to the present value of expected future cash flows discounted at the loan’s contractual effective rate.

Each loan classified as held for investment is evaluated for impairment on a quarterly basis. Loans are collateralized by real estate. The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received. The Company monitors performance of its investment portfolio under the following methodology: (1) borrower review, which analyzes the borrower’s ability to execute on its original business plan, reviews its financial condition, assesses pending litigation and considers its general level of responsiveness and cooperation; (2) economic review, which considers underlying collateral (i.e. leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity); (3) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception; and (4) market review, which analyzes the

collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective. Such impairment analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, and the borrower’s exit plan, among other factors.

In addition, the Company evaluates the entire portfolio to determine whether the portfolio has any impairment that requires a valuation allowance on the remainder of the loan portfolio. As of June 30, 2016 and December 31, 2015 , the Company did not recognize any impairment charges with respect to its loans held for investment.

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower's ability to make pending principal and interest payments. Non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current. The Company may make exceptions to placing a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Preferred equity investments, which are subordinate to any loans but senior to common equity, are accounted for as loans held for investment and are carried at cost, net of unamortized loan fees and origination costs, unless the loans are deemed impaired, and are included within loans held for investment in the Company’s consolidated balance sheets. The Company accretes or amortizes any discounts or premiums over the life of the related loan held for investment utilizing the effective interest method.

Loans Held for Sale

Through its subsidiaries, including ACRE Capital, ACRC Lender W TRS LLC ("ACRC W TRS") and ACRC Lender U TRS LLC ("ACRC U TRS"), the Company originates mortgage loans held for sale, which are recorded at fair value and accounted for under FASB ASC Topic 860, Transfers and Servicing . The holding period for loans originated by ACRE Capital is approximately 30 days. The carrying value of the mortgage loans sold is reduced by the value allocated to the associated retained MSRs based on relative fair value at the time of the sale. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the adjusted value of the related mortgage loans sold. See Notes 1 and 16 included in these consolidated financial statements for further discussion of the sale of the Mortgage Banking segment.

Although the Company generally holds its target investments as long‑term investments within its principal lending business, the Company may occasionally classify some of its investments as held for sale. Investments held for sale will be carried at fair value within loans held for sale in the Company’s consolidated balance sheets, with changes in fair value recorded through earnings. The fees received are deferred and recognized as part of the gain or loss on sale. As of June 30, 2016 and December 31, 2015 , the Company did not have any loans held for sale in its principal lending business.

Mortgage Servicing Rights

When a mortgage loan is sold, ACRE Capital retains the right to service the loan and recognizes the MSR at fair value. The initial fair value represents expected net cash flows from servicing, as well as interest earnings on escrows and interim cash balances, borrower prepayment penalties, delinquency rates, late charges along with ancillary fees that are discounted at a rate that reflects the credit and liquidity risk of the MSR over the estimated life of the underlying loan. After initial recognition, changes in the MSR fair value are included within net income from discontinued operations held for sale, net of income taxes, in the Company’s consolidated statements of operations for the period in which the change occurs. See Notes 1 and 16 included in these consolidated financial statements for further discussion of the sale of the Mortgage Banking segment.

Allowance for Loss Sharing

When a loan is sold under the Fannie Mae DUS program, ACRE Capital undertakes an obligation to partially guarantee the performance of the loan. The date ACRE Capital commits to make a loan to a borrower, a liability for the fair value of the obligation undertaken in issuing the guarantee is recognized. Subsequent to the initial commitment date, the Company monitors the performance of each loan for events or circumstances which may signal an additional liability to be recognized if there is a probable and estimable loss. The initial fair value of the guarantee is estimated by examining historical loss share experienced in the ACRE Capital Fannie Mae DUS portfolio over the most recent 10 -year period. The initial fair value of the guarantee is included within net income from discontinued operations held for sale, net of income taxes, in the Company’s consolidated statements of operations. These historical loss shares serve as a basis to derive a loss share rate which

is then applied to the current ACRE Capital DUS portfolio (net of specifically identified impaired loans that are subject to a separate loss share reserve analysis). See Notes 1 and 16 included in these consolidated financial statements for further discussion of the sale of the Mortgage Banking segment.

Revenue Recognition

Interest income from loans held for investment is accrued based on the outstanding principal amount and the contractual terms of each loan. For loans held for investment, origination fees, contractual exit fees and direct loan origination costs are also recognized in interest income from loans held for investment over the initial loan term as a yield adjustment using the effective interest method.

A reconciliation of the Company's interest income from loans held for investment, excluding non-controlling interests, to the Company's interest income from loans held for investment as included within its consolidated statements of operations for the three and six months ended June 30, 2016 and 2015 is as follows ($ in thousands):



	For the three months ended June 30,				For the six months ended June 30,
	2016		2015		2016		2015
Interest income from loans held for investment, excluding non-controlling interests	$	17,640	$	18,706	$	35,101	$	39,633
Interest income from non-controlling interest investment held by third parties	1,289		2,306		2,578		4,549
Interest income from loans held for investment	$	18,929	$	21,012	$	37,679	$	44,182

Servicing fees are earned for servicing mortgage loans, including all activities related to servicing the loans, and are recognized as services are provided over the life of the related mortgage loan. Also included in servicing fees are the net fees earned on borrower prepayment penalties and interest earned on borrowers’ escrow payments and interim cash balances, along with other ancillary fees and reduced by write-offs of MSRs for loans that are prepaid, changes in the fair value of the servicing fee payable (defined below) and interest expense related to escrow accounts. ACRE Capital provides additional payments to certain personnel by providing them with a percentage of the servicing fee revenue that is earned by ACRE Capital, which is initially recorded as a liability when ACRE Capital commits to make a loan to a borrower (the “servicing fee payable”). Servicing fees, net are included within net income from discontinued operations held for sale, net of income taxes, in the Company’s consolidated statements of operations.

Gains from mortgage banking activities includes the initial fair value of MSRs, loan origination fees, gain on the sale of loans originated, interest income and fees earned on loans held for sale, changes to the fair value of derivative financial instruments attributable to the loan commitments and forward sale commitments and reduced by the expense related to the initial fair value of the servicing fee payable and the interest expense related to the Warehouse Lines of Credit (as defined in Note 5 included in these consolidated financial statements). The initial fair value of MSRs, loan origination fees, gain on the sale of loans originated, certain direct loan origination costs for loans held for sale and the expenses related to the initial fair value of the servicing fee payable are recognized when ACRE Capital commits to make a loan to a borrower. When the Company settles a sale agreement and transfers the mortgage loan to the buyer, the Company recognizes a MSR asset equal to the present value of the expected net cash flows associated with the servicing of loans sold. Gains from mortgage banking activities are included within net income from discontinued operations held for sale, net of income taxes, in the Company’s consolidated statements of operations.

See Notes 1 and 16 included in these consolidated financial statements for further discussion of the sale of the Mortgage Banking segment.

Net Interest Margin and Interest Expense

Net interest margin within the consolidated statements of operations is a measure that is specific to the Company's principal lending business and serves to measure the performance of the Company's loans held for investment as compared to its use of debt leverage. The Company includes interest income from its loans held for investment and interest expense related to its Secured Funding Agreements, securitizations debt, the Secured Term Loan and the 2015 Convertible Notes (individually defined in Note 5 included in these consolidated financial statements) in net interest margin. For the three and six months ended June 30, 2016 and 2015 , interest expense is comprised of the following ($ in thousands):



	For the three months ended June 30,				For the six months ended June 30,
	2016		2015		2016		2015
Secured funding agreements and securitizations debt	$	6,657	$	7,085	$	13,425	$	15,674
Secured term loan	1,758		—		3,515		—
Convertible notes	—		1,616		—		3,205
Interest expense	$	8,415	$	8,701	$	16,940	$	18,879

Comprehensive Income

For the three and six months ended June 30, 2016 and 2015 , comprehensive income equaled net income; therefore, a separate consolidated statement of comprehensive income is not included in the accompanying consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) . The guidance in this ASU supersedes the revenue recognition requirements in Revenue Recognition (Topic 605) . Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No. 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Considerations , which clarifies the guidance in ASU No. 2014-09 and has the same effective date as the original standard. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , an update on identifying performance obligations and accounting for licenses of intellectual property. Additionally, in May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients , which includes amendments for enhanced clarification of the guidance. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The guidance in this ASU supersedes the leasing guidance in Leases (Topic 840) . Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 2016-02 are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU No. 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The standard will replace the incurred loss impairment methodology pursuant to GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU No. 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted after December 15, 2018, including interim periods within that reporting period. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

3. LOANS HELD FOR INVESTMENT

As of June 30, 2016 , the Company had originated or co-originated 33 loans held for investment, excluding 34 loans that were repaid or sold since inception. The aggregate originated commitment under these loans at closing was approximately $ 1.2 billion and outstanding principal was $ 1.1 billion, excluding non-controlling interests held by third parties, as of June 30, 2016 . During the six months ended June 30, 2016 , the Company funded approximately $ 197.9 million of outstanding principal

and received repayments of $ 229.4 million of outstanding principal, excluding non-controlling interests held by third parties, as described in more detail in the tables below. Such investments are referred to herein as the Company’s "investment portfolio." As of June 30, 2016 , 69.0% of the Company’s loans have London Interbank Offered Rates ("LIBOR") floors, with a weighted average floor of 0.23% , calculated based on loans with LIBOR floors. References to LIBOR or “L” are to 30-day LIBOR (unless otherwise specifically stated).

The Company’s investments in loans held for investment are accounted for at amortized cost. The following tables summarize the Company’s loans held for investment as of June 30, 2016 and December 31, 2015 ($ in thousands):



	As of June 30, 2016
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Interest Rate		Weighted Average Unleveraged Effective Yield (2)		Weighted Average Remaining Life (Years)
Senior mortgage loans	$	927,991	$	931,662	4.4	%	5.1	%	1.4
Subordinated debt and preferred equity investments	168,397		170,668		10.7	%	11.2	%	5.2
Total loans held for investment portfolio (excluding non-controlling interests held by third parties)	$	1,096,388	$	1,102,330	5.3	%	6.1	%	2.0



	As of December 31, 2015
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Interest Rate		Weighted Average Unleveraged Effective Yield (2)		Weighted Average Remaining Life (Years)
Senior mortgage loans	$	961,395	$	965,578	4.4	%	5.1	%	1.4
Subordinated debt and preferred equity investments	166,417		168,264		10.6	%	11.2	%	5.1
Total loans held for investment portfolio (excluding non-controlling interests held by third parties)	$	1,127,812	$	1,133,842	5.3	%	6.0	%	1.9

_______________________________________________________________________________

(1)

The difference between the Carrying Amount and the Outstanding Principal face amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs. The tables above exclude non-controlling interests held by third parties. A reconciliation of the Carrying Amount of loans held for investment portfolio, excluding non-controlling interests, to the Carrying Amount of loans held for investment, as included within the Company's consolidated balance sheets, is presented below.

(2)

Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premium or discount) and assumes no dispositions, early prepayments or defaults. The Total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of June 30, 2016 and December 31, 2015 as weighted by the Outstanding Principal balance of each loan.

A reconciliation of the Company's loans held for investment portfolio, excluding non-controlling interests held by third parties, to the Company's loans held for investment as included within its consolidated balance sheets is as follows ($ in thousands):



	As of June 30, 2016
	Carrying Amount		Outstanding Principal
Total loans held for investment portfolio (excluding non-controlling interests held by third parties)	$	1,096,388	$	1,102,330
Non-controlling interest investment held by third parties	46,579		46,579
Loans held for investment	$	1,142,967	$	1,148,909



	As of December 31, 2015
	Carrying Amount		Outstanding Principal
Total loans held for investment portfolio (excluding non-controlling interests held by third parties)	$	1,127,812	$	1,133,842
Non-controlling interest investment held by third parties	46,579		46,579
Loans held for investment	$	1,174,391	$	1,180,421

A more detailed listing of the Company’s investment portfolio, excluding non-controlling interests, based on information available as of June 30, 2016 is as follows ($ in millions, except percentages):

Loan Type

Location

Outstanding Principal (1)

Carrying Amount (1)

Interest Rate

Unleveraged Effective Yield (2)

Maturity Date (3)

Payment Terms (4)

Senior Mortgage Loans:

Office

$82.9

$82.7

L+5.00%

6.3%

Jan 2017

I/O

Retail

75.9

75.7

L+4.00%

4.9%

Aug 2017

I/O

Mixed-use

65.6

65.1

L+4.16%

5.1%

Apr 2019

I/O

Hotel

56.0

55.5

L+4.75%

5.9%

Feb 2019

I/O

Mixed-use

60.5

60.0

L+3.60%

4.5%

Oct 2018

I/O

Multifamily

44.7

L+3.75%

4.7%

Sep 2016

I/O

(5)

Healthcare

41.6

41.5

L+5.00%

6.0%

Dec 2016

I/O

Industrial

MO/KS

37.1

37.0

L+4.30%

5.3%

Jan 2017

P/I

(6)

Hotel

36.5

36.3

L+4.75%

5.7%

June 2018

I/O

Hotel

35.2

35.1

L+4.15%

4.8%

July 2017

I/O

Office

34.0

33.9

L+3.65%

4.3%

Oct 2017

I/O

Industrial

32.5

32.4

L+4.20%

5.0%

May 2018

I/O

(6)

Retail

30.4

30.2

L+3.25%

4.1%

Sep 2018

I/O

Multifamily

28.7

28.6

L+3.75%

4.7%

Oct 2017

I/O

Office

29.2

29.0

L+3.75%

4.7%

Oct 2018

I/O

Mixed-use

28.3

L+4.25%

5.1%

Aug 2017

I/O

Office

25.5

25.4

L+5.00%

6.1%

Oct 2017

I/O

Multifamily

25.0

24.9

L+3.65%

4.6%

Jan 2017

I/O

Multifamily

24.2

24.1

L+3.80%

4.5%

Jan 2019

I/O

Multifamily

23.1

L+3.85%

5.0%

May 2017

I/O

Multifamily

22.1

22.0

L+4.25%

5.5%

Sep 2017

I/O

(5)

Office

19.5

19.4

L+3.95%

4.9%

Dec 2017

I/O

Office

15.9

L+3.75%

4.6%

July 2016

I/O

Office

14.9

15.0

L+4.50%

5.1%

July 2018

I/O

Multifamily

15.3

L+3.85%

4.7%

Nov 2017

I/O

Mixed-use

14.6

14.5

L+3.95%

5.0%

Sep 2017

I/O

Multifamily

12.4

12.3

L+3.75%

4.9%

Apr 2017

I/O

Subordinated Debt and Preferred Equity Investments:

Multifamily

GA/FL

40.8

40.4

L+11.85%

(7)

12.6%

June 2021

I/O

Multifamily

33.3

33.2

L+8.07%

8.8%

Jan 2019

I/O

Office

17.0

16.3

12.00%

12.8%

Jan 2026

I/O

(6)

Office

14.3

9.50%

9.5%

Aug 2017

I/O

Mixed-use

16.8

11.50%

(8)

12.1%

Nov 2016

I/O

Various

Diversified

(9)

48.5

47.5

10.95%

11.7%

Dec 2024

I/O

Total/Weighted Average

$1,102.3

$1,096.4

6.1%

_______________________________________________________________________________


(1)	The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs.

(2)

Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premium or discount) and assumes no dispositions, early prepayments or defaults. Unleveraged Effective Yield for each loan is calculated based on LIBOR as of June 30, 2016 or the LIBOR floor, as applicable. The Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by the Company as of June 30, 2016 as weighted by the Outstanding Principal balance of each loan.

(3)

Certain loans are subject to contractual extension options that vary between one and two 12-month extensions and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities in connection with loan modifications.


(4)	I/O = interest only, P/I = principal and interest.


(5)	In June 2016, the Company extended the maturity dates on the senior Texas and Arizona loans to September 2016 and September 2017, respectively, in accordance with the loan agreements.

(6)

In January 2015, amortization began on the senior Missouri/Kansas loan, which had an outstanding principal balance of $ 37.1 million as of June 30, 2016 . In May 2017, amortization will begin on the senior Ohio loan, which had an outstanding principal balance of $ 32.5 million as of June 30, 2016 . In February 2021, amortization will begin on the subordinated New Jersey loan, which had an outstanding principal balance of $17.0 million as of June 30, 2016 . The remainder of the loans in the Company’s principal lending portfolio are non-amortizing through their primary terms.


(7)	The preferred return is L+ 11.85% with 2.00% as payment-in-kind ("PIK"), to the extent cash flow is not available. There is no capped dollar amount on accrued PIK.


(8)	The interest rate is 11.50% with a 9.00% current pay and up to a capped dollar amount as PIK based on the borrower’s election. In July 2015, the Company entered into an amendment to increase the loan commitment and outstanding principal by $650 thousand at an interest rate of 15.00% on the increased commitment and outstanding principal only.


(9)	The preferred equity investment is in an entity whose assets are comprised of multifamily, student housing and medical office properties.

For the six months ended June 30, 2016 , the activity in the Company's loan portfolio was as follows ($ in thousands):



Balance at December 31, 2015	$	1,174,391
Initial funding	179,022
Origination fees and discounts, net of costs	(1,924		)
Additional funding	18,912
Amortizing payments	(309		)
Loan payoffs	(229,138		)
Origination fee accretion	2,013
Balance at June 30, 2016	$	1,142,967

No imp airment charges have been recognized during the three and six months ended June 30, 2016 and 2015 .

4. MORTGAGE SERVICING RIGHTS

MSRs represent servicing rights retained by ACRE Capital for loans it originates and sells. The servicing fees are collected from the monthly payments made by the borrowers. ACRE Capital generally receives other remuneration including rights to various loan fees such as late charges, collateral re-conveyance charges, loan prepayment penalties, and other ancillary fees. In addition, ACRE Capital is also generally entitled to retain the interest earned on funds held pending remittance related to its collection of loan principal and escrow balances. As of June 30, 2016 , ACRE Capital had a servicing portfolio (excluding ACRE’s loans held for investment portfolio; see Note 13 included in these consolidated financial statements) consisting of 950 loans with an unpaid principal balance of $ 4.9 billion, which includes 925 GSE / HUD loans with an unpaid principal balance of $4.2 billion and 25 other loans (managed by an affiliate of the manager of ACRE) with an unpaid principal balance of $695.5 million. As of December 31, 2015, ACRE Capital had a servicing portfolio (excluding ACRE’s loans held for investment portfolio; see Note 13 included in these consolidated financial statements) consisting of 973 loans with an unpaid principal balance of $4.9 billion, which includes 953 GSE / HUD loans with an unpaid principal balance of $4.3 billion and 20 other loans (managed by an affiliate of the manager of ACRE) with an unpaid principal balance of $554.8 million. As of June 30, 2016 and December 31, 2015 , the carrying value of ACRE Capital’s MSRs for the GSE and HUD loan portfolio was approximately $60.2 million and $61.8 million, respectively.

Activity related to MSRs as of and for the six months ended June 30, 2016 and 2015 was as follows ($ in thousands):



Balance at December 31, 2015	$	61,800
MSRs purchased	323
Additions, following sale of loan	4,386
Changes in fair value	(3,895		)
Prepayments and write-offs	(2,397		)
Balance at June 30, 2016 (1)	$	60,217



Balance at December 31, 2014	$	58,889
Additions, following sale of loan	7,526
Changes in fair value	(5,183		)
Prepayments and write-offs	(1,155		)
Balance at June 30, 2015 (1)	$	60,077

_________________________________________________________________________

(1)

MSRs are included in mortgage servicing rights at fair value as of June 30, 2016 and December 31, 2015 in the reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations held for sale to assets and liabilities of discontinued operations held for sale that are presented separately in the consolidated balance sheets. See Note 16 included in these consolidated financial statements for more information.

As discussed in Note 2 included in these consolidated financial statements, the Company determines the fair values of the MSRs based on discounted cash flow models that calculate the present value of estimated future net servicing income. The fair values of ACRE Capital’s MSRs are subject to changes in discount rates. For example, a 100 basis point increase or decrease in the weighted average discount rate would decrease or increase, respectively, the fair value of ACRE Capital’s MSRs outstanding as of June 30, 2016 and December 31, 2015 by approximately $ 1.9 million and $2.0 million, respectively.

See Notes 1 and 16 included in these consolidated financial statements for further discussion of the sale of the Mortgage Banking segment.

5. DEBT

Financing Agreements

The Company, through its subsidiary ACRE Capital, borrows funds under the ASAP Line of Credit and the BAML Line of Credit (individually defined below and together, the “Warehouse Lines of Credit”). The Company also borrows funds under the Wells Fargo Facility, the Citibank Facility, the BAML Facility, the CNB Facilities, the MetLife Facility and the UBS Facilities (individually defined below and collectively, the "Secured Funding Agreements") and the Secured Term Loan (defined below). The Company refers to the Warehouse Lines of Credit, the Secured Funding Agreements and the Secured Term Loan as the “Financing Agreements.” As of June 30, 2016 and December 31, 2015 , the outstanding balances and total commitments under the Financing Agreements consisted of the following ($ in thousands):




	June 30, 2016						December 31, 2015
	Outstanding Balance			Total Commitment			Outstanding Balance		Total Commitment
Wells Fargo Facility	$	147,681		$	325,000		$	101,473	$	225,000
Citibank Facility	225,523			250,000			112,827		250,000
BAML Facility	—			50,000			—		50,000
March 2014 CNB Facility	35,100			50,000			—		50,000
July 2014 CNB Facility	—			75,000			66,200		75,000
MetLife Facility	111,196			180,000			109,474		180,000
April 2014 UBS Facility	82,294			140,000			75,558		140,000
December 2014 UBS Facility	—		(1)	—		(1)	57,243		57,243
Secured Term Loan	75,000			155,000			75,000		155,000
ASAP Line of Credit	—			80,000		(2)	—		80,000		(2)
BAML Line of Credit	46,431			135,000			24,806		135,000
Total	$	723,225		$	1,440,000		$	622,581	$	1,397,243

______________________________________________________________________________


(1)	The December 2014 UBS Facility (defined below) has been repaid in full and its terms were not extended.


(2)	The commitment amount is subject to change at any time at Fannie Mae's discretion. See Note 17 included in these consolidated financial statements for more information on a subsequent event relating to the ASAP Line of Credit.

Some of the Company's Financing Agreements are collateralized by (i) assignments of specific loans, preferred equity or a pool of loans held for investment or loans held for sale owned by the Company, (ii) interests in the subordinated portion of the Company's securitization debt, or (iii) interests in wholly owned entity subsidiaries that hold the Company's loans held for investment. The Company is the borrower or guarantor under each of the Financing Agreements (excluding the Warehouse Lines of Credit, where ACRE Capital is the borrower). Generally, the Company partially offsets interest rate risk by matching

the interest index of loans held for investment with the Secured Funding Agreements used to fund them. The Company's Financing Agreements contain various affirmative and negative covenants, including negative pledges, and provisions regarding events of default that are normal and customary for similar financing arrangements.

Wells Fargo Facility

The Company is party to a master repurchase funding facility arranged by Wells Fargo Bank, National Association ("Wells Fargo") (as amended and restated, the “Wells Fargo Facility”), which allows the Company to borrow up to $325.0 million. In June 2016, the Company amended the Wells Fargo Facility to increase the facility's size from $225.0 million to $325.0 million and extend the maturity date to December 14, 2017. The Company has two 12 -month extensions at its option assuming no existing defaults under the Wells Fargo Facility and applicable extension fees are paid. Under the Wells Fargo Facility, the Company is permitted to sell, and later repurchase, certain qualifying senior commercial mortgage loans, A-Notes, pari passu participations in commercial mortgage loans and mezzanine loans under certain circumstances, subject to available collateral approved by Wells Fargo in its sole discretion. Beginning on December 14, 2015, new advances under the Wells Fargo Facility accrue interest at a per annum rate equal to the sum of (i) 30 day LIBOR plus (ii) a pricing margin range of 1.75% to 2.35% . Advances on loans made prior to December 14, 2015 under the Wells Fargo Facility continue to accrue interest at a per annum rate equal to the sum of (i) 30 day LIBOR plus (ii) a pricing margin range of 2.00% to 2.50% . The Company incurs a non-utilization fee of 25 basis points on the daily available balance of the Wells Fargo Facility to the extent less than 75% of the Wells Fargo Facility is utilized. For the three and six months ended June 30, 2016 , the Company incurred a non-utilization fee of $ 80 thousand and $146 thousand, respectively. For both the three and six months ended June 30, 2015, the Company incurred a non-utilization fee of $55 thousand.

Citibank Facility

The Company is party to a $250.0 million master repurchase facility (the “Citibank Facility”) with Citibank, N.A. Under the Citibank Facility, the Company is permitted to sell and later repurchase certain qualifying senior commercial mortgage loans and A-Notes approved by Citibank, N.A. in its sole discretion. Advances under the Citibank Facility accrue interest at a per annum rate equal to 30 day LIBOR plus a pricing margin of 2.00% to 2.50% , subject to certain exceptions. The maturity date of the Citibank Facility is December 8, 2016, subject to three 12 -month extensions at the Company's option assuming no existing defaults under the Citibank Facility and applicable extension fees are paid. The Company incurs a non-utilization fee of 25 basis points on the daily available balance of the Citibank Facility. For the three and six months ended June 30, 2016 , the Company incurred a non-utilization fee of $ 25 thousand and $ 93 thousand, respectively. For the three and six months ended June 30, 2015, the Company incurred a non-utilization fee of $97 thousand and $194 thousand, respectively. See Note 17 for more information on a subsequent event with respect to the Citibank Facility as included in these consolidated financial statements.

BAML Facility

The Company is party to a $50.0 million Bridge Loan Warehousing Credit and Security Agreement (the “BAML Facility”) with Bank of America, N.A. Under the BAML Facility, the Company may obtain advances secured by eligible commercial mortgage loans collateralized by healthcare facilities and other multifamily properties. In February 2016, the Company amended the BAML Facility to expand the eligible assets to include loans secured by general and affordable multifamily properties. Bank of America, N.A. may approve the loans on which advances are made under the BAML Facility in its sole discretion. In May 2016, the Company amended the BAML Facility to extend the period during which the Company may request individual loans under the facility to May 25, 2017. Individual advances under the BAML Facility generally have a two -year maturity, subject to one 12 -month extension at the Company's option upon the satisfaction of certain conditions and applicable extension fees being paid. In addition, in May 2016, the final maturity date of individual loans under the BAML Facility was extended to May 25, 2020. Advances under the BAML Facility accrue interest at a per annum rate equal to one-month LIBOR plus a spread ranging from 2.25% to 2.75% depending upon the type of asset securing such advance. The Company incurs a non-utilization fee of 12.5 basis points on the average daily available balance of the BAML Facility. For the three and six months ended June 30, 2016 , the Company incurred a non-utilization fee of $ 16 thousand and $ 32 thousand, respectively. For both the three and six months ended June 30, 2015, the Company incurred a non-utilization fee of $5 thousand.

City National Bank Facilities

March 2014 CNB Facility

The Company is party to a $50.0 million secured revolving funding facility with City National Bank (the “March 2014 CNB Facility”). The Company is permitted to borrow funds under the March 2014 CNB Facility to finance investments and for other working capital and general corporate needs. In February 2016, the Company amended the March 2014 CNB Facility to extend the maturity date to March 11, 2017. The Company has one 12 -month extension at its option provided that certain conditions are met and applicable extension fees are paid, which, if exercised, would extend the final maturity of the March 2014 CNB Facility to March 10, 2018. Advances under the March 2014 CNB Facility accrue interest at a per annum rate equal to the sum of, at the Company’s option, either (a) LIBOR for a one, two, three, six or, if available to all lenders, 12 month interest period plus 3.00% or (b) a base rate (which is the highest of a prime rate, the federal funds rate plus 0.50% , or one month LIBOR plus 1.00% ) plus 1.25% ; provided that in no event shall the interest rate be less than 3.00% . Unless at least 75% of the March 2014 CNB Facility is used on average, unused commitments under the March 2014 CNB Facility accrue unused line fees at the rate of 0.375% per annum. For the three and six months ended June 30, 2016 , the Company incurred a non-utilization fee of $ 2 thousand and $ 45 thousand, respectively. For the three and six months ended June 30, 2015, the Company incurred a non-utilization fee of $47 thousand and $84 thousand, respectively.

July 2014 CNB Facility

The Company and certain of its subsidiaries are party to a $75.0 million revolving funding facility (the “July 2014 CNB Facility” and together with the March 2014 CNB Facility, the "CNB Facilities") with City National Bank. The Company is permitted to borrow funds under the July 2014 CNB Facility to finance investments and for other working capital and general corporate needs. The maturity date of the July 2014 CNB Facility is July 31, 2016. Advances under the July 2014 CNB Facility accrue interest at a per annum rate equal, at the Company’s option, to either (a) LIBOR for a one, two, three, six or, if available to all lenders, 12 month interest period plus 1.50% or (b) a base rate (which is the highest of a prime rate, the federal funds rate plus 0.50% , or one month LIBOR plus 1.00% ) plus 0.25% ; provided that in no event shall the interest rate be less than 1.50% . Unless at least 75% of the July 2014 CNB Facility is used on average, unused commitments under the July 2014 CNB Facility accrue unused line fees at the rate of 0.125% per annum. For the three and six months ended June 30, 2016 , the Company incurred a non-utilization fee of $ 20 thousand and $ 26 thousand, respectively. For the three and six months ended June 30, 2015, the Company did not incur a non-utilization fee. See Note 13 included in these consolidated financial statements for more information on a credit support fee agreement and Note 17 included in these consolidated financial statements for more information on a subsequent event with respect to the July 2014 CNB Facility.

MetLife Facility

The Company and certain of its subsidiaries are party to a $180.0 million revolving master repurchase facility (the “MetLife Facility”) with Metropolitan Life Insurance Company (“MetLife”), pursuant to which the Company may sell, and later repurchase, commercial mortgage loans meeting defined eligibility criteria which are approved by MetLife in its sole discretion. The maturity date of the MetLife Facility is August 12, 2017, subject to two 12 -month extensions at the Company’s option provided that certain conditions are met and applicable extension fees are paid. Advances under the MetLife Facility accrue interest at a per annum rate of 30 day LIBOR plus 2.35% . The Company will pay MetLife, if applicable, an annual make-whole fee equal to the amount by which the aggregate price differential paid over the term of the MetLife Facility is less than the defined minimum price differential, unless certain conditions are met.

UBS Facilities

April 2014 UBS Facility

The Company is party to a $140.0 million revolving master repurchase facility (the “April 2014 UBS Facility”) with UBS Real Estate Securities Inc. (“UBS”), pursuant to which the Company may sell, and later repurchase, commercial mortgage loans and, under certain circumstances, other assets meeting defined eligibility criteria that are approved by UBS in its sole discretion. The maturity date of the April 2014 UBS Facility is October 21, 2018, subject to annual extensions in UBS' sole discretion. The price differential (or interest rate) on the April 2014 UBS Facility is one-month LIBOR plus (a) 1.88% per annum, for assets that are subject to an advance for one year or less, (b) 2.08% per annum, for assets that are subject to an advance in excess of one year but less than two years, and (c) 2.28% per annum, for assets that are subject to an advance for greater than two years; in each case, excluding amortization of commitment and exit fees. Upon termination of the April 2014 UBS Facility, the Company will pay UBS, if applicable, the amount by which the aggregate price differential paid over the term of the April 2014 UBS Facility is less than the defined minimum price differential and an exit fee, in each case, unless certain conditions are met.

December 2014 UBS Facility

The Company was party to a global master repurchase agreement (the “December 2014 UBS Facility,” and together with the April 2014 UBS Facility, the "UBS Facilities") with UBS AG, pursuant to which the Company sold, and later repurchased, certain retained subordinate notes in the Company's commercial mortgage-backed securities ("CMBS") securitization (the “Purchased Securities”) for an aggregate purchase price equal to $57.2 million. The scheduled repurchase date of the December 2014 UBS Facility was July 6, 2016 (the “Repurchase Date”). The transaction fee (or interest rate), which was payable monthly on the December 2014 UBS Facility, was equal to one-month LIBOR plus 2.74% per annum on the outstanding amount. On June 17, 2016, the December 2014 UBS Facility was repaid in full and its terms were not extended. See Note 15 included in these consolidated financial statements for information on the termination of the CMBS securitization.

Secured Term Loan

The Company and certain of its subsidiaries are party to a $155.0 million Credit and Guaranty Agreement (the "Secured Term Loan") with Highbridge Principal Strategies, LLC, as administrative agent, and DBD Credit Funding LLC, as collateral agent. The Company made an initial draw of $75.0 million on December 9, 2015, the closing date. The remaining $80.0 million of the Secured Term Loan may be borrowed during the nine-month commitment period following the closing date, subject to the satisfaction of certain conditions. The Secured Term Loan carries a coupon of LIBOR plus 6.0% with a LIBOR floor of 1.0% on drawn amounts. The Secured Term Loan has a maturity date of December 9, 2018. The Company is subject to a monthly non-utilization fee equal to 1.0% per annum on the unused commitment amount during the nine -month commitment period following the closing date. For the three and six months ended June 30, 2016 , the Company incurred a non-utilization fee of $ 202 thousand and $ 404 thousand, respectively. The original issue discount on the initial draw was $ 1.1 million, which represented a discount to the debt cost to be amortized into interest expense using the effective interest method over the term of the Secured Term Loan. The estimated effective interest rate of the Secured Term Loan, which is equal to LIBOR (subject to a floor of 1.0% ) plus the stated rate of 6.0% plus the accretion of the original issue discount and associated costs, was 8.5% for the three and six months ended June 30, 2016 .

Warehouse Lines of Credit

ASAP Line of Credit

ACRE Capital is party to a multifamily as soon as pooled (“ASAP”) sale agreement with Fannie Mae (the “ASAP Line of Credit”) to finance installments received from Fannie Mae. To the extent the ASAP Line of Credit remains active through utilization, there is no expiration date. The commitment amount is subject to change at any time at Fannie Mae's discretion. Fannie Mae advances payment to ACRE Capital in two separate installments according to the terms as set forth in the ASAP sale agreement. The first installment is considered an advance to ACRE Capital from Fannie Mae and not a sale until the second advance and settlement is made. The ASAP Line of Credit is included in warehouse lines of credit as of June 30, 2016 and December 31, 2015 in the reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations held for sale to assets and liabilities of discontinued operations held for sale that are presented separately in the consolidated balance sheets. See Note 16 included in these consolidated financial statements for more information. See Note 17 included in these consolidated financial statements for more information on a subsequent event relating to the ASAP Line of Credit.

BAML Line of Credit

ACRE Capital is party to a $135.0 million line of credit agreement with Bank of America, N.A. (as amended and restated, the “BAML Line of Credit”), which is used to finance mortgage loans originated by ACRE Capital. The stated interest rate on the BAML Line of Credit is LIBOR Daily Floating Rate plus 1.60% . In June 2016, the Company amended the BAML Line of Credit to extend the maturity date to June 29, 2017. ACRE Capital incurs a non-utilization fee of 12.5 basis points on the daily available balance of the BAML Line of Credit to the extent less than 40% of the BAML Line of Credit is utilized. For the three and six months ended June 30, 2016 , the Company incurred a non-utilization fee of $ 34 thousand and $ 57 thousand, respectively. For the three and six months ended June 30, 2015, the Company incurred a non-utilization fee of $17 thousand and $32 thousand , respectively. The BAML Line of Credit is included in warehouse lines of credit as of June 30, 2016 and December 31, 2015 in the reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations held for sale to assets and liabilities of discontinued operations held for sale that are presented separately in the consolidated balance sheets. See Note 16 included in these consolidated financial statements for more information. See Note 17 included in these consolidated financial statements for more information on a subsequent event relating to the BAML Line of Credit.

2015 Convertible Notes

In December 2012, the Company issued $69.0 million aggregate principal amount of unsecured 7.00% Convertible Senior Notes due 2015 (the "2015 Convertible Notes"). The 2015 Convertible Notes bore interest at a rate of 7.00% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2013. The effective interest rate of the 2015 Convertible Notes, which was equal to the stated rate of 7.00% plus the accretion of the original issue discount and associated costs, was 9.4% for the three and six months ended June 30, 2015. For the three and six months ended June 30, 2015, the interest expense incurred on the 2015 Convertible Notes was $1.6 million and $3.2 million, respectively. The 2015 Convertible Notes matured on December 15, 2015 and were fully repaid at par.

6. ALLOWANCE FOR LOSS SHARING

Loans originated and sold by ACRE Capital to Fannie Mae under the Fannie Mae DUS program are subject to the terms and conditions of a Master Loss Sharing Agreement, which was amended and restated during 2012. Under the Master Loss Sharing Agreement, ACRE Capital is responsible for absorbing certain losses incurred by Fannie Mae with respect to loans originated under the DUS program, as described below in more detail. The compensation for this risk of loss is a component of servicing fees on the loan.

The losses incurred with respect to individual loans are allocated between ACRE Capital and Fannie Mae based on the loss level designation (“Loss Level”) for the particular loan. Loans are designated as Loss Level I, Loss Level II or Loss Level III. All loans are designated Loss Level I unless Fannie Mae and ACRE Capital agree upon a different Loss Level for a particular loan at the time of the loan commitment, or if Fannie Mae determines that the loan was not underwritten, processed or serviced according to Fannie Mae guidelines.

Losses on Loss Level I loans are shared 33.33% by ACRE Capital and 66.67% by Fannie Mae. The maximum amount of ACRE Capital’s risk-sharing obligation with respect to any Loss Level I loan is 33.33% of the original principal amount of the loan. Losses incurred in connection with Loss Level II and Loss Level III loans are allocated disproportionately to ACRE Capital until ACRE Capital has absorbed the maximum level of its risk-sharing obligation with respect to the particular loan. The maximum loss allocable to ACRE Capital for Loss Level II loans is 30% of the original principal amount of the loan, and for Loss Level III loans is 40% of the original principal amount of the loan.

According to the Master Loss Sharing Agreement, Fannie Mae may unilaterally increase the amount of the risk-sharing obligation of ACRE Capital with respect to individual loans without regard to a particular Loss Level if (a) the loan does not meet specific underwriting criteria, (b) the loan is defaulted within 12 months after it is purchased by Fannie Mae, or (c) Fannie Mae determines that there was fraud, material misrepresentation or gross negligence by ACRE Capital in its underwriting, closing, delivery or servicing of the loan. Under certain limited circumstances, Fannie Mae may require ACRE Capital to absorb 100% of the losses incurred on a loan by requiring ACRE Capital to repurchase the loan.

The amount of loss incurred on a particular loan is determined at the time the loss is incurred, for example, at the time a property is foreclosed by Fannie Mae (whether acquired by Fannie Mae or a third party) or at the time a loan is modified in connection with a default. Losses may be determined by reference to the price paid by a third party at a foreclosure sale or by reference to an appraisal obtained by Fannie Mae in connection with the default on the loan.

In connection with the Company’s acquisition of ACRE Capital, Alliant, Inc., a Florida corporation, and The Alliant Company, LLC, a Florida limited liability company (the “Sellers”), are jointly and severally obligated to fund directly (if permitted) or to reimburse ACRE Capital for amounts due and owing after the closing date to Fannie Mae pursuant to ACRE Capital’s allowance for loss sharing with respect to settlement of certain DUS program mortgage loans originated and serviced by ACRE Capital, subject to certain limitations. In addition, the Sellers are jointly and severally obligated to indemnify ACRE Capital for, among other things, certain losses arising from Sellers’ failure to fulfill the funding or reimbursement obligations described above. As of both June 30, 2016 and December 31, 2015 , the preliminary estimate of the portion of such contributions towards such losses relating to the allowance for loss sharing of ACRE Capital was $ 377 thousand. Additionally, with respect to the settlement of certain non-designated DUS program mortgage loans originated and serviced by ACRE Capital, the Sellers are jointly and severally obligated to fund directly (if permitted) or to reimburse ACRE Capital in each of the three 12 -month periods following the closing date for eighty percent ( 80% ) of amounts due and owing after the closing date to Fannie Mae pursuant to ACRE Capital’s allowance for loss sharing in excess of $2.0 million during such 12 month period; provided that in no event shall Sellers obligations exceed in the aggregate $3.0 million for the entire three year period.

ACRE Capital uses several tools to manage its risk-sharing obligation, including maintenance of disciplined underwriting and approval processes and procedures, and periodic review and evaluation of underwriting criteria based on

underlying multifamily housing market data and limitation of exposure to particular geographic markets and submarkets and to individual borrowers. In situations where payment under the guarantee is probable and estimable on a specific loan, the Company records an additional liability. The amount of the provision reflects the Company’s assessment of the likelihood of payment by the borrower, the estimated disposition value of the underlying collateral and the level of risk-sharing. Historically, among other factors, the loss recognition occurs at or before the loan becoming 60 days delinquent.

A summary of the Company’s allowance for loss sharing as of and for the six months ended June 30, 2016 and 2015 is as follows ($ in thousands):



Balance at December 31, 2015	$	8,969
Current period provision for loss sharing	(289		)
Settlements/Writeoffs	—
Balance at June 30, 2016 (1)	$	8,680



Balance at December 31, 2014	$	12,349
Current period provision for loss sharing	(991		)
Settlements/Writeoffs	(175		)
Balance at June 30, 2015 (1)	$	11,183

_________________________________________________________________________

(1)

Allowance for loss sharing is included in allowance for loss sharing as of June 30, 2016 and December 31, 2015 in the reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations held for sale to assets and liabilities of discontinued operations held for sale that are presented separately in the consolidated balance sheets. See Note 16 included in these consolidated financial statements for more information.

As of both June 30, 2016 and December 31, 2015 , the maximum quantifiable allowance for loss sharing associated with the Company’s guarantees under the Fannie Mae DUS agreement was $ 1.1 billion from a total recourse at risk pool of $ 2.9 billion and $3.1 billion , respectively. Additionally, as of June 30, 2016 and December 31, 2015 , the non-at risk pool was $ 55.1 million and $64.8 million, respectively. The at risk pool is subject to Fannie Mae’s Master Loss Sharing Agreement and the non-at risk pool is not subject to such agreement. The maximum quantifiable allowance for loss sharing is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement.

7. COMMITMENTS AND CONTINGENCIES

As of June 30, 2016 and December 31, 2015 , the Company had the following commitments to fund various senior mortgage loans, subordinated debt investments, as well as preferred equity investments accounted for as loans held for investment ($ in thousands):



	As of
	June 30, 2016			December 31, 2015
Total commitments	$	1,188,858		$	1,232,163
Less: funded commitments	(1,102,330		)	(1,133,842		)
Total unfunded commitments	$	86,528		$	98,321

Commitments to extend credit by ACRE Capital are generally agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Occasionally, the commitments may expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements. As of June 30, 2016 and December 31, 2015 , ACRE Capital had the following commitments to sell and fund loans ($ in thousands):



	As of
	June 30, 2016		December 31, 2015
Commitments to sell loans	$	242,947	$	237,372
Commitments to fund loans	$	192,016	$	207,566

The Company from time to time may be party to litigation relating to claims arising in the normal course of business. As of June 30, 2016 , the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

8. DERIVATIVES

Non-designated Hedges

Derivatives not designated as hedges are derivatives that do not meet the criteria for hedge accounting under GAAP or for which the Company has not elected to designate as hedges.

Loan commitments and forward sale commitments

Through its subsidiary, ACRE Capital, the Company enters into loan commitments with borrowers on loan originations whereby the interest rate on the prospective loan is determined prior to funding. In general, ACRE Capital simultaneously enters into forward sale commitments with investors in order to hedge against the interest rate exposure on loan commitments. The forward sale commitment with the investor locks in an interest rate and price for the sale of the loan. The terms of the loan commitment with the borrower and the forward sale commitment with the investor are matched with the objective of hedging interest rate risk. Loan commitments and forward sale commitments are considered undesignated derivative instruments. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value, with changes in fair value recorded in earnings. For the three and six months ended June 30, 2016, the Company entered into 13 and 19 loan commitments, respectively, and 13 and 19 forward sale commitments, respectively. For the three and six months ended June 30, 2015, the Company entered into 31 and 47 loan commitments, respectively, and 31 and 47 forward sale commitments, respectively.

As of June 30, 2016 , the Company had nine loan commitments with a total notional amount of $ 192.0 million and 18 forward sale commitments with a total notional amount of $ 242.9 million, with maturities ranging from 20 days to 17 months that were not designated as hedges in qualifying hedging relationships. As of December 31, 2015 , the Company had 16 loan commitments with a total notional amount of $207.6 million and 24 forward sale commitments with a total notional amount of $237.4 million, with maturities ranging from 25 days to 17 months that were not designated as hedges in qualifying hedging relationships.

MSR purchase commitments

In July 2015, ACRE Capital entered into a purchase agreement with a third party to purchase the servicing rights for a HUD loan (the "July 2015 HUD Loan"). Under the purchase agreement, the purchase price for the servicing rights was $325 thousand and ACRE Capital assumed the rights to service the loan in March 2016.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification within the Company’s consolidated balance sheets as of June 30, 2016 and December 31, 2015 ($ in thousands):



	As of
	June 30, 2016					December 31, 2015
	Balance Sheet Location		Fair Value			Balance Sheet Location		Fair Value
Derivatives not designated as hedging instruments
Loan commitments	Assets of discontinued operations held for sale	(1)	$	15,532		Assets of discontinued operations held for sale	(1)	$	8,450
Forward sale commitments	Assets of discontinued operations held for sale	(1)	73			Assets of discontinued operations held for sale	(1)	25
MSR purchase commitment	Assets of discontinued operations held for sale	(1)	—			Assets of discontinued operations held for sale	(1)	330
Forward sale commitments	Liabilities of discontinued operations held for sale	(1)	(7,541		)	Liabilities of discontinued operations held for sale	(1)	(1,868		)
Total derivatives not designated as hedging instruments			$	8,064				$	6,937

_________________________________________________________________________

(1)

Derivative financial instruments are included in other assets or other liabilities as of June 30, 2016 and December 31, 2015 in the reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations held for sale to assets and liabilities of discontinued operations held for sale that are presented separately in the consolidated balance sheets. See Note 16 included in these consolidated financial statements for more information.

9. EQUITY

Stock Buyback Program

In May 2015, the Company announced that the Company's board of directors authorized the Company to repurchase up to $20 million of the Company's outstanding common stock over a period of one year (the "Stock Buyback Program"). In February 2016, the Company's board of directors increased the size of the existing $20 million Stock Buyback Program to $30 million and extended the Stock Buyback Program through March 31, 2017. Purchases made pursuant to the Stock Buyback Program will be made in either the open market or in privately negotiated transactions, from time to time and as permitted by federal securities laws and other legal requirements. Repurchases may be suspended or discontinued at any time. In connection with this Stock Buyback Program, in March 2016, the Company entered into a Rule 10b5-1 plan to repurchase shares of the Company’s common stock in accordance with certain parameters set forth in the Stock Buyback Program. During the six months ended June 30, 2016 , the Company repurchased a total of 129,916 shares of the Company's common stock in the open market for an aggregate purchase price of approximately $ 1.4 million, including expenses paid. The shares were repurchased at an average price of $ 11.06 per share, including expenses paid.

Common Stock

There were no shares issued in public or private offerings for the six months ended June 30, 2016 . See "Equity Incentive Plan" below for shares issued under the plan.

Equity Incentive Plan

On April 23, 2012, the Company adopted an equity incentive plan (the “2012 Equity Incentive Plan”). Pursuant to the 2012 Equity Incentive Plan, the Company may grant awards consisting of restricted shares of the Company’s common stock, restricted stock units and/or other equity-based awards to the Company’s outside directors, employees, officers, ACREM and other eligible awardees under the plan, subject to an aggregate limitation of 690,000 shares of common stock ( 7.5% of the issued and outstanding shares of the Company’s common stock immediately after giving effect to the issuance of the shares sold in the IPO). Any restricted shares of the Company’s common stock and restricted stock units will be accounted for under FASB ASC Topic 718, Compensation—Stock Compensation , resulting in share-based compensation expense equal to the grant date fair value of the underlying restricted shares of common stock or restricted stock units.

Restricted stock grants generally vest ratably over a one to four year period from the vesting start date. The grantee receives additional compensation for each outstanding restricted stock grant, classified as dividends paid, equal to the per-share dividends received by common stockholders.

The following table details the restricted stock grants awarded as of June 30, 2016 :



Grant Date	Vesting Start Date	Shares Granted
May 1, 2012	July 1, 2012	35,135
June 18, 2012	July 1, 2012	7,027
July 9, 2012	October 1, 2012	25,000
June 26, 2013	July 1, 2013	22,526
November 25, 2013	November 25, 2016	30,381
January 31, 2014	August 31, 2015	48,273
February 26, 2014	February 26, 2014	12,030
February 27, 2014	August 27, 2014	22,354
June 24, 2014	June 24, 2014	17,658
June 24, 2015	July 1, 2015	25,555
April 25, 2016	July 1, 2016	10,000
June 27, 2016	July 1, 2016	24,680
Total		280,619

The following tables summarize the non-vested shares of restricted stock and the vesting schedule of shares of restricted stock for the Company's directors and officers and employees of ACRE Capital as of June 30, 2016 :

Schedule of Non-Vested Share and Share Equivalents



	Restricted Stock Grants—Directors		Restricted Stock Grants—Officer		Restricted Stock Grants—Employees		Total
Balance as of December 31, 2015	16,945		4,686		62,563		84,194
Granted	34,680		—		—		34,680
Vested	(13,166	)	(3,124	)	(7,646	)	(23,936	)
Forfeited	(1,277	)	—		—		(1,277	)
Balance as of June 30, 2016	37,182		1,562		54,917		93,661

Future Anticipated Vesting Schedule



	Restricted Stock Grants—Directors	Restricted Stock Grants—Officer	Restricted Stock Grants—Employees (1)	Total
2016	15,668	1,562	30,381	47,611
2017	16,510	—	—	16,510
2018	3,336	—	—	3,336
2019	1,668	—	—	1,668
2020	—	—	—	—
Total	37,182	1,562	30,381	69,125

______________________________________________________________________________


(1)	Future anticipated vesting related to an employee of ACRE Capital that was granted restricted stock that vests in proportion to certain financial performance targets being met over a specified period of time is not included due to uncertainty in actual vesting date.

Non-Controlling Interests

The non-controlling interests held by third parties in the Company's consolidated balance sheets represent the equity interests in a limited liability company, ACRC KA Investor LLC ("ACRC KA") that are not owned by the Company. A portion

of ACRC KA's consolidated equity and net income are allocated to these non-controlling interests held by third parties based on their pro-rata ownership of ACRC KA. As of both June 30, 2016 and December 31, 2015 , ACRC KA's total equity was $ 96.0 million, of which $ 49.0 million was owned by the Company and $ 47.0 million was allocated to non-controlling interests held by third parties. See Note 15 included in these consolidated financial statements for more information on ACRC KA.

10. EARNINGS PER SHARE

The following information sets forth the computations of basic and diluted earnings per common share from continuing operations and discontinued operations held for sale for the three and six months ended June 30, 2016 and 2015 ($ in thousands, except share and per share data):



	For the three months ended June 30,				For the six months ended June 30,
	2016		2015		2016		2015
Net income from continuing operations, less non-controlling interests	$	6,004	$	6,786	$	11,474	$	13,988
Net income from discontinued operations held for sale, net of income taxes	$	2,689	$	2,181	$	2,355	$	2,041
Divided by:
Basic weighted average shares of common stock outstanding:	28,428,703		28,491,711		28,479,015		28,488,022
Non-vested restricted stock	67,130		94,069		69,929		97,263
Diluted weighted average shares of common stock outstanding:	28,495,833		28,585,780		28,548,944		28,585,285
Basic earnings per common share (1):
Net income from continuing operations	$	0.21	$	0.24	$	0.40	$	0.49
Net income from discontinued operations held for sale	0.09		0.08		0.08		0.07
Net income	$	0.31	$	0.31	$	0.49	$	0.56
Diluted earnings per common share (1):
Net income from continuing operations	$	0.21	$	0.24	$	0.40	$	0.49
Net income from discontinued operations held for sale	0.09		0.08		0.08		0.07
Net income	$	0.31	$	0.31	$	0.48	$	0.56

______________________________________________________________________________

(1)

The Company has considered the impact of the 2015 Convertible Notes and the restricted shares on diluted earnings per common share. The number of shares of common stock that the 2015 Convertible Notes are convertible into were not included in the computation of diluted net income per common share because the inclusion of those shares would have been anti-dilutive for the three and six months ended June 30, 2015.

11. INCOME TAX

The Company established a taxable REIT subsidiary (“TRS”), TRS Holdings, in connection with the acquisition of ACRE Capital. In addition, in December 2013 and March 2014, the Company formed ACRC W TRS and ACRC U TRS, respectively, in order to issue and hold certain loans intended for sale. The TRS’ income tax provision (continuing and discontinued operations) consisted of the following for the three and six months ended June 30, 2016 and 2015 ($ in thousands):



	For the three months ended June 30,					For the six months ended June 30,
	2016			2015		2016			2015
Current - continuing operations	$	3		$	3	$	7		$	(18	)
Current - discontinued operations held for sale	(127		)	74		(402		)	(532		)
Deferred - continuing operations	—			—		—			—
Deferred - discontinued operations held for sale	1,159			683		682			668
Total income tax expense	$	1,035		$	760	$	287		$	118

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are presented net by tax jurisdiction and are included within assets or liabilities of discontinued operations held for sale in the consolidated balance sheets. As of June 30, 2016 and December 31, 2015 , TRS Holdings’ U.S. tax jurisdiction was in a net deferred tax liability position. The TRS’ are not currently subject to tax in any foreign tax jurisdictions.

As of June 30, 2016 , TRS Holdings had a net operating loss carryforward of $ 7.8 million, which may be carried back to 2013 and forward 20 years. The following table presents the U.S. tax jurisdiction and the tax effects of temporary differences on the respective net deferred tax assets and liabilities of TRS Holdings ($ in thousands):



	As of
	June 30, 2016			December 31, 2015
Deferred tax assets
Mortgage servicing rights	$	5,374		$	4,083
Net operating loss carryforward	2,906			2,906
Other temporary differences	2,290			1,762
Sub-total-deferred tax assets	10,570			8,751
Deferred tax liabilities
Basis difference in assets from acquisition of ACRE Capital	(2,709		)	(2,709		)
Components of gains from mortgage banking activities	(11,782		)	(9,344		)
Amortization of intangible assets	(360		)	(297		)
Sub-total-deferred tax liabilities	(14,851		)	(12,350		)
Net deferred tax liability	$	(4,281	)	$	(3,599	)

Based on TRS Holdings’ assessment, it is more likely than not that the deferred tax assets will be realized through future taxable income.

For discontinued operations held for sale, the TRS’ recognize interest and penalties related to unrecognized tax benefits within net income from discontinued operations held for sale, net of income taxes, in the consolidated statements of operations. For discontinued operations held for sale, accrued interest and penalties, if any, are included within liabilities of discontinued operations held for sale in the consolidated balance sheets. For continuing operations, the TRS’ recognize interest and penalties related to unrecognized tax benefits within income tax expense in the consolidated statements of operations. For continuing operations, accrued interest and penalties, if any, are included within other liabilities in the consolidated balance sheets.

The following table is a reconciliation of the TRS' statutory U.S. federal income tax rate to the TRS' effective tax rate for the three and six months ended June 30, 2016 and 2015 :



	For the three months ended June 30,				For the six months ended June 30,
	2016		2015		2016		2015
Federal statutory rate	35.0	%	35.0	%	35.0	%	35.0	%
State income taxes	3.6	%	2.4	%	3.6	%	2.4	%
Federal benefit of state tax deduction	(1.3	)%	(0.8	)%	(1.3	)%	(0.8	)%
Effective tax rate	37.3	%	36.6	%	37.3	%	36.6	%

As of June 30, 2016 , tax years 2012 through 2015 remain subject to examination by taxing authorities. The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.

Intercompany Notes

In connection with the acquisition of ACRE Capital, the Company partially capitalized TRS Holdings with a $44.0 million note. In October 2014, the Company entered into an $8.0 million revolving promissory note with TRS Holdings (collectively, the two intercompany notes described above are referred to as, the “Intercompany Notes”). As of both June 30, 2016 and December 31, 2015 , the outstanding principal balance of the Intercompany Notes was $51.9 million. The income statement effects of the Intercompany Notes are eliminated in consolidation for financial reporting purposes, but the interest income and expense from the Intercompany Notes will affect the taxable income of the Company and TRS Holdings.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows FASB ASC Topic 820-10, Fair Value Measurement (“ASC 820-10”), which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure requirements for fair value measurements. ASC 820-10 determines fair value to be the price that would be received for a financial instrument in a current sale, which assumes an orderly transaction between market participants on the measurement date. The financial instruments recorded at fair value on a recurring basis in the Company’s consolidated financial statements are derivative instruments, MSRs and loans held for sale. ASC 820-10 specifies a hierarchy of valuation techniques based on the inputs used in measuring fair value.

In accordance with ASC 820-10, the inputs used to measure fair value are summarized in the three broad levels listed below:

• Level I-Quoted prices in active markets for identical assets or liabilities.


•	Level II-Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.


•	Level III-Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by the Company’s management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced.

Financial Instruments Reported at Fair Value

The Company has certain assets and liabilities that are required to be recorded at fair value on a recurring basis in accordance with GAAP. Financial instruments reported at fair value in the Company's consolidated financial statements include MSRs, MSR purchase commitments, loan commitments, forward sale commitments and loans held for sale. Summarized

financial information for the discontinued Mortgage Banking segment is shown in Note 16 included in these consolidated financial statements, which includes the financial instruments noted above.

The following table summarizes the levels in the fair value hierarchy into which the Company’s financial instruments were categorized as of June 30, 2016 and December 31, 2015 ($ in thousands):



	Fair Value as of June 30, 2016
	Level I		Level II		Level III			Total
Loans held for sale	$	—	$	54,698	$	—		$	54,698
Mortgage servicing rights	—		—		60,217			60,217
Derivative assets:
Loan commitments	—		—		15,532			15,532
Forward sale commitments	—		—		73			73
Derivative liabilities:
Forward sale commitments	—		—		(7,541		)	(7,541		)



	Fair Value as of December 31, 2015
	Level I		Level II		Level III			Total
Loans held for sale	$	—	$	30,612	$	—		$	30,612
Mortgage servicing rights	—		—		61,800			61,800
Derivative assets:
Loan commitments	—		—		8,450			8,450
Forward sale commitments	—		—		25			25
MSR purchase commitment	—		—		330			330
Derivative liabilities:
Forward sale commitments	—		—		(1,868		)	(1,868		)

There were no transfers between the levels as of June 30, 2016 and December 31, 2015 . Transfers between levels are recognized based on the fair value of the financial instrument at the beginning of the period.

Loan commitments and forward sale commitments are valued based on a discounted cash flow model that incorporates changes in interest rates during the period. The MSRs and the MSR purchase commitment are valued based on discounted cash flow models that calculate the present value of estimated future net servicing income. The model considers contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. The loans held for sale are valued based on discounted cash flow models that incorporate quoted observable prices from market participants. The valuation of derivative instruments are determined using widely accepted valuation techniques, including market yield analyses and discounted cash flow analysis on the expected cash flows of each derivative.

The following table summarizes the significant unobservable inputs the Company used to value financial instruments categorized within Level III as of June 30, 2016 ($ in thousands):

Unobservable Input

Fair

Primary

Weighted

Asset Category

Value

Valuation Technique

Input

Range

Average

Mortgage servicing rights

60,217

Discounted cash flow

Discount rate

8 - 14%

11.0%

Loan commitments and forward sale commitments

8,064

Discounted cash flow

Discount rate

8 - 12%

9.3%

The following table summarizes the significant unobservable inputs the Company used to value financial instruments categorized within Level III as of December 31, 2015 ($ in thousands):

Unobservable Input

Fair

Primary

Weighted

Asset Category

Value

Valuation Technique

Input

Range

Average

Mortgage servicing rights

61,800

Discounted cash flow

Discount rate

8 - 14%

11.1%

Loan commitments and forward sale commitments

6,607

Discounted cash flow

Discount rate

8 - 12%

8.2%

MSR purchase commitment

330

Discounted cash flow

Discount rate

8.0%

The tables above are not intended to be all-inclusive, but instead are intended to capture the significant unobservable inputs relevant to the Company’s determination of fair values. Changes in market yields, discount rates or EBITDA multiples, each in isolation, may have changed the fair value of the financial instruments. Generally, an increase in market yields or discount rates or a decrease in EBITDA multiples may have resulted in a decrease in the fair value of the financial instruments.

The Company’s management is responsible for the Company’s fair value valuation policies, processes and procedures related to Level III financial instruments. The Company’s management reports to the Company’s Chief Financial Officer, who has final authority over the valuation of the Company’s Level III financial instruments.

The following table summarizes the change in derivative assets and liabilities classified as Level III related to mortgage banking activities as of and for the six months ended June 30, 2016 and 2015 ($ in thousands):



Balance as of December 31, 2015	$	6,937
Settlements	(18,516		)
Realized gains (losses) recorded in net income (1)	11,579
Unrealized gains (losses) recorded in net income (1)	8,064
Balance as of June 30, 2016	$	8,064



Balance as of December 31, 2014	$	1,670
Settlements	(11,102		)
Realized gains (losses) recorded in net income (1)	9,432
Unrealized gains (losses) recorded in net income (1)	5,867
Balance as of June 30, 2015	$	5,867

______________________________________________________________________________


(1)	Realized and unrealized gains (losses) are included in gains from mortgage banking activities for the three and six months ended June 30, 2016 and 2015 in the reconciliation of net income from discontinued operations held for sale, net of income taxes. See Note 16 included in these consolidated financial statements for more information.

See Note 4 included in these consolidated financial statements for the changes in MSRs that are classified as Level III.

As of June 30, 2016 and December 31, 2015 , the carrying values and fair values of the Company’s financial assets and liabilities recorded at cost are as follows ($ in thousands):



		As of
		June 30, 2016				December 31, 2015
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Loans held for investment	3	$	1,142,967	$	1,148,909	$	1,174,391	$	1,180,421
Financial liabilities:
Secured funding agreements	2	$	601,794	$	601,794	$	522,775	$	522,775
Warehouse lines of credit	2	46,431		46,431		24,806		24,806
Secured term loan	2	70,205		75,000		69,762		75,000
Commercial mortgage-backed securitization debt (consolidated VIE)	3	—		—		61,815		61,856
Collateralized loan obligation securitization debt (consolidated VIE)	3	104,656		104,993		192,528		193,419

The carrying values of cash and cash equivalents, restricted cash, interest receivable, due to affiliate liability and accrued expenses approximate their fair values due to their short-term nature.

Loans held for investment are recorded at cost, net of unamortized loan fees and origination costs and net of an allowance for loan losses. The Company may record fair value adjustments on a nonrecurring basis when it has determined that it is necessary to record a specific reserve against a loan and the Company measures such specific reserve using the fair value of the loan’s collateral. To determine the fair value of the collateral, the Company may employ different approaches depending on the type of collateral. The Financing Agreements, CMBS debt and collateralized loan obligation ("CLO") debt are recorded at outstanding principal, which is the Company’s best estimate of the fair value.

13. RELATED PARTY TRANSACTIONS

Management Agreement

The Company is party to a Management Agreement under which ACREM, subject to the supervision and oversight of the Company’s board of directors, is responsible for, among other duties, (a) performing all of the Company’s day-to-day functions, (b) determining the Company’s investment strategy and guidelines in conjunction with the Company’s board of directors, (c) sourcing, analyzing and executing investments, asset sales and financing, and (d) performing portfolio management duties. In addition, ACREM has an Investment Committee that oversees compliance with the Company’s investment strategy and guidelines, investment portfolio holdings and financing strategy.

In exchange for its services, ACREM is entitled to receive a base management fee, an incentive fee, expense reimbursements, grants of equity-based awards pursuant to the Company’s 2012 Equity Incentive Plan and a termination fee, if applicable.

The base management fee is equal to 1.5% of the Company’s stockholders’ equity per annum, which is calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, stockholders’ equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter determined in accordance with GAAP (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) (x) any amount that the Company has paid to repurchase the Company’s common stock since inception, (y) any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s consolidated financial statements prepared in accordance with GAAP, and (z) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case after discussions between ACREM and the Company’s independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown in the Company’s consolidated financial statements.

The incentive fee is an amount, not less than zero , equal to the difference between: (a) the product of (i) 20% and (ii) the difference between (A) the Company’s Core Earnings (as defined below) for the previous 12 month period, and (B) the product of (1) the weighted average of the issue price per share of the Company’s common stock of all of the Company’s public offerings of common stock multiplied by the weighted average number of all shares of common stock outstanding including

any restricted shares of the Company’s common stock, restricted stock units or any shares of the Company’s common stock not yet issued, but underlying other awards granted under the Company’s 2012 Equity Incentive Plan (see Note 9 included in these consolidated financial statements) in the previous 12 month period, and (2) 8% ; and (b) the sum of any incentive fees earned by ACREM with respect to the first three fiscal quarters of such previous 12 month period; provided , however , that no incentive fee is payable with respect to any fiscal quarter unless cumulative Core Earnings for the 12 most recently completed fiscal quarters is greater than zero . “Core Earnings” is a non-GAAP measure and is defined as GAAP net income (loss) computed in accordance with GAAP, excluding non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that any of the Company’s target investments are structured as debt and the Company forecloses on any properties underlying such debt), any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss), and one-time events pursuant to changes in GAAP and certain non-cash charges after discussions between ACREM and the Company’s independent directors and after approval by a majority of the Company’s independent directors. No incentive fees were incurred for the three and six months ended June 30, 2016 and 2015 .

The Company reimburses ACREM at cost for operating expenses that ACREM incurs on the Company’s behalf, including expenses relating to legal, financial, accounting, servicing, due diligence and other services.

The Company will not reimburse ACREM for the salaries and other compensation of its personnel, except for the allocable share of the salaries and other compensation of the Company’s (a) Chief Financial Officer, based on the percentage of his time spent on the Company’s affairs and (b) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment professional personnel of ACREM or its affiliates who spend all or a portion of their time managing the Company’s affairs based on the percentage of their time spent on the Company’s affairs. The Company is also required to pay its pro rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of ACREM and its affiliates that are required for the Company’s operations. The term of the Management Agreement ends on May 1, 2016, with automatic one -year renewal terms thereafter. Except under limited circumstances, upon a termination of the Management Agreement, the Company will pay ACREM a termination fee equal to three times the average annual base management fee and incentive fee received by ACREM during the 24 -month period immediately preceding the most recently completed fiscal quarter prior to the date of termination, each as described above.

Certain of the Company’s subsidiaries, along with the Company’s lenders under certain of the Company's Secured Funding Agreements, as well as under the CMBS and CLO have entered into various servicing agreements with ACREM’s subsidiary servicer, Ares Commercial Real Estate Servicer LLC (“ACRES”), a Standard & Poor’s-rated commercial special servicer that is included on Standard & Poor’s Select Servicer List. Effective January 1, 2015, ACREM transferred primary servicing of the Company’s loans held for investment to ACRE Capital. The Company’s Manager will specially service, as needed, certain of the Company’s investments. Effective May 1, 2012, ACRES agreed that no servicing fees pursuant to these servicing agreements would be charged to the Company or its subsidiaries by ACRES or the Manager for so long as the Management Agreement remains in effect, but that ACRES will continue to receive reimbursement for overhead related to servicing and operational activities pursuant to the terms of the Management Agreement.

Summarized below are the related party costs incurred by the Company related to continuing operations for the three and six months ended June 30, 2016 and 2015 and amounts payable to the Company's Manager as of June 30, 2016 and December 31, 2015 ($ in thousands):



	Incurred								Payable
	For the three months ended June 30,				For the six months ended June 30,				As of
	2016		2015		2016		2015		June 30, 2016		December 31, 2015
Affiliate Payments
Management fees	$	1,338	$	1,346	$	2,690	$	2,689	$	1,338	$	1,357
General and administrative expenses	660		821		1,557		1,751		660		835
Direct costs	157		390		503		785		75		232
Total	$	2,155	$	2,557	$	4,750	$	5,225	$	2,073	$	2,424

Summarized below are the related party costs incurred by the Company related to discontinued operations held for sale for the three and six months ended June 30, 2016 and 2015 and amounts payable to the Company's Manager as of June 30, 2016 and December 31, 2015 ($ in thousands):



	Incurred								Payable
	For the three months ended June 30,				For the six months ended June 30,				As of
	2016		2015		2016		2015		June 30, 2016		December 31, 2015
Affiliate Payments
Management fees	$	145	$	135	$	292	$	268	$	145	$	144
General and administrative expenses	306		120		437		255		306		84
Direct costs	4		4		33		16		—		6
Total	$	455	$	259	$	762	$	539	$	451	$	234

Credit Support Fee Agreement

In July 2014, the Company and certain of its subsidiaries entered into a Credit Support Fee Agreement with Ares Management under which the Company agreed to pay Ares Management a credit support fee in an amount equal to 1.50% per annum times the average amount of the loans outstanding under the July 2014 CNB Facility and to reimburse Ares Management for its out-of-pocket costs and expenses in connection with the transaction. During the three and six months ended June 30, 2016 , the Company incurred a credit support fee of $ 49 thousand and $242 thousand, respectively, under the July 2014 CNB Facility which is included within interest expense in the Company's consolidated statements of operations. During the three and six months ended June 30, 2015 , the Company incurred a credit support fee of $270 thousand and $545 thousand, respectively, under the July 2014 CNB Facility which is included within interest expense in the Company's consolidated statements of operations. See Note 5 included in these consolidated financial statements for more information on the July 2014 CNB Facility and Note 17 included in these consolidated financial statements for more information on a subsequent event with respect to the July 2014 CNB Facility.

14. DIVIDENDS AND DISTRIBUTIONS

The following table summarizes the Company’s dividends declared during the six months ended June 30, 2016 and 2015 ($ in thousands, except per share data):



Date declared	Record date	Payment date	Per share amount		Total amount
May 5, 2016	June 30, 2016	July 15, 2016	$	0.26	$	7,413
March 1, 2016	March 31, 2016	April 15, 2016	0.26		7,429
Total cash dividends declared for the six months ended June 30, 2016			$	0.52	$	14,842

May 7, 2015	June 30, 2015	July 15, 2015	$	0.25	$	7,152
March 5, 2015	March 31, 2015	April 15, 2015	0.25		7,146
Total cash dividends declared for the six months ended June 30, 2015			$	0.50	$	14,298

15. VARIABLE INTEREST ENTITIES

Consolidated VIEs

As discussed in Note 2 , the Company evaluates all of its investments and other interests in entities for consolidation, including its investments in: (a) the CMBS transaction and the Company’s retained interests in the subordinated classes of the certificates issued by the Trust (as defined below) it initiated and (b) the CLO transaction and the Company's retained interests in the subordinated notes and preferred equity of the Issuer (as defined below) and (c) a preferred equity investment in an LLC entity (discussed below), all of which are generally considered to be variable interests in a VIE. The Trust and Issuer together are referred herein as the Company's "Securitization VIEs."

CMBS Securitization

In connection with forming ACRE Commercial Mortgage Trust 2013-FL1 (the "Trust"), ACRC 2013-FL1 Depositor LLC (the "Depositor"), a wholly owned subsidiary of the Company, entered into a Pooling and Servicing Agreement dated as of November 1, 2013 (as amended on March 28, 2014, the "Pooling and Servicing Agreement") with Wells Fargo as master servicer, ACRES as servicer, U.S. Bank National Association as trustee, and Trimont Real Estate Advisors Inc. as trust advisor. The Trust is treated for U.S. federal income tax purposes as a real estate mortgage investment conduit.

The Pooling and Servicing Agreement governed the issuance of approximately $493.8 million aggregate principal balance commercial mortgage pass through certificates in a CMBS effected by the Depositor. In connection with the securitization, the Depositor contributed a pool of 18 adjustable rate participation interests in commercial mortgage loans to the Trust. The commercial mortgage loans were originated by the Company or its subsidiaries and were secured by 27 commercial properties. The certificates represented, in the aggregate, the entire beneficial ownership interest in, and the obligations of, the Trust.

In connection with the securitization, the Company offered and sold the following classes of certificates: Class A, Class B, Class C and Class D Certificates (collectively, the "Offered Certificates") to third parties pursuant to an offering made privately in transactions exempt from the registration requirements of the Securities Act of 1933. A s of December 31, 2015 , the aggregate principal balance of the Offered Certificates was approximately $61.9 million. In addition, a wholly owned subsidiary of the Company retained approximately $98.8 million of the certificates. The Company, as the holder of the subordinated classes of the Trust, had the obligation to absorb losses of the Trust, since the Company had a first loss position in the capital structure of the Trust.

On June 17, 2016, the Company terminated the Trust, and in connection therewith, exchanged its remaining certificates for the remaining mortgage loans held by the Trust. All of the Offered Certificates of the Trust held by third parties have been repaid in full.

CLO Securitization

On August 15, 2014, ACRE Commercial Mortgage 2014-FL2 Ltd. (the "Issuer") and ACRE Commercial Mortgage 2014-FL2 LLC ("Co-Issuer"), both wholly owned indirect subsidiaries of the Company, entered into an indenture with Wells Fargo as advancing agent and note administrator and Wilmington Trust, National Association as trustee, which governs the issuance of approximately $346.1 million principal balance secured floating rate notes (the "Notes") and $32.7 million of preferred equity in the Issuer. For U.S. federal income tax purposes, the Issuer and Co-Issuer are disregarded entities.

The Notes are collateralized by interests in a pool of 15 mortgage assets having a total principal balance of $378.8 million (the "Mortgage Assets") originated by a subsidiary of the Company. The sale of the Mortgage Assets to the Issuer is governed by a Mortgage Asset Purchase Agreement dated as of August 15, 2014, between ACRC Lender LLC and the Issuer. In connection with the securitization, the Issuer and Co-Issuer offered and sold the following classes of Notes: Class A, Class A-S, Class B, Class C and Class D Notes to third parties. A wholly owned subsidiary of the Company retained approximately $37.4 million of the most subordinate Notes and all of the preferred equity in the Issuer. The Company, as the holder of the subordinated Notes and all of the preferred equity in the Issuer, has the obligation to absorb losses of the CLO, since the Company has a first loss position in the capital structure of the CLO. As of June 30, 2016 and December 31, 2015 , the aggregate principal balance of the Offered Notes was approximately $105.0 million and $193.4 million, respectively.

Summary of Securitization VIEs

As the directing holder of the CMBS and the CLO, the Company has the ability to direct activities that could significantly impact the Securitization VIEs’ economic performance. If an unrelated third party had the right to unilaterally remove the special servicer, then the Company would not have the power to direct activities that most significantly impact the Securitization VIEs' economic performance. In addition, there are no substantive kick-out rights of any unrelated third party to remove the special servicer without cause. The Company’s subsidiaries, as directing holders, have the ability to remove the special servicer without cause. Based on these factors, the Company is determined to be the primary beneficiary of these Securitization VIEs; thus, the Securitization VIEs are consolidated into the Company’s consolidated financial statements.

ACRE Capital is designated as primary servicer and ACRES as special servicer of the CMBS and the CLO. ACRES has the power to direct activities during the loan workout process on defaulted and delinquent loans, which is the activity that

most significantly impacts the Securitization VIEs' economic performance. ACRE Capital and ACRES waive the servicing and special servicing fees and the Company pays its overhead costs, as with other servicing agreements.

The Securitization VIEs consolidated in accordance with FASB ASC Topic 810 are structured as pass through entities that receive principal and interest on the underlying collateral and distribute those payments to the certificate and note holders, as applicable. The assets and other instruments held by the Securitization VIEs are restricted and can only be used to fulfill the obligations of the Securitization VIEs. Additionally, the obligations of the Securitization VIEs do not have any recourse to the general credit of any other consolidated entities, nor to the Company as the primary beneficiary.

The inclusion of the assets and liabilities of Securitization VIEs of which the Company is deemed the primary beneficiary has no economic effect on the Company. The Company’s exposure to the obligations of Securitization VIEs is generally limited to its investment in these entities. The Company is not obligated to provide, nor has it provided, any financial support for any of these consolidated structures. As such, the risk associated with the Company’s involvement in these Securitization VIEs is limited to the carrying value of its investment in the entity. As of June 30, 2016 and December 31, 2015 , the Company’s maximum risk of loss was $70.1 million and $168.8 million, respectively, which represents the carrying value of its investment in the Securitization VIEs. For the three and six months ended June 30, 2016 , the Company incurred interest expense related to the Securitization VIEs of $941 thousand and $2.4 million, respectively, which is included within interest expense in the Company’s consolidated statements of operations. For the three and six months ended June 30, 2015, the Company incurred interest expense related to the Securitization VIEs of $1.9 million and $4.2 million , respectively, which is included within interest expense in the Company’s consolidated statements of operations.

Investment in VIE

On December 19, 2014, the Company and third party institutional investors formed a limited liability company, ACRC KA, which acquired $170.0 million of preferred equity in a REIT whose assets were comprised of a portfolio of 22 multifamily, student housing, medical office and self-storage properties managed by its sponsor. The Company’s investment in ACRC KA is considered to be an investment in a VIE. As of both June 30, 2016 and December 31, 2015 , the Company owned a controlling financial interest of 51.0% of the equity shares in the VIE and the third party institutional investors owned the remaining 49.0% , a minority financial interest. The preferred equity shares are entitled to a preferred monthly return over the term of the investment at a fixed rate of 10.95 % per annum.

ACREM is the non-member manager of the VIE. Based on the terms of the ACRC KA LLC agreement, ACREM has the ability to direct activities that could significantly impact the VIE’s economic performance. There are no substantive kick-out rights held by the third party institutional investors to remove ACREM as the non-member manager without cause. As ACREM serves as the manager of the Company, the Company has the right to receive benefits from the VIE that could potentially be significant. As such, the Company is deemed to be the primary beneficiary of the VIE and the party that is most closely associated with the VIE. Thus, the VIE is consolidated into the Company’s consolidated financial statements and the preferred equity interests owned by the third party institutional investors are reflected as a non-controlling interest held by third parties within the Company’s consolidated balance sheets.

As of June 30, 2016 and December 31, 2015 , the carrying value of the preferred equity investment, which is net of unamortized fees and origination costs, was $94.1 million and $93.9 million, respectively, and is included within loans held for investment in the consolidated balance sheets. The risk associated solely with respect to the Company’s investment in this VIE is limited to the outstanding principal of its investment in the entity. As of both June 30, 2016 and December 31, 2015 , the Company’s maximum risk of loss solely with respect to this investment was $48.5 million.

Unconsolidated VIEs

The Company also holds variable interests in VIEs structured as preferred equity investments, where the Company does not have a controlling financial interest. For these structures, the Company is not deemed to be the primary beneficiary of the VIE, and the Company does not consolidate these VIEs. These preferred equity investments are accounted for as loans held for investment and are carried at cost, net of unamortized loan fees and origination costs, unless the loans are deemed impaired, and are included within loans held for investment in the Company’s consolidated balance sheets.

The Company is not obligated to provide, nor has it provided, any financial support for any of the Company’s unconsolidated VIEs. As such, the risks associated with the Company’s involvement in these unconsolidated VIEs are limited to the outstanding principal of the Company’s investment in the entity.

The following table presents the carrying value and the maximum exposure to loss of unconsolidated VIEs as of June 30, 2016 and December 31, 2015 ($ in thousands):



	As of
	June 30, 2016		December 31, 2015
Carrying value	$	40,406	$	55,144
Maximum exposure to loss	$	40,799	$	55,704

16. DISCONTINUED OPERATIONS HELD FOR SALE

On June 28, 2016, the Company entered into a Purchase and Sale Agreement to sell all of the outstanding common units of TRS Holdings. See Note 1 included in these consolidated financial statements for further discussion of the sale.

The following information reconciles the carrying amounts of major classes of assets and liabilities of the discontinued operations held for sale to assets and liabilities of discontinued operations held for sale that are presented separately in the consolidated balance sheets:



	As of
	June 30, 2016		December 31, 2015
ASSETS
Cash and cash equivalents	$	1,002	$	3,929
Restricted cash	17,022		17,297
Loans held for sale, at fair value	54,698		30,612
Mortgage servicing rights, at fair value	60,217		61,800
Other assets	26,667		19,613
Assets of discontinued operations held for sale	$	159,606	$	133,251
LIABILITIES
Warehouse lines of credit	$	46,431	$	24,806
Allowance for loss sharing	8,680		8,969
Due to affiliate	451		234
Other liabilities	21,934		17,522
Liabilities of discontinued operations held for sale	$	77,496	$	51,531

The following information reconciles the net income from discontinued operations held for sale, net of income taxes, that are presented separately in the consolidated statements of operations:



	For the three months ended June 30,						For the six months ended June 30,
	2016			2015			2016			2015
Mortgage banking revenue:
Servicing fees, net	$	2,924		$	3,908		$	6,966		$	7,824
Gains from mortgage banking activities	10,813			7,489			13,172			11,633
Provision for loss sharing	61			425			289			991
Change in fair value of mortgage servicing rights	(2,047		)	(2,002		)	(3,895		)	(5,183		)
Mortgage banking revenue	11,751			9,820			16,532			15,265
Expenses:
Management fees to affiliate	145			135			292			268
Professional fees	162			208			371			477
Compensation and benefits	5,960			5,434			10,244			10,071
Transaction costs	515			—			515			—
General and administrative expenses	942			985			2,038			2,017
General and administrative expenses reimbursed to affiliate	306			120			437			255
Total expenses	8,030			6,882			13,897			13,088
Income before income taxes	3,721			2,938			2,635			2,177
Income tax expense	1,032			757			280			136
Net income from discontinued operations held for sale, net of income taxes	$	2,689		$	2,181		$	2,355		$	2,041

17. SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the six months ended June 30, 2016 , except as disclosed below.

On July 12, 2016, ACRE Capital temporarily increased the ASAP Line of Credit limit from $ 80.0 million to $ 140.0 million through August 31, 2016.

On July 13, 2016, a subsidiary of the Company entered into an amendment agreement with Citibank, N.A., which contemplates that Citibank, N.A. may increase the commitment amount of the Citibank Facility, in its sole discretion, in order to fund approved mortgage loans.

On July 14, 2016, the Company originated a $72.0 million first mortgage loan on an office property located in Illinois. At closing, the outstanding principal balance was approximately $53.2 million. The loan has an interest rate of LIBOR plus 3.99% (plus fees) and an initial term of three years.

On July 15, 2016, the Company originated a $62.5 million first mortgage loan on an office property located in California. At closing, the outstanding principal balance was approximately $57.5 million. The loan has an interest rate of LIBOR plus 4.40% (plus fees) and an initial term of three years.

On July 21, 2016, the Company originated a $23.3 million first mortgage loan on a multifamily property located in Florida. At closing, the outstanding principal balance was approximately $19.8 million. The loan has an interest rate of LIBOR plus 4.25% (plus fees) and an initial term of 2.5 years.

On July 29, 2016, the Company amended the July 2014 CNB Facility to extend the maturity date to September 30, 2016.

On July 29, 2016, ACRE Capital temporarily increased its BAML Line of Credit from $135.0 million to $175.0 million from July 29, 2016 through August 8, 2016.

On August 1, 2016, ACRC Lender US LLC (“ACRC”), a subsidiary of the Company, entered into a $125 million master repurchase and securities contract (the "U.S. Bank Facility") with U.S. Bank National Association (“U.S. Bank”). Pursuant to the U.S. Bank Facility, ACRC is permitted to sell, and later repurchase, eligible commercial mortgage loans collateralized by retail, office, mixed-use, multifamily, industrial, hospitality, student housing, manufactured housing or self-storage properties. U.S. Bank may approve the mortgage loans which are subject to the U.S. Bank Facility in its sole discretion. ACRC paid U.S. Bank a commitment fee at the closing of the U.S. Bank Facility.

The initial maturity date of the U.S. Bank Facility is July 31, 2019, and the facility is subject to two 12-month extensions at ACRC’s option upon the satisfaction of certain conditions, including the payment of an extension fee. The pricing rate under the U.S. Bank Facility will accrue at a per annum rate equal to one-month LIBOR plus a spread determined by U.S. Bank depending upon the mortgage loan sold to U.S. Bank in the applicable transaction.

The U.S. Bank Facility contains margin call provisions following the occurrence of certain mortgage loan credit events. The U.S. Bank Facility is fully guaranteed by the Company. The agreements governing the U.S. Bank Facility contain various customary representations and warranties and provisions regarding events of default, and impose certain customary covenants on ACRC and the Company, including that the Company is obligated to maintain certain ratios of debt to net worth, fixed charges, liquidity and other financial conditions.

From July 1, 2016 through August 2, 2016 , ACRE Capital originated $94.4 million in Fannie Mae, Freddie Mac or HUD loan commitments.

On August 4, 2016 , the Company declared a cash dividend of $ 0.26 per common share for the third quarter of 2016 . The third quarter 2016 dividend is payable on October 17, 2016 to common stockholders of record as of September 30, 2016 .

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Some of the statements contained in this quarterly report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend such statements to be covered by the safe harbor provisions contained therein. The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q. This description contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from the results discussed in the forward-looking statements due to the factors set forth in “Risk Factors” and elsewhere in this quarterly report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 . In addition, some of the statements in this quarterly report (including in the following discussion) constitute forward-looking statements, which relate to future events or the future performance or financial condition of Ares Commercial Real Estate Corporation (“ACRE” and, together with its consolidated subsidiaries, the “Company,” “we,” “us” and “our”). The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:


•	our business and investment strategy;


•	our projected operating results;


•	the return or impact of current and future investments;


•	the timing of cash flows, if any, from our investments;


•	estimates relating to our ability to make distributions to our stockholders in the future;


•	defaults by borrowers in paying debt service on outstanding indebtedness;


•	our ability to obtain and maintain financing arrangements, including securitizations;


•	market conditions and our ability to access alternative debt markets and additional debt and equity capital;


•	the amount of commercial mortgage loans requiring refinancing;


•	our expected investment capacity and available capital;


•	financing and advance rates for our target investments;


•	our expected leverage;


•	changes in interest rates and the market value of our investments;


•	effects of hedging instruments on our target investments;


•	rates of default or decreased recovery rates on our target investments;


•	rates of prepayments on our mortgage loans and the effect on our business of such prepayments;


•	the degree to which our hedging strategies may or may not protect us from interest rate volatility;


•	the impact of committed loans failing to close;


•	availability of investment opportunities in mortgage-related and real estate-related investments and securities;


•	the ability of Ares Commercial Real Estate Management LLC ("ACREM" or our "Manager") to locate suitable investments for us, monitor, service and administer our investments and execute our investment strategy;


•	allocation of investment opportunities to us by our Manager;


•	our ability to successfully complete and integrate any acquisitions;


•	our ability to maintain our qualification as a real estate investment trust ("REIT") for U.S. federal income tax purposes;


•	our ability to maintain our exemption from registration under the Investment Company Act of 1940 (the "1940 Act");


•	our understanding of our competition;


•	general volatility of the securities markets in which we may invest;


•	adverse changes in the real estate, real estate capital and credit markets and the impact of a protracted decline in the liquidity of credit markets on our business;


•	changes in governmental regulations, tax law and rates, and similar matters (including interpretation thereof);


•	actions and initiatives of the U.S. Government and changes to U.S. Government policies;


•	the state of the U.S. economy generally or in specific geographic regions;


•	uncertainty surrounding the financial stability of the United States, European Union and China;


•	global economic trends and economic recoveries;


•	market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy;


•	the future of U.S. government-sponsored enterprises ("GSEs"); and


•	our ability to consummate the sale of ACRE Capital Holdings LLC ("TRS Holdings"), the holding company that owns our mortgage banking subsidiary, ACRE Capital LLC ("ACRE Capital"), and our ability to redeploy the net proceeds from such sale.

We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those expressed in the forward-looking statements for any reason, including the factors set forth under “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and elsewhere in this quarterly report on Form 10-Q.

We have based the forward-looking statements included in this quarterly report on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements.

Overview

We are a specialty finance company that operates both as a principal lender and a mortgage banker (with respect to loans collateralized by multifamily and senior-living properties). We are externally managed by our Manager, a subsidiary of Ares Management, L.P. (NYSE: ARES) ("Ares Management"), a publicly traded, leading global alternative asset manager, pursuant to the terms of the management agreement dated April 25, 2012, as amended, between us and our Manager (the "Management Agreement"). From the commencement of our operations in late 2011, we have been primarily focused on our principal lending business, where we directly originate, manage and service a diversified portfolio of commercial real estate ("CRE") debt-related investments for our own account.

We are also engaged in the mortgage banking business through our wholly owned subsidiary, ACRE Capital. ACRE Capital primarily originates, sells and services multifamily and other senior-living related loans under programs offered by GSEs, such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation ("Freddie Mac") and by government agencies, such as the Government National Mortgage Association (“Ginnie Mae”) and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”). ACRE Capital is approved as a Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender, a Freddie Mac Program Plus® Seller/Servicer, a Multifamily Accelerated Processing and Section 232 LEAN lender for HUD, and a Ginnie Mae issuer. While ACRE Capital earns little interest income from these activities as it generally only holds loans for short periods, ACRE Capital receives origination fees when it closes loans and sale premiums when it sells loans. ACRE Capital also retains the rights to service the loans, which are known as mortgage servicing rights (“MSRs”) and receives fees for such servicing during the life of the loans, which generally last ten years or more.

We were formed and commenced operations in late 2011. We are a Maryland corporation and completed our initial public offering in May 2012. We have elected and qualified to be taxed as a REIT for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended, commencing with our taxable year ended December 31, 2012. We generally will not be subject to U.S. federal income taxes on our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, to the extent that we annually distribute all of our REIT taxable income to stockholders and comply with various other requirements as a REIT. We also operate our business in a manner that will permit us to maintain our exemption from registration under the 1940 Act.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. However, we chose to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.0 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

Pending Sale of Mortgage Banking Subsidiary

On June 28, 2016, we entered into a Purchase and Sale Agreement (the “Agreement”) with Cornerstone Real Estate Advisers LLC ("Cornerstone"), a Delaware limited liability company (the “Buyer”), to sell our mortgage banking business. Upon the terms and subject to the conditions set forth in the Agreement, at the closing, the Buyer will purchase from us (the “Acquisition”) all of the outstanding common units of TRS Holdings, the holding company that owns our mortgage banking subsidiary, ACRE Capital. The Acquisition is expected to close in the third or fourth quarter of 2016, subject to the satisfaction or waiver of various closing conditions, as described below.

The Agreement contains customary representations, warranties and covenants regarding the business and operations of ACRE Capital. We have also agreed to a two-year non-competition and non-solicitation agreement, subject to certain customary exceptions.

The consummation of the transactions contemplated by the Agreement is subject to the receipt of certain consents and approvals of GSEs and governmental entities. The consummation of the transactions contemplated by the Agreement is also subject to the satisfaction of certain other conditions, including, among other things, a customary bringdown of representations and warranties and compliance with covenants, and that no material adverse effect with respect to ACRE Capital shall have occurred prior to the closing.

The Agreement provides for customary termination rights, including, among others, termination rights upon denial of certain required regulatory approvals or upon certain material breaches of representations, warranties or covenants. The Agreement provides for an initial outside termination date of December 31, 2016, subject to up to two successive 30-day extensions under certain circumstances.

The Agreement provides for indemnification with respect to losses relating to breaches of representations and warranties and covenants, subject to certain limitations, and for the repayment of change of control payments in certain circumstances.

The Agreement provides for reimbursement of certain out-of-pocket expenses incurred by us or the Buyer, as applicable, if the Agreement is terminated by the other party as a result of the failure to receive the consent or approval of certain third parties due to the fault of the non-terminating party.

The sale of TRS Holdings will provide us with additional capital to reinvest in our principal lending business. As a result of the expected sale of TRS Holdings, the operations of the Mortgage Banking segment have been reclassified as discontinued operations held for sale in all periods presented. After giving effect to the expected divestiture of TRS Holdings, we will no longer provide segment reporting.

Developments During the Second Quarter of 2016 :


•	ACRE originated a $76.0 million first mortgage loan on a mixed-use property located in New York.


•	ACRE originated a $15.2 million first mortgage loan on an office property located in California.


•	ACRE Capital rate locked $ 228.1 million in loan commitments.


•	ACRE entered into an agreement to sell TRS Holdings, the holding company that owns ACRE Capital, to Cornerstone for $93 million in cash, subject to certain adjustments.


•	The commercial mortgage-backed securities securitization was terminated on June 17, 2016.


•	ACRE amended the master repurchase funding facility with Wells Fargo Bank, National Association (“Wells Fargo”) (as amended and restated, the “Wells Fargo Facility”) to, among other things, increase the size of the facility from $225.0 million to $325.0 million and extend the initial maturity date to December 14, 2017.


•	The global master repurchase agreement with UBS AG (the “December 2014 UBS Facility") was repaid in full.


•	ACRE Capital amended its $135.0 million line of credit agreement with Bank of America, N.A. (as amended and restated, the “BAML Line of Credit”) to extend the initial maturity date to June 29, 2017.


•	ACRE amended the $50.0 million Bridge Loan Warehousing Credit and Security Agreement with Bank of America, N.A. (the “BAML Facility”) to extend the initial maturity date to May 25, 2017 and the final maturity date to May 25, 2020.

Factors Impacting Our Operating Results

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets and the supply of, and demand for, commercial mortgage loans, CRE debt and other financial assets in the marketplace. Our net interest income, which reflects the amortization of origination fees and direct costs, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. Interest rates will vary according to the type of investment, conditions in the financial markets, credit worthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers.

Stock Buyback Program

In May 2015, we announced that our board of directors authorized us to repurchase up to $20.0 million of our outstanding common stock over a period of one year (the "Stock Buyback Program"). In February 2016, we announced that our board of directors increased the size of the existing $20.0 million Stock Buyback Program to $30.0 million and extended the Stock Buyback Program through March 31, 2017. Purchases made pursuant to the Stock Buyback Program will be made in either the open market or in privately negotiated transactions, from time to time and as permitted by federal securities laws and other legal requirements. Repurchases may be suspended or discontinued at any time. In connection with this Stock Buyback Program, in March 2016, we entered into a Rule 10b5-1 plan to repurchase shares of our common stock in accordance with certain parameters set forth in the Stock Buyback Program. During the six months ended June 30, 2016 , we repurchased a total of 129,916 shares of our common stock in the open market for an aggregate purchase price of approximately $ 1.4 million, including expenses paid. The shares were repurchased at an average price of $ 11.06 per share, including expenses paid.

Investment Portfolio

As of June 30, 2016 , we have originated or co-originated 33 loans held for investment, excluding 34 loans that were repaid or sold since inception. Such investments are referred to herein as our investment portfolio. As of June 30, 2016 , the aggregate originated commitment under these loans at closing was approximately $ 1.2 billion and outstanding principal was $ 1.1 billion, excluding non-controlling interests held by third parties. During the six months ended June 30, 2016 , we funded approximately $ 197.9 million of outstanding principal and received repayments of $ 229.4 million of outstanding principal, excluding non-controlling interests held by third parties. As of June 30, 2016 , 69.0 % of our loans have London Interbank Offered Rates ("LIBOR") floors, with a weighted average floor of 0.23 %, calculated based on loans with LIBOR floors. References to LIBOR or “L” are to 30-day LIBOR (unless otherwise specifically stated).

As of June 30, 2016 , all loans were paying in accordance with their contractual terms. During the three and six months ended June 30, 2016 , there were no impairments with respect to our loans held for investment.

Our loans held for investment are accounted for at amortized cost. The following table summarizes our loans held for investment as of June 30, 2016 ($ in thousands):



	As of June 30, 2016
	Carrying Amount (1)		Outstanding Principal (1)		Weighted Average Interest Rate		Weighted Average Unleveraged Effective Yield (2)		Weighted Average Remaining Life (Years)
Senior mortgage loans	$	927,991	$	931,662	4.4	%	5.1	%	1.4
Subordinated debt and preferred equity investments	168,397		170,668		10.7	%	11.2	%	5.2
Total loans held for investment portfolio (excluding non-controlling interests held by third parties)	$	1,096,388	$	1,102,330	5.3	%	6.1	%	2.0

_____________________________________________________________________________


(1)	The difference between the Carrying Amount and the Outstanding Principal face amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs.

(2)

Unleveraged Effective Yield is the compounded effective rate of return that would be earned over the life of the investment based on the contractual interest rate (adjusted for any deferred loan fees, costs, premium or discount) and assumes no dispositions, early prepayments or defaults. The Total Weighted Average Unleveraged Effective Yield is calculated based on the average of Unleveraged Effective Yield of all loans held by us as of June 30, 2016 as weighted by the Outstanding Principal balance of each loan.

Non-Controlling Interests

The non-controlling interests held by third parties in our consolidated financial statements represent the equity interests in ACRC KA Investor LLC ("ACRC KA") that are not owned by us. See Note 15 to our consolidated financial statements included in this quarterly report on Form 10-Q for more information about ACRC KA.

A reconciliation of our loans held for investment portfolio, excluding non-controlling interests held by third parties, to our loans held for investment as included within our consolidated balance sheets is as follows ($ in thousands):



	As of June 30, 2016
	Carrying Amount		Outstanding Principal
Total loans held for investment portfolio (excluding non-controlling interests held by third parties)	$	1,096,388	$	1,102,330
Non-controlling interest investment held by third parties	46,579		46,579
Loans held for investment	$	1,142,967	$	1,148,909

For more information about our investment portfolio, see Note 3 to our consolidated financial statements included in this quarterly report on Form 10-Q .

A reconciliation of our interest income from loans held for investment, excluding non-controlling interests, to our interest income from loans held for investment as included within our consolidated statements of operations is as follows ($ in thousands):



	For the three months ended June 30, 2016		For the six months ended June 30, 2016
Interest income from loans held for investment, excluding non-controlling interests	$	17,640	$	35,101
Interest income from non-controlling interest investment held by third parties	1,289		2,578
Interest income from loans held for investment	$	18,929	$	37,679

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”), which require management to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and assumptions. There have been no significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 . See Note 2 to our consolidated financial statements included in this quarterly report on Form 10-Q , which describes recently issued accounting pronouncements not yet required to be adopted by us.

RESULTS OF OPERATIONS

The following table sets forth a summary of our consolidated results of operations for the three and six months ended June 30, 2016 and 2015 ($ thousands):



	For the three months ended June 30,						For the six months ended June 30,
	2016			2015			2016			2015
Net interest margin	$	10,514		$	12,311		$	20,739		$	25,303
Total expenses	3,219			3,226			6,681			6,804
Income from continuing operations before income taxes	7,295			9,085			14,058			18,499
Income tax expense (benefit)	3			3			7			(18		)
Net income from continuing operations	7,292			9,082			14,051			18,517
Net income from discontinued operations held for sale, net of income taxes	2,689			2,181			2,355			2,041
Net income attributable to ACRE	9,981			11,263			16,406			20,558
Less: Net income attributable to non-controlling interests	(1,288		)	(2,296		)	(2,577		)	(4,529		)
Net income attributable to common stockholders	$	8,693		$	8,967		$	13,829		$	16,029

The following tables set forth select details of our consolidated results of operations from continuing operations for the three and six months ended June 30, 2016 and 2015 ($ thousands):

Net Interest Margin



	For the three months ended June 30,						For the six months ended June 30,
	2016			2015			2016			2015
Interest income from loans held for investment	$	18,929		$	21,012		$	37,679		$	44,182
Interest expense	(8,415		)	(8,701		)	(16,940		)	(18,879		)
Net interest margin	$	10,514		$	12,311		$	20,739		$	25,303

For the three months ended June 30, 2016 and 2015 , net interest margin was approximately $ 10.5 million and $12.3 million, respectively. For the three months ended June 30, 2016 and 2015 , interest income from loans held for investment of $ 18.9 million and $21.0 million, respectively, was generated by weighted average earning assets of $ 1.2 billion and $1.3 billion, respectively, offset by $ 8.4 million and $8.7 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Wells Fargo Facility, the Citibank Facility, the BAML Facility, the CNB Facilities, the MetLife Facility and the UBS Facilities (individually defined below and collectively, the "Secured Funding Agreements") and securitization debt, the Secured Term Loan (defined below) and convertible notes were $ 835.8 million and $943.4 million for the three months ended June 30, 2016 and 2015 , respectively. The decrease in net interest margin for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily relates to a decrease in our weighted average earning assets for the three months ended June 30, 2016 .

For the six months ended June 30, 2016 and 2015 , net interest margin was approximately $ 20.7 million and $25.3 million, respectively. For the six months ended June 30, 2016 and 2015 , interest income from loans held for investment of $ 37.7 million and $44.2 million, respectively, was generated by weighted average earning assets of $ 1.2 billion and $1.3 billion, respectively, offset by $ 16.9 million and $18.9 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements and securitization debt, the Secured Term Loan and convertible notes were $ 840.3 million and $987.9 million for the six months ended June 30, 2016 and 2015 , respectively. The decrease in net interest margin for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily relates to a decrease in our weighted average earning assets for the six months ended June 30, 2016 .

Operating Expenses

The operating expenses below do not include expenses of ACRE Capital. See Note 16 to our consolidated financial statements included in this quarterly report on Form 10-Q for more information about the operating expenses of ACRE Capital.



	For the three months ended June 30,				For the six months ended June 30,
	2016		2015		2016		2015
Management fees to affiliate	$	1,338	$	1,346	$	2,690	$	2,689
Professional fees	535		412		1,025		918
General and administrative expenses	686		647		1,409		1,446
General and administrative expenses reimbursed to affiliate	660		821		1,557		1,751
Total expenses	$	3,219	$	3,226	$	6,681	$	6,804

For both the three months ended June 30, 2016 and 2015 , we incurred operating expenses of $ 3.2 million.

For the six months ended June 30, 2016 and 2015 , we incurred operating expenses of $ 6.7 million and $6.8 million, respectively. The decrease in operating expenses for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily relates to a reduction in allocable general and administrative expenses from our Manager for the six months ended June 30, 2016 .

Related Party Expenses

For the three months ended June 30, 2016 , related party expenses included $ 1.3 million in management fees due to our Manager and $ 0.7 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. For the three months ended June 30, 2015 , related party expenses included $1.3 million in management fees due to our Manager and $0.8 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement.

For the six months ended June 30, 2016 , related party expenses included $ 2.7 million in management fees due to our Manager and $ 1.6 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. For the six months ended June 30, 2015 , related party expenses included $2.7 million in management fees due to our Manager and $1.8 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement.

Other Expenses

For the three months ended June 30, 2016 and 2015 , professional fees were $ 0.5 million and $0.4 million, respectively. The increase in professional fees for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily relates to an increase in our use of third party professionals. For the three months ended June 30, 2016 and 2015 , general and administrative expenses were $ 0.7 million and $0.6 million, respectively. The increase in general and administrative expenses for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily relates to an increase in travel expenses.

For the six months ended June 30, 2016 and 2015 , professional fees were $ 1.0 million and $0.9 million, respectively. The increase in professional fees for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily relates to an increase in our use of third party professionals. For both the six months ended June 30, 2016 and 2015 , general and administrative expenses were $ 1.4 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and other general business needs. We use significant cash to purchase our target investments, make principal and interest payments on our borrowings, make distributions to our stockholders and fund our operations. Our primary sources of cash generally consist of unused borrowing capacity under the Secured Funding Agreements, the Warehouse Lines of Credit and the Secured Term Loan (defined below) (collectively, the "Financing Agreements"), the net proceeds of future offerings, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating activities. However, principal repayments from mortgage loans in the collateralized loan obligation ("CLO") securitization are applied sequentially, first going to pay down the senior CLO notes, and accordingly, we will not receive any proceeds from repayment of loans in the CLO until all senior notes are repaid in full. Subject to maintaining our qualification as a REIT and our exemption from the 1940 Act, we expect that our primary sources of financing will be, to the extent available to us, through (a) credit, secured funding and other lending facilities, (b) securitizations, (c) other sources of private financing, including warehouse and repurchase facilities, and (d) public or private offerings of our equity or debt securities. See “Recent Developments” included in this quarterly report on Form 10-Q for information on our available capital as of August 2, 2016 . We may seek to sell certain of our investments in order to manage liquidity needs, interest rate risk, meet other operating objectives and adapt to market conditions.

Cash Flows

The following table sets forth changes in cash and cash equivalents for the six months ended June 30, 2016 and 2015 , which are inclusive of amounts related to discontinued operations held for sale ($ in thousands):



	For the six months ended June 30,
	2016			2015
Net income	$	16,406		$	20,558
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	17,014			202,433
Net cash provided by (used in) operating activities	33,420			222,991
Net cash provided by (used in) investing activities	33,597			112,595
Net cash provided by (used in) financing activities	(69,701		)	(344,032		)
Change in cash and cash equivalents	$	(2,684	)	$	(8,446	)

During the six months ended June 30, 2016 and 2015 , cash and cash equivalents decreased by $ 2.7 million and $8.4 million, respectively.

Operating Activities

For the six months ended June 30, 2016 and 2015 , net cash provided by operating activities totaled $ 33.4 million and $223.0 million, respectively. For the six months ended June 30, 2016 , adjustments to net income related to operating activities primarily included originations of mortgage loans held for sale of $ 282.6 million, sale of mortgage loans held for sale to third parties of $ 261.5 million, change in the fair value of MSRs of $ 3.9 million and change in other assets of $ 39.7 million. For the six months ended June 30, 2015 , adjustments to net income related to operating activities primarily included originations of

mortgage loans held for sale of $382.7 million, sale of mortgage loans held for sale to third parties of $524.5 million, change in the fair value of MSRs of $5.2 million, change in restricted cash of $41.2 million and change in other assets of $20.2 million.

Investing Activities

For the six months ended June 30, 2016 and 2015 , net cash provided by investing activities totaled $ 33.6 million and $112.6 million, respectively. This change in net cash provided by investing activities was primarily related to cash received from principal repayment of loans held for investment exceeding the cash used for the origination of new loans held for investment for the six months ended June 30, 2016 and 2015 .

Financing Activities

For the six months ended June 30, 2016 , net cash used in financing activities totaled $ 69.7 million and primarily related to repayments of our Secured Funding Agreements of $ 359.7 million, repayments of debt of consolidated variable interest entities (“VIEs”) of $ 150.3 million and repayments of our Warehouse Lines of Credit of $ 311.1 million, partially offset by proceeds from our Secured Funding Agreements of $ 438.7 million and proceeds from our Warehouse Lines of Credit of $ 332.7 million. For the six months ended June 30, 2015 , net cash used in financing activities totaled $344.0 million and related primarily to repayments of our Secured Funding Agreements of $105.8 million, repayments of debt of consolidated VIEs of $197.5 million and repayments of our Warehouse Lines of Credit of $576.9 million, partially offset by proceeds from our Secured Funding Agreements of $113.9 million and proceeds from our Warehouse Lines of Credit of $435.6 million.

Summary of Financing Agreements

The sources of financing under our Financing Agreements are described in the following table ($ in thousands):



	As of
	June 30, 2016									December 31, 2015
	Total Commitment			Outstanding Balance		Interest Rate		Maturity Date		Total Commitment			Outstanding Balance		Interest Rate		Maturity Date
Secured funding agreements:
Wells Fargo Facility	$	325,000	(1)	$	147,681	LIBOR+1.75 to 2.35%		December 14, 2017	(1)	$	225,000		$	101,473	LIBOR+1.75 to 2.35%		December 14, 2016	(1)
Citibank Facility	250,000			225,523		LIBOR+2.00 to 2.50%		December 8, 2016	(2)	250,000			112,827		LIBOR+2.00 to 2.50%		December 8, 2016	(2)
BAML Facility	50,000			—		LIBOR+2.25 to 2.75%		May 25, 2017	(3)	50,000			—		LIBOR+2.25 to 2.75%		May 26, 2016	(3)
March 2014 CNB Facility	50,000			35,100		LIBOR+3.00%		March 11, 2017	(4)	50,000			—		LIBOR+3.00%		March 11, 2016	(4)
July 2014 CNB Facility	75,000			—		LIBOR+3.00%	(5)	July 31, 2016		75,000			66,200		LIBOR+3.00%	(5)	July 31, 2016
MetLife Facility	180,000			111,196		LIBOR+2.35%		August 12, 2017	(6)	180,000			109,474		LIBOR+2.35%		August 12, 2017	(6)
April 2014 UBS Facility	140,000			82,294		LIBOR+1.88 to 2.28%	(7)	October 21, 2018		140,000			75,558		LIBOR+1.88 to 2.28%	(7)	October 21, 2018
December 2014 UBS Facility	—			—		—		—	(8)	57,243			57,243		LIBOR+2.74%		July 6, 2016
Subtotal	$	1,070,000		$	601,794					$	1,027,243		$	522,775

Warehouse lines of credit:
ASAP Line of Credit	$	80,000	(9)	$	—	LIBOR+1.40 to 1.75%		No expiration	(9)	$	80,000	(9)	$	—	LIBOR+1.40 to 1.75%		No expiration	(9)
BAML Line of Credit	135,000			46,431		LIBOR+1.60%		June 29, 2017	(10)	135,000			24,806		LIBOR+1.60%		June 30, 2016
Subtotal	$	215,000		$	46,431					$	215,000		$	24,806

Secured Term Loan	$	155,000		$	75,000	LIBOR+6.00%	(11)	December 9, 2018		$	155,000		$	75,000	LIBOR+6.00%	(11)	December 9, 2018
Total	$	1,440,000		$	723,225					$	1,397,243		$	622,581

______________________________________________________________________________


(1)	The maturity date of the Wells Fargo Facility is subject to two 12-month extensions at our option provided that certain conditions are met and applicable extension fees are paid. Beginning on December 14, 2015, new advances under the Wells Fargo Facility accrue interest at a per annum rate equal to the sum of (i) 30 day LIBOR plus (ii) a pricing

margin range of 1.75% to 2.35%. Advances on loans made prior to December 14, 2015 under the Wells Fargo Facility continue to accrue interest at a per annum rate equal to the sum of (i) 30 day LIBOR plus (ii) a pricing margin range of 2.00% to 2.50%. In June 2016, we amended the Wells Fargo Facility to, among other things, increase the size of the facility from $225.0 million to $325.0 million and extend the initial maturity date to December 14, 2017.

(2)

The master repurchase facility with Citibank, N.A. (the "Citibank Facility") is subject to three 12-month extensions at our option provided that certain conditions are met and applicable extension fees are paid. See "Recent Developments" and Note 17 to our consolidated financial statements included in this quarterly report on Form 10-Q for information on a subsequent event relating to the Citibank Facility.


(3)	In May 2016, we amended the BAML Facility to extend the period during which the Company may request individual loans under the facility to May 25, 2017. Individual advances on loans under the BAML Facility generally have a two-year maturity, subject to a 12-month extension at our option provided that certain conditions are met and applicable extension fees are paid.

(4)

In February 2016, we amended the secured revolving funding facility with City National Bank (the “March 2014 CNB Facility”) to extend the maturity date to March 11, 2017. We have one 12-month extension at our option provided that certain conditions are met and applicable extension fees are paid, which, if exercised, would extend the final maturity of the March 2014 CNB Facility to March 10, 2018.

(5)

The interest rate of the revolving funding facility with City National Bank (the “July 2014 CNB Facility”) is LIBOR plus 3.00%, comprised of LIBOR plus 1.50% and a credit support fee of 1.50% payable to Ares Management. See "Recent Developments" and Note 17 to our consolidated financial statements included in this quarterly report on Form 10-Q for information on a subsequent event relating to the July 2014 CNB Facility.


(6)	The revolving master repurchase facility with Metropolitan Life Insurance Company (the "MetLife Facility") is subject to two 12-month extensions at our option provided that certain conditions are met and applicable extension fees are paid.

(7)

The price differential (or interest rate) on the revolving master repurchase facility with UBS Real Estate Securities Inc. (the “April 2014 UBS Facility”) is one-month LIBOR plus (i) 1.88% per annum, for assets that are subject to an advance for one year or less, (ii) 2.08% per annum, for assets that are subject to an advance in excess of one year but less than two years, and (iii) 2.28% per annum, for assets that are subject to an advance for more than two years; in each case, excluding amortization of commitment and exit fees.


(8)	The December 2014 UBS Facility has been repaid in full and its terms were not extended.


(9)	The commitment amount is subject to change at any time at Fannie Mae's discretion. To the extent the ASAP Line of Credit remains active through utilization, there is no expiration date. See "Recent Developments" and Note 17 to our consolidated financial statements included in this quarterly report on Form 10-Q for information on a subsequent event relating to the ASAP Line of Credit.


(10)	In June 2016, we amended the BAML Line of Credit to extend the maturity date to June 29, 2017. See "Recent Developments" and Note 17 to our consolidated financial statements included in this quarterly report on Form 10-Q for information on a subsequent event relating to the BAML Line of Credit.


(11)	The Credit and Guaranty Agreement (the ‘‘Secured Term Loan”) with Highbridge Principal Strategies, LLC, as administrative agent, and DBD Credit Funding LLC, as collateral agent, has a LIBOR floor of 1.0% on drawn amounts.

Our Financing Agreements contain various affirmative and negative covenants, including negative pledges, and provisions related to events of default that are normal and customary for similar financing agreements. See Note 5 to our consolidated financial statements included in this quarterly report on Form 10-Q for more information on our Financing Agreements.

Commercial Mortgage-Backed Securities and Collateralized Loan Obligations

We may seek to enhance the returns on our senior mortgage loan investments through securitizations, if available. To the extent available, we intend to securitize the senior portion of some of our loans, while retaining the subordinate securities in our investment portfolio. The securitization of this senior portion will be accounted for as either a “sale” and the loans will be removed from our balance sheet or as a “financing” and will be classified as “loans held for investment” in our consolidated balance sheets, depending upon the structure of the securitization.

The following table summarizes our securitizations debt as of June 30, 2016 and December 31, 2015 ($ in thousands):



	As of
	June 30, 2016				December 31, 2015
	Carrying Amount		Outstanding Principal		Carrying Amount		Outstanding Principal
Commercial mortgage-backed securitization debt (consolidated VIE)	$	—	$	—	$	61,815	$	61,856
Collateralized loan obligation securitization debt (consolidated VIE)	104,656		104,993		192,528		193,419
Securitizations debt	$	104,656	$	104,993	$	254,343	$	255,275

See Note 15 to our consolidated financial statements included in this quarterly report on Form 10-Q for additional terms and details of our securitizations.

Capital Markets

We may periodically raise additional capital through public offerings of debt and equity securities to fund new investments. In May 2013, we filed a registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”), which became effective on June 17, 2013, in order to permit us to offer, from time to time, in one or more offerings or series of offerings up to $1.5 billion of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, or units. Pursuant to Rule 415(a)(5) under the Securities Act, the shelf registration statement was scheduled to expire on June 17, 2016. On June 6, 2016, we filed a new registration statement on Form S-3 with the SEC in accordance with Rule 415(a)(6) under the Securities Act, which provides us with the ability to sell from time to time the remaining initial offering price of unsold securities registered under the prior shelf registration statement.

Other Sources of Financing

In addition to the sources of liquidity described above, in the future, we may also use other sources of financing to fund the origination or acquisition of our target investments or to refinance expiring Financing Agreements and securitizations, including other credit facilities, warehouse facilities, repurchase facilities, non-convertible or convertible debt, securitized financings and other public and private forms of borrowing. These financings may be issued by us or our subsidiaries, be collateralized or non-collateralized, accrue interest at either fixed or floating rates and may involve one or more lenders.

Leverage Policies

We intend to use prudent amounts of leverage to increase potential returns to our stockholders. To that end, subject to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act, we intend to continue to use borrowings to fund the origination or acquisition of our target investments. Given current market conditions and our focus on first or senior mortgages, we currently expect that such leverage would not exceed, on a debt-to-equity basis, a 4-to-1 ratio. Our charter and bylaws do not restrict the amount of leverage that we may use. The amount of leverage we will deploy for particular investments in our target investments will depend upon our Manager’s assessment of a variety of factors, which may include, among others, the anticipated liquidity and price volatility of the assets in our investment portfolio, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, including hedges, the availability and cost of financing the assets, our opinion of the creditworthiness of our financing counterparties, the health of the U.S. economy generally or in specific geographic regions and commercial mortgage markets, our outlook for the level and volatility of interest rates, the slope of the yield curve, the credit quality of our assets, the collateral underlying our assets, and our outlook for asset spreads relative to the LIBOR curve.

Dividends

We intend to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT annually distribute at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, and to the extent that it annually distributes less than 100% of its REIT taxable income in any taxable year, that it pay tax at regular corporate rates on that undistributed portion. We intend to make regular quarterly distributions to our stockholders in an amount equal to or greater than our REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), if and to the extent authorized by our board of directors. As a result, such distributions will not be available to fund investments. Before we make any distributions, whether for U.S.

federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our Financing Agreements and other debt payable. If our cash available for distribution is less than our REIT taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

OFF-BALANCE SHEET ARRANGEMENTS

We have commitments to fund various senior mortgage loans, as well as subordinated debt and preferred equity investments in our portfolio, extend credit and sell loans. Commitments to extend credit by ACRE Capital are generally agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Other than as set forth in this quarterly report on Form 10-Q , we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or VIEs, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment or intend to provide additional funding to any such entities.

RECENT DEVELOPMENTS

On July 12, 2016, ACRE Capital temporarily increased the ASAP Line of Credit limit from $80.0 million to $140.0 million through August 31, 2016.

On July 13, 2016, a subsidiary of ours entered into an amendment agreement with Citibank, N.A., which contemplates that Citibank, N.A. may increase the commitment amount of the Citibank Facility, in its sole discretion, in order to fund approved mortgage loans.

On July 14, 2016, we originated a $72.0 million first mortgage loan on an office property located in Illinois. At closing, the outstanding principal balance was approximately $53.2 million. The loan has an interest rate of LIBOR plus 3.99% (plus fees) and an initial term of three years.

On July 15, 2016, we originated a $62.5 million first mortgage loan on an office property located in California. At closing, the outstanding principal balance was approximately $57.5 million. The loan has an interest rate of LIBOR plus 4.40% (plus fees) and an initial term of three years.

On July 21, 2016, we originated a $23.3 million first mortgage loan on a multifamily property located in Florida. At closing, the outstanding principal balance was approximately $19.8 million. The loan has an interest rate of LIBOR plus 4.25% (plus fees) and an initial term of 2.5 years.

On July 29, 2016, we amended the July 2014 CNB Facility to extend the maturity date to September 30, 2016.

On July 29, 2016, ACRE Capital temporarily increased its BAML Line of Credit from $135.0 million to $175.0 million from July 29, 2016 through August 8, 2016.

On August 1, 2016, ACRC Lender US LLC (“ACRC”), a subsidiary of ours, entered into a $125.0 million master repurchase and securities contract (the "U.S. Bank Facility") with U.S. Bank National Association (“U.S. Bank”). Pursuant to the U.S. Bank Facility, ACRC is permitted to sell, and later repurchase, eligible commercial mortgage loans collateralized by retail, office, mixed-use, multifamily, industrial, hospitality, student housing, manufactured housing or self-storage properties. U.S. Bank may approve the mortgage loans which are subject to the U.S. Bank Facility in its sole discretion. ACRC paid U.S. Bank a commitment fee at the closing of the U.S. Bank Facility.

The U.S. Bank Facility contains margin call provisions following the occurrence of certain mortgage loan credit events. The U.S. Bank Facility is fully guaranteed by us. The agreements governing the U.S. Bank Facility contain various customary representations and warranties and provisions regarding events of default, and impose certain customary covenants

on ACRC and us, including that we are obligated to maintain certain ratios of debt to net worth, fixed charges, liquidity and other financial conditions.

From July 1, 2016 through August 2, 2016 , ACRE Capital originated $94.4 million in Fannie Mae, Freddie Mac or HUD loan commitments.

As of August 2, 2016 , we had approximately $139 million in capital, either in cash or in approved but undrawn capacity under our borrowing facilities, excluding the anticipated proceeds from the pending sale of ACRE Capital Holdings, anticipated proceeds from repayments of existing loans and the anticipated expiration of the $75 million funding facility at City National Bank. After holding in reserve $10 million in liquidity requirements, we expect to have approximately $129 million in capital available to fund new loans, fund outstanding commitments on existing loans, repurchase our common shares and for other working capital and general corporate purposes. Assuming that we use all such amount as capital to make new senior loans and we are able to leverage such amount under our financing agreements at a debt‑to‑equity ratio of 2.5:1, we would have the capacity to fund approximately $450 million of additional senior loans.

As of August 2, 2016 , the total unfunded commitments for our existing loans held for investment were approximately $109 million. In addition, borrowings under our Secured Funding Agreements were approximately $729 million, borrowings under our Secured Term Loan was approximately $75 million and debt issued in the form of CLO was approximately $80 million.

On August 4, 2016 , we declared a cash dividend of $ 0.26 per common share for the third quarter of 2016 . The third quarter 2016 dividend is payable on October 17, 2016 to common stockholders of record as of September 30, 2016 .

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As part of our risk management strategy, our Manager closely monitors our portfolio and actively manages the credit, interest rate, market, prepayment, real estate inflation and financing risks associated with holding a portfolio of our target investments. We manage our portfolio through an interactive process with our Manager and Ares Management and service our target investments through a combination of direct servicing by ACRE Capital and use of our Manager's servicer. ACRE Capital and one of its subsidiaries serve as the primary servicer of our investments. ACRE Capital is a Standard & Poor’s rated commercial primary servicer that is also included on Standard & Poor’s Select Servicer List. Our Manager's servicer, which is a Standard & Poor's rated commercial special servicer that is included on Standard & Poor's Select Servicer List, serves as the special servicer for non-routine investment servicing issues. Our Manager has an Investment Committee that oversees compliance with our investment strategy and guidelines, investment portfolio holdings and financing strategy. We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While we do not seek to avoid risk completely, we believe the risks can be quantified from historical experience and seek to actively manage those risks, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.

Credit Risk

We are subject to varying degrees of credit risk in connection with holding our target investments. We have exposure to credit risk on our CRE loans and other target investments in our principal lending business. Our Manager seeks to manage credit risk by performing our due diligence process prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate. Credit risk is also addressed through our Manager’s ongoing review of our investment portfolio. In addition, with respect to any particular principal lending target investment, our Manager’s investment team evaluates, among other things, relative valuation, comparable analysis, supply and demand trends, shape of yield curves, delinquency and default rates, recovery of various sectors and vintage of collateral.

In addition, we are exposed to credit risk in our mortgage banking business where, under the Master Loss Sharing Agreement, ACRE Capital is responsible for absorbing certain losses incurred by Fannie Mae with respect to loans originated under the DUS program. See Note 6 to our consolidated financial statements included in this quarterly report on Form 10-Q for further discussion of the Master Loss Sharing Agreement with Fannie Mae. ACRE Capital uses several tools to manage its risk-sharing obligation, including maintenance of disciplined underwriting and approval processes and procedures, and periodic review and evaluation of underwriting criteria based on underlying multifamily housing market data and limitation of exposure to particular geographic markets and submarkets and to individual borrowers.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our assets and our related financing obligations, including our borrowings under the Financing Agreements. We primarily originate or acquire floating rate mortgage assets and finance those assets with index-matched floating rate liabilities. As a result, we significantly reduce our exposure to changes in portfolio value and cash flow variability related to changes in interest rates. However, we regularly measure our exposure to interest rate risk and assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not we should enter into hedging transactions and derivative financial instruments, such as forward sale commitments and interest rate floors in order to mitigate our exposure to changes in interest rates.

While hedging activities may mitigate our exposure to adverse fluctuations in interest rates, certain hedging transactions that we may enter into in the future, such as interest rate swap agreements, may also limit our ability to participate in the benefits of lower interest rates with respect to our investments. In addition, there can be no assurance that we will be able to effectively hedge our interest rate risk.

In addition to the risks related to fluctuations in asset values and cash flows 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 real estate assets underlying our mortgages and, potentially, contribute to non-performance or, in severe cases, default.

Interest Rate Effect on Net Interest Margin

Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing. The cost of our borrowings generally is based on prevailing market interest rates. During a period of rising interest rates, our borrowing costs generally increase while the yields earned on our leveraged fixed-rate mortgage assets remain static, which could result in a decline in our net interest spread and net interest margin.

For the three and six months ended June 30, 2016 , the following fluctuations in the average 30-day LIBOR would have resulted in the following increases in net interest margin on our loans held for investment ($ in millions):



Change in Average 30-Day LIBOR	For the three months ended June 30, 2016		For the six months ended June 30, 2016
Up 300 basis points	$	1.7	$	3.6
Up 200 basis points	$	1.2	$	2.5
Up 100 basis points	$	0.6	$	1.3
Down to 0 basis points	$	0.1	$	0.2

The severity of any such impact depends on our asset/liability composition at the time as well as the magnitude and duration of the interest rate increase and any applicable floors and caps. Further, an increase in short-term interest rates could also have a negative impact on the market value of our target investments. If any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely affect our liquidity and results of operations.

Interest Rate Cap and Floor Risk

We primarily originate or acquire floating rate mortgage assets. These are assets in which the mortgages may be subject to periodic and lifetime interest rate caps and floors, which limit the amount by which the asset’s interest yield change during any given period. However, our borrowing costs pursuant to our financing agreements sometimes are not subject to similar restrictions or have different floors and caps. As a result, in a period of increasing interest rates, interest rate costs on our borrowings could increase without limitation by caps, while the interest rate yields on our floating rate mortgage assets could be limited if we do not implement effective caps. In addition, floating rate mortgage assets may be subject to periodic payment caps that result in some portion of the interest being deferred and added to the principal outstanding. This could result in our receipt of less cash income on such assets than we would need to pay the interest cost on our related borrowings. In addition, in a period of decreasing interest rates, the interest rate yields on our floating rate mortgage assets could decrease, while the interest rate costs on certain of our borrowings could be fixed at a higher floor. These factors could lower our net

interest income or cause a net loss during periods of decreasing interest rates, which would harm our financial condition, cash flows and results of operations.

Market Risk

The estimated fair values of our investments fluctuate primarily due to changes in interest rates and other factors. Generally, in a rising interest rate environment, the estimated fair value of the fixed-rate securities would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of the fixed-rate securities would be expected to increase. As market volatility increases or liquidity decreases, the fair value of our investments may be adversely impacted.

The fair value of ACRE Capital's MSRs is subject to market risk. A 100 basis point increase or decrease in the weighted average discount rate would decrease or increase, respectively, the fair value of ACRE Capital's MSRs by approximately $ 1.9 m illion and $2.0 million as of June 30, 2016 and December 31, 2015 , respectively.

Prepayment and Securitizations Repayment Risk

Our net income and earnings may be affected by prepayment rates on our existing CRE loans. When we originate our CRE loans, we anticipate that we will generate an expected yield. When borrowers prepay their CRE loans faster than we expect, we may be unable to replace these CRE loans with new CRE loans that will generate yields which are as high as the prepaid CRE loans. Additionally, principal repayment proceeds from mortgage loans in the CLO are applied sequentially, first going to pay down the senior CLO notes. We will not receive any proceeds from repayment of loans in the CLO until all senior notes are repaid in full.

Financing Risk

We borrow funds under our Financing Agreements to finance our target assets. Over time, as market conditions change, in addition to these financings, we may use other forms of leverage. Weakness or volatility in the financial markets, the commercial real estate and mortgage markets and the economy generally could adversely affect one or more of our potential lenders and could cause one or more of our potential lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.

Real Estate Risk

Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; local markets with a significant exposure to the energy sector; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loan or loans, as the case may be, which could also cause us to suffer losses. We seek to manage these risks through our underwriting and asset management processes.

Inflation Risk

Virtually all of our assets and liabilities are sensitive to interest rates. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. In each case, in general, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

Item 4. Controls and Procedures

The Company's management, with the participation of the Company's Co-Chief Executive Officers and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon such evaluation, the Company's Co-Chief Executive Officers and Chief Financial Officer concluded that its disclosure controls and procedures were effective, as of June 30, 2016 , to provide assurance that information that is required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified by the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is

accumulated and communicated to the Company's management, including its Co-Chief Executive Officers and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. During the three months ended June 30, 2016 , there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business, we may be subject to various legal proceedings from time to time. Furthermore, third parties may try to seek to impose liability on us in connection with our loans. As of June 30, 2016 , we were not subject to any material pending legal proceedings.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015 . You should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 , which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Stock Buyback Program

In May 2015, we announced that the Company's board of directors authorized us to repurchase up to $20 million of our outstanding common stock over a period of one year. In February 2016, we announced that the Company's board of directors increased the size of the existing $20 million Stock Buyback Program to $30 million and extended the Stock Buyback Program through March 31, 2017. Purchases made pursuant to the Stock Buyback Program will be made in either the open market or in privately negotiated transactions, from time to time and as permitted by federal securities laws and other legal requirements. Repurchases may be suspended or discontinued at any time. In connection with this Stock Buyback Program, in March 2016, we entered into a Rule 10b5-1 plan to repurchase shares of our common stock in accordance with certain parameters set forth in the Stock Buyback Program.

Repurchases of our common stock under our Stock Buyback Program were as follows (in thousands, except shares and per share data):



Period	Total Number of Shares Purchased	Average Price Paid Per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2016 through January 31, 2016	—	—		—	$	20,000
February 1, 2016 through February 29, 2016	—	—		—	$	30,000
March 1, 2016 through March 31, 2016	34,854	$	10.28	34,854	$	29,642
April 1, 2016 through April 30, 2016	95,062	$	11.34	95,062	$	28,563
May 1, 2016 through May 31, 2016	—	—		—	$	28,563
June 1, 2016 through June 30, 2016	—	—		—	$	28,563
Total	129,916	$	11.06	129,916

______________________________________________________________________________


(1)	Amount includes expenses paid.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

EXHIBIT INDEX



Exhibit Number			Exhibit Description
2.1*			Purchase and Sale Agreement, among Ares Commercial Real Estate Corporation and Cornerstone Real Estate Advisers LLC. (1)
3.1*			Articles of Amendment and Restatement of Ares Commercial Real Estate Corporation. (2)
3.2*			Amended and Restated Bylaws of Ares Commercial Real Estate Corporation. (3)
10.1*			Amendment No. 3 to Bridge Loan Warehousing Credit and Security Agreement dated as of May 26, 2016, among ACRC Lender B LLC and Bank of America, N.A. (4)
10.2*			Amendment No. 6 to Amended and Restated Master Repurchase and Securities Contract and Amended and Restated Guarantee Agreement dated as of June 30, 2016, among ACRC Lender W LLC, ACRC Lender W TRS LLC and Ares Commercial Real Estate Corporation and Wells Fargo Bank, National Association. (5)
10.3*			Amendment No. 5 to Sixth Amended and Restated Mortgage Warehousing Credit and Security Agreement, dated as of June 30, 2016, by and among ACRE Capital LLC, Bank of America, N.A., as Agent and Lender and the other Lenders party thereto. (5)
10.4			First Amendment to Master Repurchase Agreement and Guaranty dated as of July 13, 2016, among ACRC Lender C LLC, as borrower, Ares Commercial Real Estate Corporation, as guarantor, and Citibank, N.A., as lender.
10.5*			Second Amendment to Master Repurchase Agreement and Guaranty dated as of July 13, 2016, among ACRC Lender C LLC, as borrower, Ares Commercial Real Estate Corporation, as guarantor, and Citibank, N.A., as lender. (6)
10.6			Amendment No. 2 to Credit Agreement dated as of July 29, 2016, by and among ACRC Lender LLC, City National Bank, a national banking association, as arranger and administrative agent, and the lenders party thereto.
10.7			Amendment No. 6 to Sixth Amended and Restated Mortgage Warehousing Credit and Security Agreement dated as of July 29, 2016, by and among ACRE Capital LLC, Bank of America, N.A., as Agent and Lender and the other Lenders party thereto.
10.8			Master Repurchase and Securities Contract dated as of August 1, 2016, between ACRC Lender US LLC and U.S. Bank National Association.
10.9			Payment Guaranty, dated as of August 1, 2016, by Ares Commercial Real Estate Corporation in favor of U.S. Bank National Association.
31.1			Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Co-Chief Executive Officers and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document

* Previously filed


(1)	Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K (File No. 001-35517), filed on June 29, 2016.


(2)	Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K (File No. 001-35517), filed on March 1, 2016.


(3)	Incorporated by reference to Exhibit 3.2 to the Company’s Form S-8 (File No. 333-181077), filed on May 1, 2012.


(4)	Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 001-35517), filed on June 1, 2016.


(5)	Incorporated by reference to Exhibits 10.1 and 10.2, as applicable, to the Company’s Form 8-K (File No. 001-35517), filed on July 7, 2016.


(6)	Incorporated by reference to Exhibits 10.1 to the Company’s Form 8-K (File No. 001-35517), filed on July 19, 2016.

SIGNATURES

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



	ARES COMMERCIAL REAL ESTATE CORPORATION


Date: August 4, 2016	By	/s/ John Jardine
		John Jardine
		Co-Chief Executive Officer (Principal Executive Officer)

Date: August 4, 2016	By	/s/ Robert L. Rosen
		Robert L. Rosen
		Interim Co-Chief Executive Officer (Principal Executive Officer)

Date: August 4, 2016	By	/s/ Tae-Sik Yoon
		Tae-Sik Yoon
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

Exhibit 10.4

FIRST AMENDMENT TO MASTER REPURCHASE AGREEMENT AND GUARANTY

FIRST AMENDMENT TO MASTER REPURCHASE AGREEMENT AND GUARANTY, dated as of July 13, 2016 (this “ Amendment ”), by and among ACRC LENDER C LLC, a Delaware limited liability company (the “ Seller ”), ARES Commercial Real Estate Corporation, a Maryland corporation (the “ Guarantor ”) and CITIBANK, N.A., a national banking association (the “ Buyer ”).

R E C I T A L S:

WHEREAS, the Seller and Buyer entered into that certain Master Repurchase Agreement, dated as of December 8, 2014 (as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, the “ Repurchase Agreement ”).

WHEREAS, Guarantor entered into that certain Amended and Restated Substitute Guaranty Agreement, dated as of May 6, 2014, in favor of Buyer (as the same may be further amended, restated, supplemented or otherwise modified and in effect from time to time, the “ Guaranty ”).

WHEREAS, the parties wish to amend the Repurchase Agreement and Guaranty as more specifically set forth herein.

NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto hereby covenant, agree, represent and warrant that the Repurchase Agreement and Guaranty are hereby amended as follows, effective as of the date hereof:

Section 1. Amendment to Repurchase Agreement .

1.1 The following definition in Section 2 of the Repurchase Agreement is hereby deleted in its entirety and the following corresponding definition is substituted therefor in its proper alphabetical order:

“ Indebtedness ” shall mean, for any Person at any date, without duplication, (a) all then outstanding indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other then outstanding indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all Capital Lease Obligations, (d) all then outstanding obligations of such Person in respect of letters of credit, acceptances or similar instruments issued or created for the account of such Person and (e) all then outstanding liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for

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the payment thereof; provided, that “Indebtedness” shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of such Person under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP.

1.2 The following definition shall be added in Section 2 of the Repurchase Agreement in its proper alphabetical order:

“ Specified Third Party Securitization ” means any securitization transaction that was not established or sponsored by Guarantor or any of its consolidated Subsidiaries.

Section 2. Amendment to Guaranty . The following definitions in Section 1 of the Guaranty are hereby deleted in their entirety and the following corresponding definitions are substituted therefor in its proper alphabetical order:

“ Fixed Charge Coverage Ratio ” means, with respect to Guarantor, the EBITDA (as determined in accordance with GAAP) for the immediately preceding twelve (12) month period ending on the last date of the applicable Test Period, divided by the Fixed Charges for the immediately preceding twelve (12) month period ending on the last date of the applicable Test Period; provided, that the “Fixed Charge Coverage Ratio” and associated components thereof shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of Guarantor under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP.

“ Recourse Indebtedness ” means, without duplication, (a) Indebtedness of a consolidated Subsidiary of Guarantor for which Guarantor has provided a payment guarantee and (b) any Indebtedness of Guarantor other than Indebtedness in respect of which recourse for payment (except for customary exceptions for fraud, misrepresentation, misapplication of cash, waste, environmental claims and liabilities, prohibited transfers, violations of single purpose entity covenants and other circumstances customarily excluded by institutional lenders from exculpation provisions and/or included in separate guaranty or indemnification agreements in non-recourse or tax-exempt financings of real estate) is contractually limited to specific assets of Guarantor (and not a majority of Guarantor’s assets) encumbered by a Lien securing such Indebtedness; provided, that “Recourse Indebtedness” shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of Guarantor under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP.

“ Tangible Net Worth ” means, with respect to any Person and any date, (i) all amounts which would be included under capital or shareholder’s equity (or any like caption) on a consolidated balance sheet of such Person and its consolidated Subsidiaries, as determined in accordance with GAAP, plus, without duplication, (ii) all Qualified Capital Commitments plus origination fees, net of deferred origination costs, minus (a) intangible assets included in the foregoing and (b) prepaid taxes and/or expenses, all on or as of such date; provided,

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that “Tangible Net Worth” and associated components thereof shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of such Person under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP. For sake of clarity, mortgage servicing rights shall not be deemed to be intangible assets.

“ Total Liquidity ” means, at any date of determination, the sum of (i) Cash Liquidity plus (ii) unencumbered Investment Securities; provided, that “Total Liquidity” and associated components thereof shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of Guarantor under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP.

Section 3. Omnibus Amendment to Transaction Documents .

3.1 Any references to the Repurchase Agreement or Guaranty in the Transaction Documents shall hereinafter refer to the Repurchase Agreement and Guaranty as modified by this Amendment.

Section 4 Covenants, Representations and Warranties of Seller .

4.1 The Seller hereby represents and warrants that this Amendment has been duly executed and delivered by the Seller. This Amendment is the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

4.2 The Seller hereby represents and warrants that, to the best of its knowledge, as of the date hereof, no Event of Default has occurred and is continuing, and no Event of Default will occur as a result of the execution, delivery and performance by the Seller of this Amendment.

Section 5. Reaffirmation of Guaranty .

5.1 Guarantor has executed this Amendment for the purpose of acknowledging and agreeing that, notwithstanding the execution and delivery of this Amendment and the amendment of the Repurchase Agreement and the Guaranty hereunder, all of Guarantor’s obligations under the Guaranty remain in full force and effect and the same are hereby irrevocably and unconditionally ratified and confirmed by Guarantor in all respects.

Section 6. Effect Upon Transaction Documents .

6.1 The Seller hereby ratifies and confirms as of the date hereof that all of the terms, covenants and provisions of the Repurchase Agreement and the other Transaction Documents (except as expressly modified hereby) are and shall remain in full force and effect without change except as otherwise expressly and specifically modified by this Amendment.

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6.2 The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Buyer under the Transaction Documents, or any other document, instrument or agreement executed and/or delivered in connection therewith.

6.3 The Seller acknowledges that nothing contained herein shall be construed to relieve the Seller from its obligations under any Transaction Document except as otherwise expressly and specifically modified by this Amendment.

Section 7. No Oral Modification . This Amendment may not be modified, amended, waived, changed or terminated orally, but only by an agreement in writing signed by the party against whom the enforcement of the modification, amendment, waiver, change or termination is sought.

Section 8. Binding Effect . This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

Section 9. Counterparts . This Amendment may be executed in any number of duplicate originals and each such duplicate original shall be deemed to constitute but one and the same instrument. Signatures delivered by email (in PDF format) shall be considered binding with the same force and effect as original signatures.

Section 10. Invalidity . If any term, covenant or condition of this Amendment shall be held to be invalid, illegal or unenforceable in any respect, this Amendment shall be construed without such provision.

Section 11. Governing Law . This Amendment shall be governed in accordance with the terms and provisions of Section 20 of the Repurchase Agreement.

Section 12. No Novation . This Amendment does not, and shall not be construed to, constitute the creation of a new indebtedness or the satisfaction, discharge or extinguishment of the debt secured by the Transaction Documents, nor does it in any way affect or impair the lien of the Transaction Documents. No action undertaken pursuant to this Amendment shall constitute a waiver or a novation of the Buyer’s rights under the Transaction Documents.

Section 13. Costs . The Seller hereby acknowledges and agrees that it shall be responsible for the payment of any reasonable out-of-pocket costs, fees and expenses of the Buyer incurred in connection with the preparation, negotiation, execution or delivery of this Amendment (including, without limitation, the reasonable fees and disbursements of counsel to the Buyer).

[ Signatures appear on following pages ]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized representatives, all as of the day and year first above written.

SELLER:

ACRC LENDER C LLC ,

a Delaware limited liability company



By:	/s/ John B. Jardine
	Name: John B. Jardine
	Title: President and Co-Chief Executive Officer

GUARANTOR:

ARES COMMERCIAL REAL ESTATE CORPORATION , a Maryland corporation



By:	/s/ John B. Jardine
	Name: John B. Jardine
	Title: President and Co-Chief Executive Officer

[SIGNATURES CONTINUE ON NEXT PAGE]

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BUYER:

CITIBANK, N.A. ,

a national banking association



By:	/s/ Richard B. Schlenger
	Name: Richard B. Schlenger
	Title: Authorized Signatory

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Exhibit 10.6

EXECUTION VERSION

AMENDMENT NUMBER TWO TO CREDIT AGREEMENT

THIS AMENDMENT NUMBER TWO TO CREDIT AGREEMENT (this “ Amendment ”), dated as of July 29, 2016 is entered into by and among, on the one hand, the several banks and other financial institutions and lenders from time to time party hereto (such lenders, together with their respective successors and permitted assigns, are referred to hereinafter each individually as a “ Lender ” and, collectively, as the “ Lenders ”), and CITY NATIONAL BANK , a national banking association, as administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, “ Agent ”), and, on the other hand, ACRC LENDER LLC , a Delaware limited liability company (the “ Borrower ”), and in light of the following:

W I T N E S S E T H

WHEREAS , Borrower, Lenders, and Agent are parties to that certain Credit Agreement, dated as of July 30, 2014 (as amended, restated, supplemented, or otherwise modified from time to time, the “ Credit Agreement ”);

WHEREAS , Borrower has requested that Agent and Lenders make certain amendments to the Credit Agreement; and

WHEREAS, upon the terms and conditions set forth herein, Agent and Lenders are willing to make certain amendments to the Credit Agreement.

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Defined Terms . All initially capitalized terms used herein and not otherwise defined herein (including the preamble and recitals hereof) shall have the meanings ascribed thereto in the Credit Agreement.

2. Amendments to the Credit Agreement .

(a) Section 1.1 of the Credit Agreement is hereby amended and modified by deleting the definitions of “Extended Maturity Date”, “Initial Maturity Date”, and “One Year Extension Option” appearing therein in their entirety.

(b) Section 1.1 of the Credit Agreement is hereby amended by amending and restating the definition of “Maturity Date” in its entirety as follows:

“ Maturity Date ” means September 30, 2016.

“3.3 Maturity Date . The term of this Agreement shall continue through and including the Maturity Date.”

3. Conditions Precedent to Amendment . The satisfaction of each of the following shall constitute conditions precedent to the effectiveness of the Amendment:

LEGAL_US_W#83424870.3

(a) Agent shall have received this Amendment, duly executed by the parties hereto, and the same shall be in full force and effect.

(b) Agent shall have received the reaffirmation and consent of Guarantor and Ares Management LLC attached hereto as Exhibit A , duly executed and delivered by authorized officers of Guarantor and Ares Management LLC, respectively.

(c) After giving effect to this Amendment, the representations and warranties herein and in the Credit Agreement and the other Loan Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that are already qualified or modified by materiality in the text thereof) on and as of the date hereof as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date).

(d) No litigation, inquiry, other action or proceeding (governmental or otherwise), or injunction or other restraining order prohibiting, directly or indirectly, the consummation of the transactions contemplated herein shall be pending or, to Borrower’s knowledge, overtly threatened that could reasonably could be expected to have: (i) a material adverse effect on Borrower’s ability to repay the Loans or (ii) a Material Adverse Effect on Borrower.

(e) After giving effect to this Amendment, no Event of Default or Unmatured Event of Default shall have occurred and be continuing or shall result from the consummation of the transactions contemplated herein.

(f) All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered, executed, or recorded and shall be in form and substance reasonably satisfactory to Agent.

4. Representations and Warranties . Borrower hereby represents and warrants to Agent and the Lenders as follows:

(a) It a duly organized and validly existing limited liability company in good standing under the law of the State of Delaware and is duly qualified to conduct business in all jurisdictions where its failure to do so could reasonably be expected to have a Material Adverse Effect on Borrower.

(b) It has all requisite limited liability company power to execute and deliver this Agreement and the other Loan Documents to which it is a party, and to borrow the sums provided for in this Agreement. Borrower has all governmental licenses, authorizations, consents, and approvals necessary to own and operate its Assets and to carry on its businesses as now conducted and as proposed to be conducted, other than licenses, authorizations, consents, and approvals that are not currently required or the failure to obtain which could not reasonably be expected to have a Material Adverse Effect on the Loan Parties, taken as a whole. The execution, delivery, and performance of this Amendment and the other Loan Documents have been duly authorized by Borrower and all necessary limited liability company action in respect thereof has been taken, and the execution, delivery, and performance thereof do not require any consent or approval of any other Person that has not been obtained (except for such consents or approvals as could not reasonably be expected to have a Material Adverse Effect on the Loan Parties, taken as a whole).

(c) The execution, delivery, and performance by Borrower of this Amendment and the other Loan Documents to which it is a party, do not and will not: (i) violate (A) any provision of any federal (including the Exchange Act), state, or local law, rule, or regulation (including Regulations T, U, and X of

LEGAL_US_W#83424870.3

the Federal Reserve Board) binding on any Loan Party, (B) any order of any domestic Governmental Authority, court, arbitration board, or tribunal binding on any Loan Party, or (C) the Governing Documents of any Loan Party, or (ii) contravene any provisions of, result in a breach of, constitute (with the giving of notice or the lapse of time) a default under, or result in the creation of any Lien (other than a Permitted Lien) upon any of the Assets of any Loan Party pursuant to, any Contractual Obligation of any Loan Party, or (iii) require termination of any Contractual Obligation of any Loan Party, or (iv) constitute a tortious interference with any Contractual Obligation of any Loan Party, in each case, except as could not reasonably be expected to have a Material Adverse Effect on the Loan Parties, taken as a whole.

(d) Other than such as may have previously been obtained, filed, or given, as applicable, no consent, license, permit, approval, or authorization of, exemption by, notice to, report to or registration, filing, or declaration with, any Governmental Authority is required in connection with the execution, delivery, and performance by the Loan Parties of this Amendment or the Loan Documents to which they are a party, in each case, except as could not reasonably be expected to have a Material Adverse Effect on the Loan Parties, taken as a whole.

(e) This Amendment and the other Loan Documents to which Borrower is a party, when executed and delivered by Borrower, will constitute the legal, valid, and binding obligations of Borrower, enforceable against Borrower in accordance with their terms except as the enforceability hereof or thereof may be affected by: (i) bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights generally, and (ii) equitable principles of general applicability (whether considered in a proceeding in equity or law).

(f) No litigation, inquiry, other action or proceeding (governmental or otherwise), or injunction or other restraining order prohibiting, directly or indirectly, the consummation of the transactions contemplated herein shall be pending or, to Borrower’s knowledge, overtly threatened that could reasonably could be expected to have: (i) a material adverse effect on Borrower’s ability to repay the Loans or (ii) a Material Adverse Effect on Borrower.

(g) No Event of Default or Unmatured Event of Default has occurred and is continuing as of the date of the effectiveness of this Amendment.

(h) No event or development has occurred as of the date of the effectiveness of this Amendment which could reasonably be expected to result in a Material Adverse Effect with respect to any Loan Party.

(i) The representations and warranties set forth in this Amendment, in the Credit Agreement, as amended by this Amendment and after giving effect to this Amendment, and the other Loan Documents to which Borrower is a party are true, correct and complete in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date hereof, as though made on such date (except to the extent that such representations and warranties relate solely to an earlier date).

(j) This Amendment has been entered into without force or duress, of the free will of Borrower, and the decision of Borrower to enter into this Amendment is a fully informed decision and Borrower is aware of all legal and other ramifications of each such decision.

(k) It has read and understands this Amendment, has consulted with and been represented by independent legal counsel of its own choosing in negotiations for and the preparation of this Amendment,

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has read this Amendment in full and final form, and has been advised by its counsel of its rights and obligations hereunder.

5. GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF TRIAL BY JURY . THIS AMENDMENT SHALL BE SUBJECT TO THE PROVISIONS REGARDING GOVERNING LAW, JURISDICTION AND VENUE, AND WAIVER OF TRIAL BY JURY SET FORTH IN SECTIONS 11.6 – 11.8 OF THE CREDIT AGREEMENT, AND SUCH PROVISIONS ARE INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS .

6. Counterpart Execution . This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of this Amendment by telefacsimile or other electronic method of transmission shall be equally effective as delivery of an original executed counterpart of this Amendment. Any party delivering an executed counterpart of this Amendment by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Amendment, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment.

7. Effect on Loan Documents .

(a) The Credit Agreement, as amended hereby, and each of the other Loan Documents shall be and remain in full force and effect in accordance with their respective terms and hereby are ratified and confirmed in all respects. The execution, delivery, and performance of this Amendment shall not operate, except as expressly set forth herein, as a modification or waiver of any right, power, or remedy of Agent or any Lender under the Credit Agreement or any other Loan Document. Except for the amendments to the Credit Agreement expressly set forth herein, the Credit Agreement and the other Loan Documents shall remain unchanged and in full force and effect. The modifications set forth herein are limited to the specifics hereof (including facts or occurrences on which the same are based), shall not apply with respect to any facts or occurrences other than those on which the same are based, shall neither excuse any future non-compliance with the Loan Documents nor operate as a waiver of any Event of Default or Unmatured Event of Default, shall not operate as a consent to any waiver, consent or further amendment or other matter under the Loan Documents, and shall not be construed as an indication that any future waiver or amendment of covenants or any other provision of the Credit Agreement will be agreed to, it being understood that the granting or denying of any waiver or amendment which may hereafter be requested by Borrower remains in the sole and absolute discretion of Agent and the Lenders. To the extent that any terms or provisions of this Amendment conflict with those of the Credit Agreement or the other Loan Documents, the terms and provisions of this Amendment shall control.

(b) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “therein”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby.

(c) To the extent that any of the terms and conditions in any of the Loan Documents shall contradict or be in conflict with any of the terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby.

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(d) This Amendment is a Loan Document.

(e) The rules of construction set forth in Section 1.2 of the Credit Agreement are incorporated herein by this reference, mutatis mutandis .

8. Entire Agreement . This Amendment, and the terms and provisions hereof, the Credit Agreement and the other Loan Documents constitute the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersede any and all prior or contemporaneous amendments or understandings with respect to the subject matter hereof, whether express or implied, oral or written.

9. Integration . This Amendment, together with the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.

10. Reaffirmation of Obligations . Borrower hereby reaffirms its obligations under each Loan Document to which it is a party.

11. Ratification . Borrower hereby restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement and the Loan Documents to which it is a party effective as of the date hereof and as amended hereby.

12. Severability . In case any provision in this Amendment shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

[signature pages follow]

LEGAL_US_W#83424870.3

IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed and delivered as of the date first above written.

ACRC LENDER LLC ,
a Delaware limited liability company, as Borrower

By: /s/ Tae-Sik Yoon

Name: Tae-Sik Yoon

Title: Chief Financial Officer

[SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO CREDIT AGREEMENT (JULY 2014)]

CITY NATIONAL BANK ,

a national banking association,

as Agent and as a Lender

By: /s/ Brandon L. Feitelson

Name: Brandon L. Feitelson

Title: Senior Vice President

[SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO CREDIT AGREEMENT (JULY 2014)]

EXECUTION VERSION

Exhibit A

REAFFIRMATION AND CONSENT

Reference is hereby made to that certain AMENDMENT NUMBER TWO TO CREDIT AGREEMENT , dated as of July 29, 2016 (the “ Amendment ”), by and among on the one hand, the lenders from time to time party thereto (such lenders, together with their respective successors and permitted assigns, are referred to hereinafter each individually as a “ Lender ” and collectively as the “ Lenders ”) and CITY NATIONAL BANK , a national banking association, as the arranger and administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, “ Agent ”), and, on the other hand, ACRC LENDER LLC , a Delaware limited liability company (“ Borrower ”). All capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in that certain Credit Agreement dated as of July 30, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), by and among Borrower, Agent, and Lenders. Each of the undersigned Guarantor and Ares Management LLC hereby (a) represents and warrants to Agent that the execution, delivery, and performance of this Reaffirmation and Consent have been duly authorized by Guarantor and Ares Management LLC, as applicable, and all necessary corporate action in respect thereof has been taken, and the execution, delivery, and performance of this Reaffirmation and Consent does not require any consent or approval of any other Person that has not been obtained (except for such consents or approvals as could not reasonably be expected to have a Material Adverse Effect on the Loan Parties, taken as a whole); (b) consents to the amendment of the Credit Agreement as set forth in the Amendment; (c) acknowledges and reaffirms its obligations owing to the Agent and the Lenders under any Loan Documents to which it is a party; (d) restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement and other Loan Documents to which it is a party effective as of the date of the Amendment; (e) confirms that all Debt and obligations of the Guarantor and Ares Management LLC evidenced by the Loan Documents to which they are a party are unconditionally owing by it to Agent and the Lenders, without offset, defense, withholding, counterclaim or deduction of any kind, nature or description whatsoever; and (f) agrees that each of the Loan Documents to which it is a party is and shall remain in full force and effect.

Although each of the undersigned has been informed of the matters set forth herein and has acknowledged and agreed to same, each of the undersigned understands that neither Agent nor any Lender has any obligation to inform it of such matters in the future or to seek its acknowledgment or agreement to future amendments, and nothing herein shall create such a duty.

Delivery of an executed counterpart of this Reaffirmation and Consent by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Reaffirmation and Consent. Any party delivering an executed counterpart of this Reaffirmation and Consent by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Reaffirmation and Consent but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Reaffirmation and Consent.

The validity of this Reaffirmation and Consent, its construction, interpretation and enforcement, and the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the law of the State of New York.

[signature pages follow]

LEGAL_US_W#83424870.3

IN WITNESS WHEREOF, the undersigned has caused this Reaffirmation and Consent to be executed as of the date of the Amendment.

ARES COMMERCIAL REAL ESTATE CORPORATION ,

a Maryland corporation

Name:

Title:

ARES MANAGEMENT LLC ,

a Delaware limited liability company

Name:

Title:

[SIGNATURE PAGE TO REAFFIRMATION AND CONSENT TO AMENDMENT NUMBER TWO TO CREDIT AGREEMENT (JULY 2014)]

Exhibit 10.7

AMENDMENT NO. 6
TO
SIXTH AMENDED AND RESTATED

MORTGAGE WAREHOUSING CREDIT AND SECURITY AGREEMENT

This Amendment No. 6 to Sixth Amended and Restated Mortgage Warehousing Credit and Security Agreement (this “ Amendment ”) is entered into as of July 29, 2016 by and among ACRE CAPITAL LLC, a Michigan limited liability company (the “ Borrower ”), the financial institutions party to the Credit Agreement (as defined below) from time to time as lenders (the “ Lenders ”) and Bank of America, N.A., as agent for itself and the other Lenders (in such capacity, the “ Agent ”).

R E C I T A L S

A. The Agent, the Lenders and the Borrower are parties to that certain Sixth Amended and Restated Mortgage Warehousing Credit and Security Agreement, dated as of May 1, 2014 (as amended and/or restated from time to time, the “ Credit Agreement ”). Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed to them in the Credit Agreement;

B. The Borrower has requested that the Agent and the Lenders temporarily increase the aggregate Commitment Amount to $175,000,000.00 for the period beginning on July 29, 2016 and ending on and including August 8, 2016 (the “ Increase Period ”) (the portion of the Loan outstanding from time to time during the Increase Period in excess of $135,000,000.00 is hereinafter referred to as the “ Temporary Increase Loan ”); and

C. In response to such request, the Agent and the Lenders have agreed to amend the Credit Agreement solely upon the terms and conditions set forth herein, it being the intention of the parties that such amendments shall not constitute a novation of the obligations of the Borrower under the Credit Agreement and the other Loan Documents.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Agent, the Lenders and the Borrower, the parties hereto agree, upon the satisfaction in full of all of the terms, conditions, covenants, representations and warranties set forth in this Amendment, as follows:

Section 1 . Amendments to Credit Agreement.

Section 1.1 . Amendment to Commitment Amount . The definition of “Commitment Amount” set forth in Exhibit A to the Credit Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

“ Commitment Amount means, for each Lender, the amount set forth on Schedule 1 , and, in the aggregate under this Agreement, the aggregate amount for all the Lenders set forth on Schedule 1 not to exceed $135,000,000.00; provided , however , that during the Increase Period (as defined in that certain Amendment No. 6 to Sixth Amended and Restated Mortgage Warehousing

Credit and Security Agreement, dated as of July 29, 2016, by and among the Borrower, the Lenders and the Agent), the aggregate amount for all the Lenders set forth on Schedule 1 shall not exceed $175,000,000.00 and after the expiration of the Increase Period, the aggregate amount for all the Lenders set forth on Schedule 1 shall not exceed $135,000,000.00.”

Section 1.2 . Flood Insurance .

(a) The definition of “Legal Requirements” set forth in Exhibit A to the Credit Agreement is hereby amended by (y) adding “FEMA,” immediately following the reference to “Ginnie Mae,” contained therein and (z) adding “flood, flood insurance,” immediately following the reference to “fire,” contained therein.

(b) The Credit Agreement is hereby amended by adding the following definition to Exhibit A to the Credit Agreement in the appropriate alphabetical order:

“ FEMA means the Federal Emergency Management Agency or any successor thereof.”

Section 1.3 . Amendment to Schedule 1 . Schedule 1 to the Credit Agreement is hereby amended by deleting it in its entirety and replacing it with Schedule 1 attached hereto as Exhibit A .

Section 2 . Documentation for Funding Temporary Increase Loan . Notwithstanding anything in the Credit Agreement to the contrary, and in addition to all other documentation required to be delivered and all other actions required to be performed by the Borrower in accordance with Exhibit B of the Credit Agreement, the Borrower shall deliver such additional documentation and perform such additional actions with respect to the Pledged Loans funded by any portion of the Temporary Increase Loan as the Agent may reasonably request, in such form and substance and at such times as are satisfactory to the Agent. The aggregate principal balance and all accrued and unpaid interest and fees with respect to the Temporary Increase Loan shall be due and payable by the Borrower no later than the last day of the Increase Period. Each party hereto agrees that, after the repayment in full of the Temporary Increase Loan and the expiration of the Increase Period, (a) the aggregate amount of the Commitment Amount shall not exceed $135,000,000.00 and (b) any allonge to the Notes delivered by the Borrower to the Agent in connection with the Temporary Increase Loan shall be automatically terminated, shall be of no further force or effect and shall be cancelled by the Agent and returned to the Borrower.

Section 3 . Representations and Warranties . The Borrower represents and warrants to the Agent and to the Lenders as of the effective date of this Amendment that: (i) no Default or Event of Default is in existence, from and after, or will result from, the execution and delivery of this Amendment or the consummation of any transactions contemplated hereby; (ii) each of the representations and warranties of the Borrower in the Credit Agreement and the other Loan Documents is true and correct in all material respects on the effective date of this Amendment (except for representations and warranties limited as to time or with respect to a specific event,

which representations and warranties shall continue to be limited to such time or event); and (iii) this Amendment and the Credit Agreement (as amended by this Amendment) are legal, valid and binding agreements of the Borrower and are enforceable against it in accordance with their terms.

Section 4 . Ratification . Except as expressly hereby amended, the Credit Agreement, all other Loan Documents and each provision thereof are hereby ratified and confirmed in every respect and shall continue in full force and effect, and this Amendment shall not be, and shall not be deemed to be, a waiver of any Default or Event of Default or of any covenant, term or provision of the Credit Agreement or the other Loan Documents.

Section 5 . Conditions Precedent . The representations, warranties, covenants and agreements set forth in this Amendment are conditional and this Amendment shall not be effective until (a) receipt by the Agent of a fully-executed counterpart original of this Amendment; (b) receipt by Bank of America, N.A., in its capacity as a Lender, of a fully-executed original Allonge to Third Amended and Restated Promissory Note, in the form attached hereto as Exhibit B ; and (c) receipt by the Agent of the other instruments, agreements, certificates and documents, and performance by the Borrower of all of its obligations, listed on the Closing Checklist attached hereto as Exhibit C in form and substance acceptable to the Agent; and (d) payment by the Borrower of the fees required to be paid pursuant to the Fee Letter listed on Exhibit C attached hereto and all of the Agent’s fees, costs and expenses associated with the preparation, negotiation, execution and delivery and administration of this Amendment and the Credit Agreement accrued through the date hereof, including, without limitation, the Agent’s attorneys’ fees.

Section 6 . Counterparts . This Amendment may be executed and delivered in any number of counterparts with the same effect as if the signatures on each counterpart were upon the same instrument.

Section 7 . Amendment as Loan Document . Each party hereto agrees and acknowledges that this Amendment constitutes a “Loan Document” under and as defined in the Credit Agreement.

Section 8 . Governing Law . This Amendment shall in all respects be governed, construed, applied and enforced in accordance with the internal laws of the State of New York without regard to principles of conflicts of laws other than for sections 5-1401 and 5-1402 of the New York General Obligations Law.

Section 9 . Successors and Assigns . This Amendment shall be binding upon each of the Borrower, the Lenders, the Agent and their respective successors and assigns, and shall inure to the benefit of each of the Borrower, the Lenders and the Agent.

Section 10 . Headings . Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

Section 11 . Expenses . The Borrower agrees to promptly reimburse the Agent and the Lenders for all expenses, including, without limitation, reasonable fees and expenses of outside legal counsel, it has heretofore or hereafter incurred or incurs in connection with the preparation,

negotiation and execution of this Amendment and all other instruments, documents and agreements executed and delivered in connection with this Amendment.

Section 12 . Integration . This Amendment contains the entire understanding of the parties hereto with regard to the subject matter contained herein. This Amendment supersedes all prior or contemporaneous negotiations, promises, covenants, agreements and representations of every nature whatsoever with respect to the matters referred to in this Amendment, all of which have become merged and finally integrated into this Amendment. Each of the parties hereto understands that in the event of any subsequent litigation, controversy or dispute concerning any of the terms, conditions or provisions of this Amendment, no party shall be entitled to offer or introduce into evidence any oral promises or oral agreements between the parties relating to the subject matter of this Amendment not included or referred to herein and not reflected by a writing included or referred to herein.

Section 13 . No Course of Dealing . The Agent and the Lenders have entered into this Amendment on the express understanding with the Borrower that in entering into this Amendment the Agent and the Lenders are not establishing any course of dealing with the Borrower. The Agent’s and the Lenders’ rights to require strict performance with all of the terms and conditions of the Credit Agreement and the other Loan Documents shall not in any way be impaired by the execution of this Amendment. None of the Agent and the Lenders shall be obligated in any manner to execute any further amendments or waivers and if such waivers or amendments are requested in the future, assuming the terms and conditions thereof are satisfactory to them, the Agent and the Lenders may require the payment of fees in connection therewith. The Borrower agrees that none of the ratifications and reaffirmations set forth herein, nor the Agent’s nor any Lender’s solicitation of such ratifications and reaffirmations, constitutes a course of dealing giving rise to any obligation or condition requiring a similar or any other ratification or reaffirmation from the Borrower with respect to any subsequent modification, consent or waiver with respect to the Credit Agreement or any other Loan Document.

Section 14 . Jury Trial Waiver . THE BORROWER, THE AGENT AND THE LENDERS BY ACCEPTANCE OF THIS AMENDMENT MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT, THE CREDIT AGREEMENT, OR ANY OTHER LOAN DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

[Remainder of page intentionally left blank; signatures appear on next page]

IN WITNESS WHEREOF, the undersigned have executed and delivered this Amendment as of the date first set forth above.

BORROWER:

ACRE CAPITAL LLC



By:	/s/ Rachel Vinson
	Name: Rachel Vinson
	Title: Chief Financial Officer

AGENT AND LENDER:

BANK OF AMERICA, N.A



By:	/s/ Chris Guthrie
	Name: Chris Guthrie
	Title: Vice President

Exhibit 10.8

EXECUTION COPY

MASTER REPURCHASE AND SECURITIES CONTRACT

Dated as of August 1, 2016

ACRC LENDER US LLC,

as Seller,

and

U.S. BANK NATIONAL ASSOCIATION,

as Buyer

LEGAL02/36513741v13

TABLE OF CONTENTS

Page


1.	APPLICABILITY 1


2.	DEFINITIONS 1


3.	INITIATION; CONFIRMATION; TERMINATION; FEES 32


4.	FACILITY FINANCIAL COVENANTS, REBALANCING 41


5.	INCOME PAYMENTS AND PRINCIPAL PAYMENTS 42


6.	PRECAUTIONARY SECURITY INTEREST 45


7.	PAYMENT, TRANSFER AND CUSTODY 48


8.	SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE LOANS 54


9.	REPRESENTATIONS 55


10.	NEGATIVE COVENANTS OF SELLER 60


11.	AFFIRMATIVE COVENANTS OF SELLER 62


12.	SPECIAL-PURPOSE ENTITY 67


13.	EVENTS OF DEFAULT 69


14.	REMEDIES 72


15.	NOTICES AND OTHER COMMUNICATIONS 75


16.	SINGLE AGREEMENT 75


17.	INTENTIONALLY OMITTED. 75


18.	ASSIGNABILITY 76


19.	ENTIRE AGREEMENT; SEVERABILITY 78


20.	GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL 78


21.	NO RELIANCE 79


22.	INDEMNITY 79

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23.	DUE DILIGENCE 80


24.	SERVICING 81


25.	MISCELLANEOUS 82


26.	INTENT 84


27.	CHANGE IN CIRCUMSTANCES 85

ANNEXES, EXHIBITS AND SCHEDULES



ANNEX I ANNEX II	Names and Addresses for Communications between Parties Ares Competitors
EXHIBIT I	Form of Confirmation
EXHIBIT II	Authorized Representatives of Seller
EXHIBIT III	Form of Custodial Delivery
EXHIBIT IV	Due Diligence Checklist
EXHIBIT V	Form of Power of Attorney
EXHIBIT VI	Representations and Warranties Regarding Each Individual Purchased Mortgage Loan
EXHIBIT VII	Form of Subsequent Purchase Request
EXHIBIT VIII	Form of Transaction Request
EXHIBIT IX EXHIBIT X EXHIBIT XI EXHIBIT XII EXHIBIT XIII	Ownership Chart Form of Servicing Direction Letter Forms of U.S. Tax Compliance Certificate Form of Compliance Certificate Form of Bailee Agreement

MASTER REPURCHASE AND SECURITIES CONTRACT

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This Master Repurchase and Securities Contract is dated as of August 1, 2016, between ACRC LENDER US LLC, a Delaware limited liability company, as Seller, and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as Buyer.


1.	APPLICABILITY

From time to time Buyer and Seller may enter into transactions in which Seller agrees to transfer to Buyer specified interests in Eligible Mortgage Loans set forth in the related Confirmation against the transfer of funds by Buyer on the related Initial Purchase Date and, if applicable, on each Subsequent Purchase Date thereafter with a simultaneous agreement by Buyer to transfer to Seller such specified interests in such Eligible Mortgage Loans at a date certain or on demand, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a “ Transaction ” and, unless otherwise agreed in writing, shall be governed by this Agreement.


2.	DEFINITIONS

(a) Definitions . As used herein, the following terms shall have the following meanings:

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

“ Accepted Servicing Practices ” shall have the meaning set forth in the Servicing Agreement.

“ ACRE Management ” shall mean Ares Commercial Real Estate Management LLC, a Delaware limited liability company.

“ Act of Insolvency ” means with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or similar 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, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment or election, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to, solicited or colluded, or not timely contested by such party or (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, (iii) the making by such party of a general assignment for the benefit of 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.

“ Advance ” means an advance of Dollars actually made by Seller or Originator (or, in the case of a Table Funding, including any funds by Buyer on behalf of Seller or Originator) to a Mortgagor pursuant to the terms of the related Mortgage Note or Mortgage Loan

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Agreement (including by deposit into any reserve account for the benefit of the Mortgagor), whether made upon the closing of the related Mortgage Loan or subsequent to such closing.

“ Affiliate ” of any Person means a specified Person that, directly or indirectly, Controls or is Controlled By, or is Under Common Control With, such Person.

“ Affiliate Originator ” means an Originator that is an Affiliate of the Seller.

“ Agreement ” means this Master Repurchase and Securities Contract.

“ Alternative Rate ” means, for any Pricing Rate Period or portion thereof with respect to any Transaction, an annual rate determined in accordance with Section 27(c) .

“ Alternative Rate Transaction ” means, with respect to any Pricing Rate Period, any Transaction with respect to which the Pricing Rate for such Pricing Rate Period is determined by reference to the Alternative Rate.

“ Annual Valuation Period ” means the “ annual valuation period ” as defined in 29 C.F.R. §2510.3-101(d)(5) as determined, for Seller or Guarantor, as applicable.

“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to the Seller or Guarantor from time to time concerning or relating to bribery or corruption.

“ Applicable Spread ” means, with respect to each Purchased Mortgage Loan (a) so long as no Event of Default shall have occurred and be continuing, the “Applicable Spread” reflected in the related Confirmation; and (b) after the occurrence and during the continuance of an Event of Default, the applicable incremental per annum rate described in clause (a) of this definition, plus [400] ⁽¹⁾ basis points (i.e. [4]%).

“ Appraisal ” means an appraisal of the related Mortgaged Property from an independent appraiser having a minimum of five (5) years’ experience in the subject property type (unless otherwise approved by Buyer), and otherwise acceptable to Buyer in its sole but good faith discretion, complying with the requirements of Title XI of the Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989, and conducted in accordance with the standards of the American Appraisal Institute in form and substance acceptable to Buyer in its sole but good faith discretion. If an Appraisal is to be performed pursuant to this Agreement at a time when the prior Appraisal of the same Mortgaged Property was performed less than one (1) year before such Appraisal is to be performed, Buyer may, in its sole and absolute discretion, permit such prior Appraisal to be updated in lieu of performing a new full Appraisal, and such update shall qualify as an “Appraisal” hereunder. New Appraisals shall be obtained in accordance with Section 25 hereof.

“ Appraisal Trigger Event ” has the meaning specified in Section 25(e).

^{(1) Subject to USBank credit approval}

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“ Appraised Value ” means the “as-is” market value of the underlying Mortgaged Property relating to a Purchased Mortgage Loan as reflected in the most recent Appraisal delivered or obtained pursuant to the terms of this Agreement or the related Mortgage Loan Documents or by the Seller. At any time Buyer may, in its discretion, substitute the stabilized market value of the underlying Mortgaged Property relating to a Purchased Mortgage Loan, assuming the material assumptions contained in the Appraisal for such underlying Mortgaged Property relating to such Purchased Mortgage Loan delivered to Buyer as part of the Due Diligence Checklist for such Purchased Mortgage Loan continue to apply based on the most recent Appraisal delivered by Seller to Buyer, pursuant to the terms of this Agreement. In addition, to the extent Seller has made an additional Advance to the Mortgagor of a Purchased Mortgage Loan as set forth in the related Mortgage Loan Documents, Buyer may, in its discretion, permit Seller to aggregate such additional Advance with the Appraised Value as reflected on the most recent Appraisal of such Purchased Mortgage Loan and utilize such adjusted Appraised Value hereunder. If Buyer does not receive any Appraisal as and when required to be delivered under Sections 11(r) and 25(e), Buyer shall have the right to obtain an Appraisal with respect to the related Mortgaged Property at Seller’s cost and expense, and such appraisal shall be deemed to be the “Appraisal” for purposes of this definition of “Appraised Value”.

“ Assignment of Leases and Rents ” means with respect to any Mortgaged Property related to a Purchased Mortgage Loan, an assignment of leases, rents and profits derived from the ownership, operation or leasing of such Mortgaged Property, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the Mortgaged Property is located to effect the assignment of leases, rents and profits to the holder of the Purchased Mortgage Loan.

“ Assignment of Mortgage ” means, with respect to any Mortgage, an assignment of such Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related property is located to reflect the assignment and pledge of such Mortgage, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering Mortgages encumbering Mortgaged Properties located in the same jurisdiction, if permitted by law and acceptable for recording.

“ Bailee Agreement” means an agreement between Buyer, Seller and a bailee in the form of Exhibit XIII .

“ Bankruptcy Code ” means Title 11 of the United States Code.

“ Business Day ” means a day other than (i) a Saturday or Sunday, or (ii) a day in which banks in the State of New York are not open for business.

“ Buyer ” means U.S Bank National Association.

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“ Buyer’s Debt Service Coverage Ratio ” means, for any Purchased Mortgage Loan, and any calendar quarter, the ratio calculated by Seller and verified by Buyer of the (i) Net Cash Flow of the Mortgaged Property securing such Purchased Mortgage Loan for such calendar quarter to (ii) the Price Differential for such Purchased Mortgage Loan for such calender quarter.

“ Buyer’s Debt Yield ” means, for any Purchased Mortgage Loan, and any calendar quarter, the ratio calculated by Seller and verified by Buyer (expressed as a percentage), of (i) the Net Cash Flow of the Mortgaged Property securing such Purchased Mortgage Loan for such calendar quarter divided by (ii) the Repurchase Price (excluding Other Price Components) of such Purchased Mortgage Loan on the date of measurement.

“ Buyer’s Debt Yield Deficit ” has the meaning assigned to such term in the definition of “Purchased Mortgage Loan Credit Event”.

“ Buyer’s DSCR Deficit ” has the meaning assigned to such term in the definition of “Purchased Mortgage Loan Credit Event”.

“ Buyer’s LTV ” means, for any Purchased Mortgage Loan, as of any date of determination, the ratio (expressed as a percentage) of the Repurchase Price (excluding Other Price Components) of such Purchased Mortgage Loan as of such date of determination to the Appraised Value of the Mortgaged Property securing such Purchased Mortgage Loan as of the date of the most recent Appraisal of such Mortgaged Property.

“ Buyer’s LTV Deficit ” has the meaning assigned to such term in the definition of “Purchased Mortgage Loan Credit Event”.

“ Cash Management Account ” means a segregated interest bearing account, in the name of Seller, for the benefit of Buyer, established at the Depository.

“ CERCLIS ” means the Comprehensive Environmental Response, Compensation and Liability Information System.

“ Change in Circumstance Notice ” has the meaning set forth in Section 27(e) .

“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority, including any change in the Risk-Based Capital Guidelines; or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that, notwithstanding anything herein to the contrary: (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act (or any similar law enacted in the future by any Governmental Authority) and all requests, rules, guidelines or directives thereunder or issued in connection therewith; and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on

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Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued. “Risk Based Capital Guidelines” means (x) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (y) the corresponding capital regulations promulgated by regulatory authorities outside the United States including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement applicable to Buyer.

“ Change of Control ” means the occurrence of any one or more of the following events: (a) Guarantor shall cease to own and control, of record or beneficially, directly or indirectly, 100% of the outstanding Equity Interests of Seller, (b) any “person” or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a percentage of the total voting power of all classes of Equity Interests of Guarantor entitled to vote generally in the election of directors, of thirty-five percent (35%) or more, (c) ACRE Management is no longer the manager of substantially all (by face value) of the loan assets of Guarantor or (d) ACRE Management shall cease to be owned and controlled, directly or indirectly, by Ares Management L.P. or one or more of its Affiliates.

“ Closing Date ” means the date hereof as set forth on the first page of this Agreement.

“ Code ” means the United States Internal Revenue Code of 1986 and the regulations promulgated thereunder.

“ Collateral ” shall have the meaning specified in Section 6(a) of this Agreement.

“ Collection Period ” means 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.

“ Competitor ” shall mean the entities listed on Annex II.

“ Compliance Certificate ” means a certificate in substantially the form of Exhibit XII hereto, duly completed and certified in accordance with Section 11(k).

“ Condemnation ” means any taking of title to, use of, or any other interest in a Mortgaged Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Government Agency.

“ Confirmation ” shall have the meaning specified in Section 3(b) of this Agreement.

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“ 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 ” and the correlative meanings of the terms “ Controlled By ” and “ Under Common Control With ” means the (i) possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting shares or partnership interests, or of the ability to exercise voting power by contract or otherwise or (ii) the direct or indirect beneficial ownership of fifty percent (50%) or more of the outstanding voting securities or voting equity of such Person.

“ Conveyance ” and the correlative meanings of the term “ Convey ” means a sale, outright assignment (and not a collateral assignment), transfer, set over or other outright conveyance.

“ Covenant Determination Date ” means the date that is sixty (60) days following the end of each calendar quarter following the First Covenant Determination Quarterly Period; provided, however, with respect to the determination of whether a Margin Deficit exists or would exist for purposes of clause second of part II of Section 5(d), the Covenant Determination Date shall mean the last day of the calendar month immediately preceding the date of the payment described therein and such calculation shall be made on a pro forma basis.

“ Current Mark-to-Market Value ” means, for any Purchased Mortgage Loan as of any date, the market value for such Purchased Mortgage Loan as of such date as determined by Buyer in its commercially reasonable judgment, taking into account such criteria as and to the extent that Buyer deems appropriate, including as appropriate, market conditions, credit quality, subordination, delinquency status and aging and any amounts owing to Buyer or a counterparty under any related Hedging Transaction, which market value, in each case, may be determined to be zero.

“ Custodial Agreement ” means the Custodial Agreement, dated as of the date hereof, by and among the Custodian, Seller and Buyer.

“ Custodial Delivery ” means the document executed by Seller in order to deliver the Purchased Mortgage Loan Schedule and the Mortgage Loan File to Buyer or its designee (including the Custodian) pursuant to Section 7 of this Agreement, a form of which is attached hereto as Exhibit III .

“ Custodian ” means U.S. Bank National Association, or any successor Custodian appointed by Buyer with the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed).

“ Cut-off Date ” means the second Business Day preceding each Remittance Date.

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“ Debt ” means (a) indebtedness for borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations to pay the deferred purchase price of property or services (including trade obligations); and (d) obligations under guaranties, endorsements, performance bonds, assurances of payment, required investments, assurances against loss, and all other contingent obligations relating to the assurance of another Person against loss. “Debt” shall not include contingent indemnification obligations occurring under contracts entered into in the ordinary course of acquiring, holding or servicing the Purchased Mortgage Loans.

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

“ Depository ” means U.S. Bank National Association, or any successor Depository appointed by Buyer with the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed).

“ Distribution ” means with respect to any Person, (a) any dividend or other distribution, direct or indirect, on account of any shares (or equivalent) of any class of Equity Interests of such Person or any of its Subsidiaries, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares (or equivalent) of any class of Equity Interests of such Person or any of its Subsidiaries, now or hereafter outstanding, (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Equity Interests of such Person or any of its Subsidiaries, now or hereafter outstanding, (d) any payment or prepayment of principal of, premium, if any, or interest on, redemption, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any subordinated debt of such Person or Intercompany Debt of such Person or any Subsidiary, (e) the payment by such Person or any of its Subsidiaries of any management, advisory or consulting fees to any other Person who is directly or indirectly a significant partner, shareholder, owner or executive officer of any such Person or its Affiliates or (f) the payment of any extraordinary salary, bonus or other form of compensation to any other Person who is directly or indirectly a significant partner, shareholder, owner or executive officer of any such Person, to the extent such extraordinary salary, bonus or other form of compensation does not reduce such Person’s consolidated net income.

“ Dollars ” means the legal tendered of the United States of America.

“ Due Diligence Checklist ” means the due diligence materials set forth in Exhibit IV attached hereto.

“ Due Diligence Fee ” shall have the meaning set forth in the Fee Letter.

“ Due Diligence Package ” means (i) the items on the Due Diligence Checklist, in each case to the extent applicable and available and (ii) such other documents or information as Buyer or its counsel shall reasonably deem necessary with respect to the Eligible Mortgage Loans.

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

“ Eligible Assignee ” shall mean (a) prior to the occurrence and continuance of an Event of Default any Person that (i) is a bank, financial institution, pension fund, insurance company or similar Person, an Affiliate of any of the foregoing, or an Affiliate of Buyer, and (ii) is not a Competitor and (b) after the occurrence and continuance of an Event of Default, any Person.

“ Eligible Mortgage Loan ” means performing (i.e. not an Impaired Asset) fixed or floating rate whole mortgage loans (“ Whole Loans ”) on a servicing released basis that are originated or purchased by Seller and are secured by first liens on commercial properties located in the United States of America that are retail, office, mixed-use, multifamily, industrial, hospitality, student housing, manufactured housing or self-storage properties that, upon purchase by Buyer in accordance with the terms of this Agreement, satisfies the representations and warranties set forth in Exhibit VI or, if not satisfied, Buyer has accepted said exception as reflected in the completed Confirmation delivered by the Buyer to the Seller, and is otherwise acceptable to Buyer in its discretion as evidenced by a completed Confirmation executed and delivered by the Buyer. Impaired Assets and loans secured by undeveloped land are not eligible for inclusion as Eligible Mortgage Loans.

“ Eligible Servicer ” shall mean Wells Fargo Bank, National Association, Midland Loan Services, a division of PNC Bank, National Association, or any other successor Servicer appointed by Seller with the prior written consent of Buyer (which consent shall not be unreasonably withheld or delayed).

“ Environmental Complaint ” means any complaint, order, demand, citation or notice threatened or issued in writing to any Underlying Obligor by a Governmental Authority with regard to air emissions, water discharges, Releases, or disposal of any Hazardous Material, noise emissions or any other environmental, health or safety matter affecting any Underlying Obligor or any Mortgaged Property .

“ Environmental Law ” means: (a) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Re-authorization Act of 1986, 42 U.S.C. §9601 et seq.; (b) the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §6901 et seq.; (c) the Clean Air Act, 42 U.S.C. §7401 et seq., as amended by the Clean Air Act Amendments of 1990; (d) the Clean Water Act of 1977, 33 U.S.C. §1251 et seq.; (e) the Toxic Substances Control Act, 15 U.S.C.A. §2601 et seq.; (f) all other federal, state and local laws, ordinances, regulations or policies relating to pollution or protection of human health or the environment including air pollution, water pollution, noise control, or the use, handling, discharge, disposal or Release or recovery of on-site or off-site Hazardous Materials, as each of the foregoing may be amended from time to time; and (g) any and all regulations promulgated under or pursuant to any of the foregoing statutes .

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“ Environmental Liability ” means any written claim, demand, obligation, cause of action, accusation or allegation, or any order, violation, damage (including, without limitation, to any Person, property or natural resources), injury, judgment, penalty or fine, cost of enforcement, cost of remedial action, clean-up, restoration or any other cost or expense whatsoever, including reasonable attorneys’ fees and disbursements resulting from the violation or alleged violation of any Environmental Law or the imposition of any Environmental Lien or otherwise arising under any Environmental Law or resulting from any common law cause of action asserted by any Person.

“ Environmental Lien ” means a lien in favor of any Governmental Authority: (a) under any Environmental Law; or (b) for any liability or damages arising from, or costs incurred by, any Governmental Authority in response to the release or threatened release of any Hazardous Material.

“ Equity Interests ” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“ ERISA ” means the Employee Retirement Income Security Act of 1974.

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with Seller or Guarantor within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

“ Exchange Act ” means the Securities Exchange Act of 1934.

“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to Buyer or the applicable Lending Installation or required to be withheld or deducted from a payment to Buyer or the applicable Lending Installation, (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 or the applicable Lending Installation being organized under the laws of, or having its principal office, or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) withholding Taxes imposed on amounts payable to or for the account of Buyer or the applicable Lending Installation pursuant to a law in effect on the date on which (i) Buyer or the applicable Lending Installation acquires such interest under this Agreement or (ii) Buyer or the applicable Lending Installation changes its lending office, except in each case to the extent that, pursuant to Section 27 , amounts with respect to such

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Taxes were payable either to Buyer’s or the applicable Lending Installation’s assignor immediately before such Person became a party hereto or to such Person immediately before it changed its lending office, (c) Taxes attributable to such Person’s failure to comply with Section 27(a)(vi) and (d) any U.S. federal withholding Taxes imposed under FATCA.

“ Extended Facility Expiration Date ” shall have the meaning specified in Section 3(i) of this Agreement.

“ Extension Fee ” shall have the meaning set forth in the Fee Letter.

“ Event of Default ” shall have the meaning specified in Section 13 of this Agreement.

“ Facility ” means the facility evidenced by and the Transactions contemplated under the Transaction Documents.

“ Facility Amount ” means $125,000,000, as such amount may be decreased from time to time pursuant to Section 3(1).

“ Facility Conditions Precedent ” shall have the meaning specified in Section 3(c) of this Agreement.

“ Facility Expiration Date ” means the Initial Facility Expiration Date or any later date to which the Facility Expiration Date may be extended in accordance with Section 3(i) of this Agreement, or any earlier date on which the Transactions are required to terminate in full and the Purchased Mortgage Loans are required to be repurchased under this Agreement or any of the other Transaction Documents (including as a result of the Seller reducing the Facility Amount to $0 pursuant to Section 3(l) ). The Facility Expiration Date is subject to two (2) twelve (12) month extensions pursuant to the provisions of Section 3(i) .

“ Facility Fee ” shall have the meaning set forth in the Fee Letter.

“ Facility Obligations ” means the Seller’s obligations owed to Buyer under the Transaction Documents, including without limitation the Seller’s obligations to pay the Repurchase Prices and other amounts from time to time due and owing to Buyer under the Transaction Documents.

“ 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) and any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code or any “intergovernmental agreements” relating to the foregoing and any fiscal or regulatory legislation, rules, or practices adopted pursuant to such intergovernmental agreement.

“ FDIA ” shall have the meaning specified in Section 26(a) of this Agreement.

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“ FDICIA ” shall have the meaning specified in Section 26(a) of this Agreement.

“ Fee Letter ” means that certain letter agreement dated as of the date hereof between Seller and Buyer.

“ Filings ” shall have the meaning specified in Section 6(c) of this Agreement.

“ First Covenant Determination Quarterly Period ” means with respect to any Purchased Mortgage Loan, the first calendar quarter commencing more than twelve (12) months after the related Purchase Date, unless otherwise specified in the related Confirmation.

“ Foreign Buyer ” means a Buyer that is not a U.S. Person.

“ Funding Account ” means an account held at U.S. Bank National Association (or, for the Transaction that occurs on the Closing Date, such other depository institution reflected in the related Confirmation) and designated by Seller in the Confirmation or Subsequent Purchase Request, as applicable.

“ GAAP ” means United States generally accepted accounting principles consistently applied as in effect from time to time.

“ General Assignment ” shall have the meaning assigned to such term in the Custodial Agreement.

“ Governmental Authority ” means any national or federal government, any state, regional, local or other political subdivision thereof with jurisdiction and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“ Guarantor ” means Ares Commercial Real Estate Corporation and any other Person who now or hereafter executes a joinder to a Guaranty to support the obligations of Seller under this Agreement and the other Transaction Documents.

“ Guaranty ” means the Payment Guaranty, dated as of the date hereof, from Guarantor to Buyer.

“ Hazardous Material ” means any substance, material, or waste that is or becomes regulated, under any Environmental Law, as hazardous to public health or safety or to the environment, including, but not limited to: (a) any substance or material designated as a “ hazardous substance ” pursuant to Section 311 of the Clean Water Act, as amended, 33 U.S.C. §1251 et seq., or listed pursuant to Section 307 of the Clean Water Act, as amended; (b) any substance or material defined as “ hazardous waste ” pursuant to Section 1004 of the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §6901 et seq.; (c) any substance or material defined as a “ hazardous substance ” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. §9601 et seq.; or (d) petroleum, petroleum products and petroleum waste materials.

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“ Hedging Transactions ” means, with respect to any or all of the Purchased Mortgage Loans, as applicable, any interest rate swap, cap or collar agreement or similar arrangements providing for protection against fluctuations in interest rates, either generally or under specific contingencies, entered into by an Underlying Obligor in connection with one or more Purchased Mortgage Loans or by Seller in the ordinary course of its business.

“ Impaired Asset ” means any Purchased Mortgage Loan with respect to which (a) a monetary or material non-monetary event of default (whether or not declared) under the related Mortgage Loan Documents has occurred and is continuing; (b) Seller, Guarantor or Servicer deem the Purchased Mortgage Loan “impaired”, “non-accrual” or “specially serviced” (or equivalent term) pursuant to its internal credit review process, internal credit rating and/or servicing; (c) an Act of Insolvency involving a related Underlying Obligor has occurred; (d) the Seller or Servicer has initiated foreclosure proceedings or has engaged in deed-in-lieu negotiations all or any portion of the Mortgaged Property; (e) the ratio of the maximum principal balance of the Purchased Mortgage Loan to the Appraised Value of the Mortgaged Property securing such Purchased Mortgage Loan, as reflected in the most recent Appraisal(s), exceeds one hundred percent (100%); or (f) except as may be otherwise specified in the related Confirmation, the annualized Net Cash Flow of the related Mortgaged Property as verified by Buyer, does not exceed the annualized debt service for such Purchased Mortgage Loan.

“ Income ” means, with respect to any Purchased Mortgage Loan at any time, the sum of (x) any principal thereof and all interest, dividends or other distributions thereon, including without limitation, amounts received (or receivable) by Seller in connection with the sale of any portion of the related Mortgaged Property, (y) all payments and other receipts on account of associated Hedging Transactions and (z) all net sale proceeds received by Seller or any Affiliate of Seller in connection with a sale of such Purchased Mortgage Loan but solely to the extent of the related Repurchase Price for such Purchased Mortgage Loan. Income does not include amounts that, pursuant to the related Mortgage Loan Documents, are held in reserves or escrows as additional collateral for the obligations of the underlying Mortgagor unless and until such reserves and escrows are applied to such obligations in accordance with such Mortgage Loan Documents.

“ Indemnified Amounts ” shall have the meaning specified in Section 22 of this Agreement.

“ Indemnified Parties ” shall have the meaning specified in Section 22 of this Agreement.

“ Indemnified Taxes ” means: (a) Taxes other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Seller and Guarantor under any Transaction Document; and (b) to the extent not otherwise described in clause (a), Other Taxes.

“ Independent Manager ” means an individual who has at least three (3) years’ prior experience as an independent director, independent manager or independent member and

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who is either (i) provided by CT Corporation, Corporation Service Company, Citadel SPV, MaplesFS, Global Securitization Services LLC, Puglisi & Associates, 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 regularly engaged in the business of providing Independent Managers reasonably approved by Buyer, in each case that is not an Affiliate of any Seller Party and that provides professional Independent Managers and other corporate services in the ordinary course of its business or (ii) approved by Buyer, who is duly appointed as a manager or member of the board of directors (or managers) of the relevant entity who shall not have been, at the time of such appointment or at any time while serving as a director or manager of the relevant entity and may not have been at any time in the preceding five (5) years,

(a) a member, partner, equity holder, manager, director, officer or employee of any Seller Party, any of their respective equity holders or Affiliates (other than (a) as an independent director or independent manager of any Seller Party and (b) as an independent director or independent manager of an Affiliate of any Seller Party or any of their respective single-purpose entity equity holders that is not in the direct chain of ownership of any Seller Party and that is required by a creditor to be a single purpose bankruptcy remote entity, provided that such independent director or independent manager is employed by a company that routinely provides professional independent directors or independent managers);

(b) a creditor, supplier or service provider (including provider of professional services) to any Seller Party, any single-purpose entity equity holder, or any of their respective equity holders or Affiliates (other than a nationally-recognized company that routinely provides professional independent directors or independent managers and other corporate services to Seller, any other Seller Party or any of their respective equity holders or Affiliates in the ordinary course of business);

(c) a family member of any such member, partner, equity holder, manager, director, officer, employee, creditor, supplier or service provider; or

(d) a Person that controls (whether directly, indirectly or otherwise) any Person described in any of the preceding clauses (a) or (b) ; provided, however, that a natural Person who otherwise satisfies the preceding definition other than clause (a) by reason of being the independent director or independent manager of a “special purpose entity” affiliated with any Seller Party shall not be disqualified from serving as an independent director or independent manager of any Seller Party provided that the fees that such individual earns from serving as independent directors or independent managers of Affiliates of any Seller Party in any given year constitute in the aggregate less than 5% of such individual’s annual income for that year.

“ Initial Advance ” means the Advance first made in connection with a Purchased Mortgage Loan by Seller or Originator to or for the benefit of a Mortgagor.

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“ Initial Facility Expiration Date ” means July 31, 2019.

“ Initial Purchase Date ” means the Business Day upon which the Buyer and Seller first enter into a Transaction with respect to a Purchased Mortgage Loan.

“ Initial Purchase Price ” means, with respect to any Purchased Mortgage Loan, the Purchase Price paid by Buyer for such Purchased Mortgage Loan on the Initial Purchase Date related to such Purchased Mortgage Loan as reflected in the related Confirmation and determined by multiplying the Outstanding Principal Balance by the related Purchase Price Percentage.

“ Intercompany Debt ” means any Debt of Seller, Guarantor or an Affiliate of Seller or Guarantor payable to or held by Seller, Guarantor or an Affiliate of Seller or Guarantor, or any manager, officer or director of any such parties.

“ Interest Differential ” means the sum equal to the greater of zero or the financial loss incurred by Buyer resulting from the repurchase of a Purchased Mortgage Loan on any date other than a Remittance Date, calculated as the difference between (i) the amount of Price Differential that would have been due beginning on, and including, the actual date of repurchase and ending on, and including, the last date of the Pricing Rate Period in which such repurchase occurs had the repurchase not occurred and (ii) the interest or comparable return that Buyer will actually earn (from like investments in the Money Markets as of the date of prepayment) as a result of the redeployment of funds from the repurchase. Because of the short-term nature of this facility, Seller agrees that the Interest Differential shall not be discounted to its present value.

“ Investment ” means with respect to any Person, any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities (including warrants or options to purchase securities) owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments or contracts owned by such Person.

“ Laws ” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

“ Lending Installation ” means the office, branch, subsidiary or affiliate of Buyer listed on the signature pages hereof.

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“ LIBO Rate ” means for any Pricing Rate Period, an annual rate equal to the Applicable Spread plus the greater of (a) zero percent (0.0%) and (b) the one-month LIBOR rate quoted by Buyer from Reuters Screen LIBOR01 Page or any successor thereto, which shall be that one-month LIBOR rate in effect two (2) New York Banking Days prior to the Remittance Date, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, such rate rounded up to the nearest one-sixteenth percent and, such rate to be reset monthly on the Pricing Rate Determination Date. The term “ New York Banking Day ” means any date (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York. If the initial advance of funds by Buyer for a Purchased Mortgage Loan occurs on a day other than the Pricing Rate Determination Date, the initial one-month LIBOR rate shall be that one-month LIBOR rate in effect two (2) New York Banking Days prior to the date of such initial advance, which rate plus the percentage described above shall be in effect until the next Pricing Rate Determination Date. Buyer’s internal records of applicable interest rates shall be determinative in the absence of manifest error. The Seller shall not have the right to have more than five (5) LIBO Rates in the aggregate outstanding applicable to Transactions during any Pricing Rate Period unless otherwise agreed by Buyer and Seller.

“ Lien ” means any mortgage, lien, pledge, charge, hypothecation, charge, security interest or similar encumbrance.

“ Margin Call ” has the meaning specified in Section 4(a) of this Agreement.

“ Margin Deficit ” means , with respect to one or more of a Buyer’s LTV Deficit, Buyer’s Debt Yield Deficit, Buyer’s DSCR Deficit or Purchased Mortgage Loan MAC Deficit, the entire amount, without duplication, of such deficit.

“ Margin Notice Deadline ” means 10:00 a.m., CST.

“ Market Value ” means, with respect to any Purchased Mortgage Loan as of any relevant date, the lesser of (x) the market value of a Purchased Mortgage Loan, as verified or determined by Buyer in its commercially reasonable discretion in accordance with the immediately succeeding sentence and (y) the outstanding principal balance of such Purchased Mortgage Loan; provided, that in the event a Purchased Mortgage Loan becomes an Impaired Asset, the Market Value of such Purchased Mortgage Loan shall be designated as zero. Market Value as determined above shall not be based on credit spreads, end loan borrower rates, and other interest rate-related movements and without regard to liquidity and trading conditions in the securitized real estate finance market (unless Seller’s current intention is to securitize the specified Purchased Mortgage Loan in the CMBS market).

“ Material Adverse Change ” means a material adverse change in or to (a) the property, assets, business, operations, financial condition or credit quality of Seller or Guarantor, (b) the ability of Seller or Guarantor to timely perform its obligations under the Transaction Documents to which it is a party, (c) the validity, legality, binding effect or enforceability of any Transaction Document, Mortgage Loan Document with respect to any Purchased Mortgage Loan, Purchased Mortgage Loan or Lien granted hereunder or thereunder, (d) the

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rights and remedies of Buyer or any Indemnified Party under any Transaction Document, Mortgage Loan Document or Purchased Mortgage Loan, or (e) the perfection or priority of any Lien granted under any Transaction Document or Mortgage Loan Document with respect to any Purchased Mortgage Loan.

“ Material Condemnation ” means a Condemnation to a Mortgaged Property that results in the loss of 10% or more of the rental income from such Mortgaged Property.

“Material Damage or Destruction ” means physical damage or destruction to a Mortgaged Property that results in the loss of 10% or more of the rental income from such Mortgaged Property.

“ Material Purchased Mortgage Loan Modification ” means any modification or amendment of a Purchased Mortgage Loan that:

(i) reduces the principal amount of such Purchased Mortgage Loan (other than (a) with respect to a dollar-for-dollar principal payment or (b) as expressly permitted in the related Confirmation);

(ii) increases the principal amount of such Purchased Mortgage Loan (other than as expressly permitted in the related Confirmation or the Mortgage Loan Documents, including permitted increases resulting from future funding amounts advanced by Seller to Mortgagor as set forth therein);

(iii) modifies or changes the amount or frequency of regularly scheduled payments of principal and interest of such Purchased Mortgage Loan including any modification of the interest rate or principal payments of such Purchased Mortgage Loan; provided , however , that Seller shall be permitted, without the consent of Buyer, to change the monthly payment date with respect to a Purchased Mortgage Loan in connection with an intended securitization;

(iv) changes the maturity date in respect of such Purchased Mortgage Loan;

(v) subordinates the lien priority of such Purchased Mortgage Loan or the payment priority of the Purchased Mortgage Loan other than subordinations required under the then existing terms and conditions of the Purchased Mortgage Loan (provided, however, the foregoing shall not preclude the execution and delivery of subordination, nondisturbance and attornment agreements with tenants, subordination to tenant leases, easements, plats of subdivision and condominium declarations and similar instruments which in the commercially reasonable judgment of the Seller do not materially adversely affect the rights and interest of the holder of such Purchased Mortgage Loan);

(vi) releases any collateral (either full or partial) for such Purchased Mortgage Loan other than releases required under the then existing Mortgage Loan

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Documents or releases in connection with eminent domain or under threat of eminent domain or releases any guarantees (either full or partial) securing the Purchased Mortgage Loan;

(vii) releases any borrower, guarantor, pledgor or other obligor from any material obligation under the Mortgage Loan Documents;

(viii) waives any monetary or material non-monetary defaults of any Underlying Obligor under the Mortgage Loan Documents;

(ix) modifies any other economic terms in respect of a Purchased Mortgage Loan, including, but not limited to, the prepayment terms;

(x) materially waives, amends or modifies, in Borrower’s reasonable judgment, any cash management or reserve account requirements of such Purchased Mortgage Loan other than changes required under the related Mortgage Loan Documents; or

(xi) waives any due-on-sale or due-on-encumbrance provisions of such Purchased Mortgage Loan other than waivers required to be given under the then existing Purchased Mortgage Loan Documents;

(xii) materially waives, amends or modifies any insurance requirements of such Purchased Mortgage Loan under the related Purchased Mortgage Loan Documents;

(xiii) encumbers the related Mortgaged Property or the direct or indirect ownership interest in the mortgagor in connection with a subordinate financing, a mezzanine financing or a preferred equity investment; or

(xiv) relates to the issuance of a letter of credit as security for a Purchased Mortgage Loan where Seller has a consent right to the form of letter of credit.

“ Maximum Advance Amount ” means, with respect to any Purchased Mortgage Loan, the maximum Dollar amount of Advances that have been approved by Buyer with respect to such Purchased Mortgage Loan, which initial amount is reflected in the Confirmation, which may be reduced, from time to time, in connection with a corresponding reduction in the Advance amount approved by Seller with respect to such Purchased Mortgage Loan.

“ Maximum Purchase Price Percentage ” means with respect to any Purchased Mortgage Loan, as set forth on the related Confirmation.

“ Maximum Repurchase Price ” means, with respect to any Purchased Mortgage Loan on any date of determination, an amount equal to the product of (i) the Maximum Advance Amount and (ii) the Maximum Purchase Price Percentage related to such Purchased Mortgage Loan.

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“ Money Markets ” means one or two wholesale funding markets available to and selected by Buyer, including negotiable certificates of deposit, commercial paper, Eurodollar deposits, bank notes, federal funds, interest rate swaps or others.

“ Mortgage ” means a mortgage, deed of trust, deed to secure debt or other instrument, creating a valid and enforceable first priority lien on or a first priority ownership interest in an estate in fee simple in real property or ground leasehold interest and the improvements thereon, securing a mortgage note or similar evidence of indebtedness.

“ Mortgage Loan ” means a loan secured by one or more Mortgages, evidenced by a Mortgage Note and a Mortgage Loan Agreement, that the Seller (whether directly or by way of assignment from the Originator pursuant to the Mortgage Loan Purchase Documents) has made to a Mortgagor.

“ Mortgage Loan Agreement ” means the agreement between the Seller (whether directly or by way of assignment pursuant to the Mortgage Loan Purchase Documents) and the Mortgagor reflecting the terms upon which the Seller made the Mortgage Loan to the Mortgagor and pursuant to which the related Mortgage Note was issued.

“ Mortgage Loan Documents ” means, with respect to a Mortgage Loan, the documents comprising the Mortgage Loan File for such Mortgage Loan.

“ Mortgage Loan File ” means the documents specified as the “Mortgage Loan File” in Section 7(c), together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Agreement.

“ Mortgage Loan Purchase Documents ” means, with respect to any Eligible Mortgage Loan to be sold to Buyer that was not originated by Seller, any mortgage loan purchase agreement, the allonge to or other endorsement of the related Note to Seller, the general or omnibus assignment of the related Mortgage Loan Documents, the Assignment of Mortgage, assignment of Assignment of Leases and Rents and any other recordable document or instrument related to such Eligible Mortgage Loan (together with all intervening assignments representing an unbroken chain of assignment from the Originator of such Eligible Mortgage Loan to the Person transferring the Eligible Mortgage Loan to Seller), pursuant to which Seller will acquire loans to become Purchased Mortgage Loans.

“ Mortgage Note ” means a note or other evidence of indebtedness of a Mortgagor secured by a Mortgage.

“ Mortgaged Property ” means the real property or properties securing repayment of the debt evidenced by a Mortgage Note and Mortgage Loan Agreement.

“ Mortgagor ” means, individually or collectively, as the case may be the obligor on a Mortgage Note and the grantor of the related Mortgage.

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“ Multiemployer Plan ” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which Seller, Guarantor or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding six plan years, has made or been obligated to make contributions.

“ Multiple Employer Plan ” means any employee benefit plan that has two or more contributing sponsors (including Seller, Guarantor or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

“ Net Cash Flow ” shall mean , for:

(A ) any Purchased Mortgage Loan the related Mortgaged Property of which is not a hotel, self-storage, student housing or multi-family asset , the amount by which operating revenues for the most recently ended calendar quarter from the related Mortgaged Property ( increased for the addition of fully executed leases where the tenant will take occupancy and commence paying rent within ninety (90) days from the end of such calendar quarter and reduced by (i) leases expiring within ninety (90) days of the end of such calendar quarter where no extension or renewal has been fully executed or is available under the leases; (ii) leases with tenants that have notified the Seller of their intention to vacate or not pay rent (to the extent inconsistent with the terms of the related lease) in the current calendar quarter (whether such notification was received in the prior calendar quarter or during the current calendar quarter), (iii) leases with tenants that have already vacated and with tenants that have gone dark (whether such events occurred in the prior calendar quarter or during the current calendar quarter); (iv) month-to-month leases; and (v) leases with tenants in bankruptcy until and unless the lease has been affirmed by the bankruptcy court and the tenant continues to pay rent) exceeds operating expenses for the applicable trailing three (3) month period as adjusted for normalized non-monthly expenses including real estate taxes and insurance and any Seller required capital reserves, such amount to be annualized;

(B) any Purchased Mortgage Loan, that is a hotel, self-storage or student housing asset , the amount by which operating revenues for the twelve (12) month period ending with the most recent calendar quarter exceeds operating expenses for such applicable period; or

(C) any Purchased Mortgage Loan that is a multi-family asset , the amount by which operating revenues for the three (3) month period ending with the most recent calendar quarter exceeds operating expenses for such applicable period as adjusted for normalized non-monthly expenses including real estate taxes and insurance and any Seller required capital reserves, such amount to be annualized.

“ OFAC ” means the United States Treasure Department Office of Foreign Assets Control, and any successor thereto.

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“ Originator ” means the entity that has originated a Purchased Mortgage Loan.

“ Other Connection Taxes ” means, with respect to Buyer or the applicable Lending Installation, Taxes imposed as a result of a present or former connection between Buyer or the applicable Lending Installation and the jurisdiction imposing such Tax (other than connections arising from Buyer or the applicable Lending Installation 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 herein or in any Transaction).

“ Other Price Components ” has the meaning set forth in the definition of Repurchase Price.

“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, 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 imposed with respect to an assignment (other than any assignment made pursuant to Section 27(a)(v) or made at Seller’s request).

“ Outstanding Principal Balance ” means, with respect to any Purchased Mortgage Loan, on any date of determination, the then outstanding amount of principal owed by the Underlying Obligor to the lender on such Purchased Mortgage Loan pursuant to the Purchased Loan Documents.

“ PATRIOT Act ” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“ Pension Plan ” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by Seller, Guarantor or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.

“ Permitted Purchased Mortgage Loan Modification ” means any modification or amendment of a Purchased Mortgage Loan or other action with respect to any Purchased Mortgage Loan (including waivers and releases) that is not a Material Purchased Mortgage Loan Modification.

“ Person ” means 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 ” means any Pension Plan established or maintained for employees of Seller, Guarantor or any ERISA Affiliate, or any such Pension Plan to which Seller, Guarantor or any ERISA Affiliate is required to contribute on behalf of any of its employees.

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“ Plan Assets Regulation ” means 29 C.F.R. §2510.3-101, et seq., as modified in operation by Section 3(42) of ERISA.

“ Plan Assets ” means “ plan assets ” within the meaning of the Plan Assets Regulation or otherwise.

“ Price Differential ” means, with respect to any Transaction as of any date of determination, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Repurchase Price (excluding Other Price Components) for such Transaction 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 ” means, for any Pricing Rate Period with respect to any Transaction, an annual rate equal to the LIBO Rate for such Pricing Rate Period plus the relevant Applicable Spread for such Transaction; provided , that the Pricing Rate shall be the Alternative Rate for any Pricing Rate Period or portion thereof for which the Alternative Rate is provided to be used under either of, or both, Sections 27(b) and/or 27(c) of this Agreement.

“ Pricing Rate Determination Date ” means (a) in the case of the first Pricing Rate Period with respect to any Transaction, the second (2 ^nd ) Business Day preceding the first day of such Pricing Rate Period and (b) with respect to any subsequent Pricing Rate Period, the second (2 ^nd ) Business Day preceding the first day of the Pricing Rate Period.

“ Pricing Rate Period ” means, (a) in the case of the first Pricing Rate Period with respect to any Transaction, the period commencing on and including the Purchase Date for such Transaction to and excluding the immediately succeeding Remittance Date, and (b) in the case of any subsequent Pricing Rate Period, the period commencing on and including each Remittance Date to and excluding the immediately succeeding Remittance Date; provided , however , that in no event shall any Pricing Rate Period end subsequent to the Repurchase Date.

“ Principal Payment ” means, with respect to any Purchased Mortgage Loan, any payment or prepayment of principal or any proceeds of redemption received by the Depository or Buyer in respect thereof.

“ Purchase Agreement ” has the meaning assigned to such term in Section 9(b)(xxiv).

“ Purchase Date ” means the date of each Transaction entered into hereunder with respect to any Purchased Mortgage Loan, either the Initial Purchase Date or a Subsequent Purchase Date, as the context requires.

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“ Purchase Price ” means, with respect to any Purchased Mortgage Loan, the sum of (i) the Initial Purchase Price therefor and (ii) the aggregate of the Subsequent Purchase Prices.

“ Purchase Price Percentage ” means, with respect to any Purchased Mortgage Loan (x) on the Purchase Date therefor, the “Purchase Price Percentage” reflected in the related Confirmation and (y) thereafter, on any date of determination, the lesser of (A) a fraction, expressed as a percentage (i) the numerator of which is the Repurchase Price (excluding Other Price Components) of such Purchased Mortgage Loan as of such date and (ii) the denominator of which is the Outstanding Principal Balance of such Purchased Mortgage Loan as of such date, and (B) the Maximum Purchase Price Percentage of such Purchased Mortgage Loan. The Purchase Price Percentage as described in clause (x) above for each Eligible Mortgage Loan to be purchased by Buyer shall be up to 75% (or with respect to multi-family, up to 80%); provided , however , the Eligible Mortgage Loan related to the Mortgaged Property known as “Woodfield Preserve” shall have an initial Purchase Price Percentage of 80%; provided further , that, the “Purchase Price Percentage” reflected in the related Confirmation shall supersede any limitations thereon as described in this sentence.

“ Purchased Mortgage Loan ” means (i) with respect to any Transaction, the specified interest in the related Mortgage Loan (including the Servicing Rights thereto) sold by Seller to Buyer in such Transaction set forth in the related Confirmation, including any acquisitions of additional interests in such Mortgage Loan on Subsequent Purchase Dates, but expressly excluding any obligation under such Mortgage Loan to make any Advance or undertake any other obligation of the lender or any other party thereunder and (ii) with respect to the Transactions in general, the specified Mortgage Loans (including the Servicing Rights thereto) sold by Seller to Buyer set forth in all related Confirmations, including any acquisitions in all Mortgage Loans on Subsequent Purchase Dates.

“ Purchased Mortgage Loan Credit Event ” shall mean the occurrence of any of the following events with respect to any Purchased Mortgage Loan, as determined by Buyer in its commercially reasonable discretion:

(a) on any Covenant Determination Date that the Buyer’s LTV for such Purchased Mortgage Loan exceeds the “Maximum As-stabilized Buyer’s LTV” specified on the related Confirmation Statement; provided that , notwithstanding the related Confirmation, the “Maximum As-is Buyer’s LTV” during the first Extension Period, if any, shall be fifty percent (50%), and during the second Extension Period, if any, such amount shall be forty-five percent (45%); provided further that for Purchased Mortgage Loans secured by Mortgaged Properties that are multi-family properties, the “Maximum As-is Buyer’s LTV” during the first Extension Period, if any, shall be sixty percent (60%), and during the second Extension Period, if any, such amount shall be fifty-five percent (55%); and for Purchased Mortgage Loans secured by Mortgaged Properties that are hospitality, student-housing and self storage properties, the “Maximum As-is Buyer’s LTV” during the first Extension Period, if any, shall be forty-five percent (45%), and during the second Extension

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Period, if any, such amount shall be forty percent (40%) (the amount necessary to reduce the Repurchase Price for the Mortgage Loan to a level such that the Buyer’s LTV of the Mortgage Loan is at or below the Maximum As-is Buyer’s LTV is referred to herein as the “ Buyer’s LTV Deficit ”);

(b) on any Covenant Determination Date that the Buyer’s Debt Yield of such Purchased Mortgage Loan as of the end of the most recent calendar quarter is less than the “Minimum Buyer’s Debt Yield” specified in the related Confirmation Statement; provided that , notwithstanding the related Confirmation, the “Minimum Buyer’s Debt Yield” during the first Extension Period, if any, shall be ten and one-quarter percent (10.25%), and during the second Extension Period, if any, such amount shall be eleven percent (11%); provided further that for Purchased Mortgage Loans secured by Mortgaged Properties that are multi-family properties, the “Minimum Buyer’s Debt Yield” during the first Extension Period, if any, shall be nine and one-quarter percent (9.25%), and during the second Extension Period, if any, such amount shall be ten percent (10%); and for Purchased Mortgage Loans secured by Mortgaged Properties that are hospitality, student-housing and self storage properties, the “Minimum Buyer’s Debt Yield” during the first Extension Period, if any, shall be twelve and one-half percent (12.5%), and during the second Extension Period, if any, such amount shall be thirteen percent (13%) (the amount necessary to reduce the Repurchase Price for such Purchased Mortgage Loan to a level such that the Buyer’s Debt Yield equals the Minimum Buyer’s Debt Yield is referred to herein as a “ Buyer’s Debt Yield Deficit ”);

(c) on any Covenant Determination Date that the Buyer’s Debt Service Coverage Ratio as of the end of the most recent calendar quarter is less than “Minimum Buyer’s DSCR” specified in the related Confirmation Statement; provided that , notwithstanding the related Confirmation, the “Minimum Buyer’s DSCR” during the first Extension Period, if any, shall be two and one-half (2.50x), and during the second Extension Period, if any, such amount shall be two and three-quarters (2.75x); provided further that for Purchased Mortgage Loans secured by Mortgaged Properties that are multi-family properties, the “Minimum Buyer’s DSCR” during the first Extension Period, if any, shall be two and one-quarter (2.25x), and during the second Extension Period, if any, such amount shall be two and one-half (2.50x); and for Purchased Mortgage Loans secured by Mortgaged Properties that are hospitality, student-housing and self storage properties, the “Minimum Buyer’s DSCR” during the first Extension Period, if any, shall be two and three-quarters (2.75x), and during the second Extension Period, if any, such amount shall be three (3.00x) (the amount necessary to reduce the Repurchase Price for such Purchased Mortgage Loan to a level such that the Buyer’s Debt Service Coverage Ratio equals the Minimum Buyer’s DSCR is referred to herein as the “ Buyer’s DSCR Deficit ”); or

(d) a Purchased Mortgage Loan MAC.

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“ Purchased Mortgage Loan MAC ” means, with respect to any Purchased Mortgage Loan, as determined by Buyer in its commercially reasonable discretion, a material adverse change that negatively affects the value or cash flows of the Purchased Mortgage Loan, including due to a casualty or condemnation at the Mortgaged Property, or any Underlying Obligor of such Purchased Mortgage Loan, other than due to fluctuations in current interest rates or spreads.

“ Purchased Mortgage Loan MAC Deficit ” means, for any Purchased Mortgaged Loan subject to a Purchased Mortgage Loan MAC, the amount necessary to reduce the Repurchase Price for such Purchased Mortgage Loan to the product of the Purchase Price Percentage and the revised Market Value (which shall be determined by Seller in its reasonably commercial discretion upon the occurrence of a Purchased Mortgage Loan MAC).

“ Purchased Mortgage Loan Schedule ” means a schedule of Purchased Mortgage Loans attached to each Custodial Delivery.

“ Recipient ” means Buyer or any other recipient of any payment to be made by or on account of any obligation of Seller or Guarantor hereunder.

“ Remittance Date ” means the fifteenth (15 ^th ) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day.

“ Repurchase Date ” means, with respect to each Purchased Mortgage Loan, the earliest of:

(a) the Facility Expiration Date;

(b) the Accelerated Repurchase Date;

(c) the Business Day on which Seller is to repurchase such Purchased Mortgage Loan as specified by Seller and agreed to by Buyer in the related Confirmation or such Business Day that Seller elects to repurchase such Purchased Mortgage Loan pursuant to the terms of this Agreement;

(d) the date that is thirty (30) days after the Purchased Mortgage Loan first becomes an Impaired Asset; or

(e) the date of maturity or repayment in full of the Purchased Mortgage Loan.

“ Repurchase Price ” means, with respect to any Purchased Mortgage Loan as of any date, the price at which such Purchased Mortgage 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 (a) the Purchase Price of such Purchased Mortgage Loan as of such date, less any amounts paid by Seller to Buyer, or Income received by Buyer from the Depository pursuant to Section 5 hereof, on or prior to the date of such determination on account of the

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Repurchase Price for such Purchased Mortgage Loan (other than amounts applied to the components of the Repurchase Price set forth in the following clauses (b) and (c) of this definition (the “ Other Price Components ”)), (b) the accrued and unpaid Price Differential with respect to such Purchased Mortgage Loan as of the date of such determination, and (c) all other amounts due and owing to Buyer under this Agreement and the other Transaction Documents provided that if such other amounts are not payable at the time of a repurchase of such Purchased Mortgage Loan the same shall not be included in the Repurchase Price of such Purchased Mortgage Loan.

“ Requirement of Law ” means 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.

“ Sanctioned Country ” means, at any time, any country or territory which is itself the subject or target of any comprehensive Sanctions.

Sanctioned Person ” means, at any time, (a) any Person or group listed in any Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person or group operating, organized or resident in a Sanctioned Country, (c) any agency, political subdivision or instrumentality of the government of a Sanctioned Country, or (d) any Person 50% or more owned, directly or indirectly, by any of the above.

“ Sanctions ” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

“ Secondary Market Transaction ” shall have the meaning specified in Section 8(a) of this Agreement.

“ Seller ” means ACRC Lender US LLC, a Delaware limited liability company.

“ Seller LLC Agreement ” means the Limited Liability Company Agreement of Seller dated August 1, 2016, by ACRC Warehouse Holdings LLC and the Independent Manager named therein, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof and this Agreement.

“ Seller Parties ” means Seller, Guarantor and any Affiliate Originator with respect to a Purchased Mortgage Loan.

“ Servicer ” means ACRE Capital LLC and any successor or other servicer of the Purchased Mortgage Loans under the Servicing Agreement.

“ Servicer Acco unt” shall have the meaning assigned such term in the Servicing Agreement.

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“ Servicing Agreement ” means that Servicing Agreement dated as of the date hereof among Seller, Buyer, ACRE Capital LLC and Ares Commercial Real Estate Servicer LLC, and any other agreement to which Buyer, Seller and an Eligible Servicer are party providing for the servicing of one or more of the Purchased Mortgage Loans.

“ Servicing Direction Letter ” has the meaning specified in Section 24(e) .

“ Servicing Records ” has the meaning specified in Section 24(b) .

“ Servicing Rights ” means, with respect to any Purchased Mortgage Loan, any and all of the following: (a) any and all rights to service the Purchased Mortgage Loan; (b) any payments to or monies received by Seller or any other Person for servicing the Purchased Mortgage Loan; (c) any late fees, penalties or similar payments as compensation with respect to the Purchased Mortgage Loan; (d) 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 or Originator (individually or as servicer) thereunder; (e) escrow payments or other similar payments with respect to the Purchased Mortgage Loans and any amounts actually collected by Seller, Originator or any servicer with respect thereto; and (f) all accounts and other rights to payment related to the Purchased Mortgage Loans.

“ Special-Purpose Entity ” means a Person, other than an individual, that is formed or organized solely for the purpose of originating, acquiring and holding, selling and repurchasing, directly and subject to this Agreement, the Purchased Mortgage Loans and entering into related Hedging Transactions; does not engage in any business unrelated to the Purchased Mortgage Loans and the financing and sale thereof; does not have any assets other than the Purchased Mortgage Loans, the Cash Management Account, the Funding Account, cash and its interest under the related Mortgage Loan Documents, Hedging Transactions and Transaction Documents, or any indebtedness other than as permitted by this Agreement. If the foregoing entity is a limited partnership or limited liability company, (i) its partnership agreement or limited liability company agreement (as applicable) shall provide that upon the withdrawal or dissolution of the last remaining general partner or member, the partnership or limited liability company will not be dissolved and shall be continued by the personal representative of such member or general partner who shall agree to be, or appoint a substitute member within ninety (90) days after the occurrence of the event that terminated the last remaining member or general partner, and (ii) the partnership agreement or limited liability company agreement (as applicable) shall provide that the dissolution and winding up or bankruptcy or insolvency filing of such partnership or limited liability company shall require the unanimous consent of all partners or members (including the affirmative vote of each independent director).

“ Special Purpose Provisions ” has the meaning assigned to such term in the Seller LLC Agreement.

“ Specified Securities Contract ” means any “securities contract” as defined in Section 741(7) of the Bankruptcy Code entered into for the purpose of financing commercial real estate mortgage loans or interests therein in a manner similar to this Agreement.

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“ Subsequent Advance ” means each additional Advance made by Seller to a Mortgagor after the Initial Advance, which, in each case, shall be evidenced by an increase in the amount payable by the Mortgagor under the related Mortgage Note.

“ Subsequent Purchase ” shall have the meaning specified in Section 3(k) .

“ Subsequent Purchase Date ” means, with respect to any Transaction, each Business Day after the Initial Purchase Date upon which Buyer and Seller enter into a Subsequent Purchase.

“ Subsequent Purchase Price ” means, with respect to any Purchased Mortgage Loan, the purchase price paid by Buyer to Seller in connection with a Subsequent Purchase pursuant to Section 3(k) , which shall be equal to the amount of the related Subsequent Advance multiplied by the Subsequent Purchase Price Percentage for such Purchased Mortgage Loan. The plural of such term shall refer to the sum of all Dollars paid by Buyer to Seller in connection with all Subsequent Purchases effected with respect to such Purchased Mortgage Loan as provided in Section 3(k).

“ Subsequent Purchase Price Percentage ” means, for any Purchased Mortgage Loan, the Purchase Price Percentage reflected in the related Confirmation.

“ Subsequent Purchase Request ” means the form executed by Seller and delivered to Buyer in connection with a Subsequent Purchase, a form of which is attached hereto as Exhibit VII .

“ Survey ” means a certified ALTA/ACSM (or applicable state standards for the state in which the Collateral is located) survey of a Mortgaged Property prepared by a registered independent surveyor and in form and content satisfactory to Buyer and the company issuing the Title Policy for such Property.

“ Table Funded Purchased Mortgage Loan ” means an Eligible Mortgage Loan that is, as indicated on the related Confirmation or Subsequent Purchase Request, to be sold to Buyer simultaneously with the Seller’s origination or acquisition thereof (or making of a Subsequent Advance), which origination or acquisition (or Subsequent Advance), pursuant to Seller’s request, is financed with the Purchase Price and paid directly to a title company, settlement agent or other Person, in each case, approved by Buyer in its sole and absolute discretion, in trust for the current holder of the Eligible Mortgage Loan or related Mortgagor for disbursement to the parties entitled thereto in connection with such origination or acquisition (or Subsequent Advance). A Purchased Mortgage Loan shall cease to be a Table Funded Purchased Mortgage Loan after the Custodian has delivered a Trust Receipt to Buyer certifying its receipt of the Mortgage Loan File therefor.

“ Table Funded Trust Receipt ” means a trust receipt from a bailee of Table Funded Purchased Mortgage Loans in the form of Attachment 1 to Exhibit XIII .

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“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“ Title Policy ” shall have the meaning specified in paragraph 6 of Exhibit VI .

“ Transaction ” shall have the meaning designated in the introductory paragraph of this Agreement and which for avoidance of doubt, which shall be comprised of an Initial Purchase and any Subsequent Purchases related to a Purchased Mortgage Loan.

“ Transaction Conditions Precedent ” shall have the meaning specified in Section 3(d) of this Agreement.

“ Transaction Documents ” means, collectively, this Agreement, including the Annexes, Exhibits and Schedules to this Agreement (as reflected in, the Table of Contents), the Fee Letter, the Custodial Agreement, the Servicing Agreement, the Guaranty, [each Servicer Acknowledgement,] all Confirmations executed pursuant to this Agreement in connection with specific Transactions, and any other document or agreement, now or in the future, executed by the Seller for the benefit of Buyer in connection with this Agreement.

“ Transaction Request ” shall have the meaning set forth in Section 3(a) .

“ Trust Receipt ” means a trust receipt issued by Custodian to Buyer confirming the Custodian’s possession of certain Mortgage Loan Files that are the property of and held by Custodian for the benefit of Buyer (or any other holder of such trust receipt).

“ UCC ” shall have the meaning specified in Section 6(c) of this Agreement.

“ Underlying Obligor ” means, individually and collectively, as the context may require, (i) the Mortgagor and other obligors under a Purchased Mortgage Loan and (ii) any other Person who has assumed or guaranteed the obligations of such Mortgagor or other obligor under the Mortgage Loan Documents relating to a Purchased Mortgage Loan.

“ Unused Fee ” shall have the meaning set forth in the Fee Letter.

“ U.S. Person ” means a “United States Person” as defined in Section 7701(a)(30) of the Code.

(b) Rules of Interpretation. The following rules apply unless the context requires otherwise.

(i) The singular includes the plural and conversely.

(ii) A gender includes all genders.

(iii) A reference to a party to this Agreement or another agreement or document includes the party’s permitted successors, substitutes or assigns.

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(iv) Where a word or phrase is defined, its other grammatical forms have a corresponding meaning.

(v) A reference to an Article, Section, subsection, paragraph, subparagraph, clause, Annex, Schedule, Appendix, Attachment, Rider or Exhibit is, unless otherwise specified, a reference to an Article, Section, subsection, paragraph, subparagraph or clause of, or Annex, Schedule, Appendix, Attachment, Rider or Exhibit to, this Agreement, all of which are hereby incorporated herein by this reference and made a part hereof.

(vi) A reference to an agreement or document is to the agreement or document as amended, modified, novated, supplemented or replaced in accordance with the terms thereof, except to the extent prohibited by any Transaction Document.

(vii) A reference to legislation or to a provision of legislation includes a modification, codification, replacement, amendment or re-enactment of it, a legislative provision substituted for it and a rule, regulation or statutory instrument issued under it.

(viii) A reference to writing includes a facsimile or electronic transmission and any means of reproducing words in a tangible and permanently visible form.

(ix) A reference to conduct includes an omission, statement or undertaking, whether or not in writing.

(x) A Default or Event of Default exists until it has been cured or waived in writing by the Buyer.

(xi) The words “hereof,” “herein,” “hereunder” and other similar compounds of the word “here” refer to this Agreement as a whole and not to any particular provision of this Agreement, unless the context clearly requires or the language provides otherwise.

(xii) The word “including” is not limiting and means “including without limitation.”

(xiii) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including,” the words “to” and “until” each mean “to but excluding,” and the word “through” means “to and including.”

(xiv) The words “will” and “shall” have the same meaning and effect.

(xv) The term “document” is used in its broadest sense and encompasses agreements, certificates, opinions, consents, instruments and other written material of every kind, including information recorded on a computer disk.

(xvi) The term “any” as a modifier to any noun, shall be construed to mean “any and/or all” preceding the same noun in the plural, and the use of the word "or" has the inclusive meaning represented by the phrase “and/or.”

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(xvii) A reference to day or days without further qualification means calendar days.

(xviii) A reference to any time means New York time unless otherwise indicated.

(xix) This Agreement may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their respective terms.

(xx) All capitalized terms used herein, but not defined herein, that are defined in Articles 8 and 9 of the UCC, are used herein as defined in such Articles 8 and 9.

(xxi) “Indorse” and correlative terms used in the Uniform Commercial Code may be spelled with an initial “e” instead of “i”.

(xxii) Whenever a Person is required to provide any document to the Buyer under the Transaction Documents, the relevant document shall be provided in writing, including, printed form or, unless the Buyer requests otherwise, in the form of a PDF attachment to electronic mail. At the request of either party receiving a document, the document shall be provided in electronic format or both printed and electronic format.

(xxiii) Except where otherwise expressly stated, either party may give or withhold, or give conditionally, approvals and consents, and may form opinions and make determinations, in its sole and absolute discretion. Notwithstanding the foregoing, in any instance in which the Agreement requires the consent or approval of Buyer to an action or request of an Underlying Obligor, Buyer’s consent or approval shall be subject to the same standard, if any, that is imposed on “lender” under the Mortgage Loan Documents.

(xxiv) A reference to “good faith” means good faith as defined in §1-201(19) of the UCC. Any requirement of good faith, reasonableness, discretion or judgment by the Buyer shall not be construed to require the Buyer to request or await receipt of information or documentation not immediately available from or with respect to Seller or any other Person or the Purchased Mortgage Loans themselves.

(xxv) The Buyer may waive, relax or strictly enforce any applicable deadline at any time and to such extent as the Buyer shall elect, and no waiver or relaxation of any deadline shall be applicable to any other instance or application of that deadline or any other deadline, and no such waiver or relaxation, no matter how often made or given, shall be evidence of or establish a custom or course of dealing different from the express provisions and requirements of this Agreement.

(xxvi) This Agreement and the other Transaction Documents are the result of negotiations between the Persons party hereto and thereto, have been reviewed by counsel to Seller and counsel to the Buyer and each Guarantor, and are the product of all Persons party hereto and thereto, each of which is sophisticated and knowledgeable in business matters. No rule of construction shall apply to disadvantage one Person party hereto on the

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ground that such Person proposed or was involved in the preparation of any particular provision of the Transaction Documents or the Transaction Documents themselves.

(c) Accounting Principles. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed in accordance with GAAP, and all accounting determinations, financial computations and financial statements required hereunder shall be made, in accordance with GAAP, as in effect from time to time, on a consistent basis, without duplication of amounts, and on a consolidated basis with all subsidiaries.

(d) Headings. All headings appearing in this Agreement and article and section headings in the Transaction Documents are for convenience of reference only and shall be disregarded in construing this Agreement and the other Transaction Documents.

(e) Other Documents. This Agreement shall be deemed a supplement to the other Transaction Documents and shall not be construed as a modification thereto. In the event of any conflict between the provisions of this Agreement and those of any other Transaction Document, the provisions of this Agreement shall control.


3.	INITIATION; CONFIRMATION; TERMINATION; FEES

(a) Subject to the terms and conditions set forth in this Agreement (including the Facility Conditions Precedent and Transaction Conditions Precedent specified in Sections 3(c) and (d) of this Agreement), an agreement to enter into a Transaction shall be made in writing at the initiation of Seller as provided below; provided , however , that the aggregate of the Maximum Repurchase Price for the subject Transaction when added to the Maximum Repurchase Prices of all then outstanding Transactions shall not exceed the Facility Amount in effect on the Initial Purchase Date for such Transaction. Seller may, from time to time, submit to Buyer a Transaction Request, in the form of Exhibit VIII attached hereto (the “ Transaction Request ”), for Buyer’s review and approval in order to enter into the initial Transaction with respect to any Eligible Mortgage Loan that Seller proposes to sell to Buyer under this Agreement. Upon Buyer’s receipt of the Transaction Request and initial Due Diligence Package, Buyer shall endeavor to within ten (10) Business Days and following receipt of internal credit approval, either (i) notify Seller of the Maximum Repurchase Price, the Initial Purchase Price and the Market Value for the Eligible Mortgage Loan or (ii) deny Seller’s request for a Transaction, in Buyer’s sole and absolute discretion. Buyer’s failure to respond to Seller within ten (10) Business Days shall be deemed to be a denial of Seller’s request for a Transaction, unless Buyer and Seller have agreed otherwise in writing. Buyer shall have the right to review each Mortgage Loan proposed to be sold to Buyer in any initial Transaction with respect thereto, request additional diligence materials and deliveries from Seller and to conduct its own due diligence investigation of such Mortgage Loan as Buyer determines in its sole and absolute discretion. Upon receipt of the Due Diligence Package and other required documentation, Buyer shall complete its due diligence review and financial modeling with respect to the Mortgage Loan proposed to be sold to Buyer by Seller. Buyer shall be entitled to make a determination, in the exercise of its sole discretion that it shall not purchase any or all of the Mortgage Loan proposed to be sold to Buyer by Seller. On the Initial Purchase Date for the Transaction, which shall be not less than two (2) Business Days following the approval of an Eligible Mortgage Loan by Buyer,

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the Purchased Mortgage Loan shall be transferred to Buyer or Custodian against the transfer of the Initial Purchase Price to the Funding Account.

(b) Upon agreeing to enter into an initial Transaction hereunder with respect to a Mortgage Loan, provided each of the Facility Conditions Precedent (as hereinafter defined) or Transaction Conditions Precedent (as hereinafter defined), as applicable, shall have been satisfied (or waived by Buyer), Buyer and Seller shall enter into a written confirmation describing the Purchased Mortgage Loans that shall be the subject of the proposed Transaction and any additional terms and conditions not inconsistent with this Agreement and in the form of Exhibit I attached hereto of each Transaction (a “ Confirmation ”). In the absence of execution and delivery by Buyer of such a Confirmation for a proposed Transaction, Buyer shall under no circumstance be deemed to have agreed to enter into such Transaction. The Pricing Rate for such Transaction 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 Period for such Transaction. Buyer or its agent shall determine in accordance with the terms of this Agreement 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.

(c) Buyer shall not be obligated to enter and consummate any Transaction until the following conditions have been satisfied, or waived by Buyer, on and as of the Closing Date (the “ Facility Conditions Precedent ”):

(i) Buyer shall have obtained internal credit approval to enter into this Agreement and the transactions contemplated hereby;

(ii) Seller shall have delivered (or caused to be delivered) to Buyer this Agreement and the other Transaction Documents duly executed by each Seller Party thereto;

(iii) Buyer shall have received the following documents, (a) an official good standing certificate dated a recent date with respect to Seller and Guarantor, (b) an executed power of attorney of Seller substantially in the form of Exhibit V attached hereto, (iii) such opinions of law from counsel to the Seller and Guarantor as Buyer may reasonably require, including with respect to corporate matters, enforceability, no consents or approvals required other than those that have been obtained, absence of conflicts with Requirements of Law and organizational documents, perfected security interest in the Purchased Mortgage Loans by filing, first priority perfected security interest in the Mortgage Loan Documents by possession, first priority perfected security interest in the Cash Management Account and any other collateral pledged pursuant to the Transaction Documents, Investment Company Act matters (including the applicability of the Volcker Rule ( §619 (12 U.S.C. § 1851) of the Dodd-Frank Wall Street Reform and Consumer Protection Act )), the applicability of Bankruptcy Code safe harbors and such other opinions as may be reasonably required by Buyer and (iv) all other documents, certificates, information, financial statements and reports and as it may require;

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(iv) Buyer shall have received a certificate of a responsible officer of each of Seller and Guarantor, certifying such Person’s (i) governing documents, (ii) certificates of formation, limited partnership or articles of incorporation, as applicable and (iii) incumbency;

(v) no Requirements of Law shall prohibit or render it unlawful, and no order, judgment or decree of any Governmental Authority shall prohibit, enjoin or render it unlawful, to enter into any Transaction Document, including after giving effect to the consummation thereof;

(vi) Buyer shall have received payment from Seller of all fees and expenses then payable under the Fee Letter, this Agreement and the other Transaction Documents, including the costs and expenses actually incurred by Buyer (including legal fees and expenses) in connection with its due diligence and underwriting review of each Eligible Mortgage Loan approved by Buyer, in each case, in an amount not to exceed the amounts set forth in the Fee Letter;

(vii) Buyer shall have provided UCC financing statements to be filed against Seller in all filing offices reasonably required by Buyer, (ii) Buyer has received such searches of UCC filings, tax liens, judgments, pending litigation and other matters relating to the Seller Parties, as Buyer may require, and (iii) the results of such searches are satisfactory to Buyer;

(viii) all information, reports, certificates, documents, financial statements, exhibits and schedules (other than projections and information as to general economic or industry condition) prepared by or on behalf of Seller and concerning a Seller Party or the Mortgaged Properties, and, to Seller’s knowledge, all of the foregoing prepared by third parties, and, in each case, furnished by or on behalf of such Seller Party, to Buyer in connection with the Transaction Documents, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case, as of the date provided or specified therein, as applicable;

(ix) the Mortgage Loan Purchase Documents, executed copies of which shall have been delivered to Buyer, shall be in full force and effect; and

(x) Seller shall have satisfied such other conditions as Buyer reasonably requires.

By its release of its signature page to this Agreement and delivery of any then payable Purchase Price to Seller, except as expressly set forth in a side letter duly executed and delivered by each of Buyer and Seller dated as of the date hereof (“ Facility Letter of Reservation ”), Buyer acknowledges that, to its knowledge, the Facility Conditions Precedent have been satisfied by Buyer and this Agreement is in full force and effect. Notwithstanding the foregoing to the contrary, Seller shall not be relieved of its obligations to deliver any Mortgage Loan Documents, documents or other information listed on the Facility Letter of Reservation and a failure to deliver any Mortgage Loan Documents, documents or other information listed on the Facility Letter of Reservation shall not be deemed a waiver of the Facility Condition Precedent(s) set forth in the Facility Letter of

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Reservation by Buyer and the failure to deliver such Mortgage Loan Documents, documents or other information listed on the Facility Letter of Reservation shall constitute an Event of Default hereunder after the delivery of notice of the expiration of any applicable cure period.

(d) Buyer shall not be obligated to enter into any initial Transaction or purchase any Eligible Mortgage Loan for the Initial Purchase Price, until the following additional conditions have been satisfied or waived by Buyer, with respect to each Eligible Mortgage Loan on or prior to the Initial Purchase Date therefor (the “ Transaction Conditions Precedent ”):

(i) Buyer has received the following documents: (i) a Transaction Request, (ii) a Due Diligence Package, (iii) a Confirmation delivered by Seller, (iv) the related Servicing Agreement and Servicing Direction Letter, (v) a Trust Receipt (or in the case of a Table Funded Purchased Mortgage Loan, a Table Funded Trust Receipt) and other items required to be delivered under the Custodial Agreement, and (vi) all other documents, certificates, information, financial statements and reports as Buyer may reasonably require;

(ii) Servicer has received copies of all documents in the Mortgage Loan File required to service the Eligible Mortgage Loan (or, if a Table Funded Purchased Mortgage Loan, the documents required pursuant to Section 7(b) ) and such other items as required in the Servicing Agreement;

(iii) no Default or Event of Default under this Agreement shall have occurred and be continuing as of the Purchase Date for such proposed Transaction or would result from entering into such Transaction;

(iv) no Requirements of Law shall prohibit or render it unlawful, and no order, judgment or decree of any Governmental Authority shall prohibit, enjoin or render it unlawful, to enter into any Transaction, including after giving effect to the consummation thereof;

(v) Buyer has (i) notified Seller that it has obtained all necessary internal credit and other approvals for such Transaction and (ii) executed and delivered to Seller the related Confirmation;

(vi) the aggregate outstanding Maximum Repurchase Price of all Transactions does not exceed the Facility Amount then in effect after giving effect to such Transaction;

(vii) the Purchase Date specified in the Confirmation is not later than thirty (30) days prior to the Facility Expiration Date;

(viii) the Repurchase Date is not later than the Facility Expiration Date then in effect;

(ix) Seller, Guarantor and Servicer have satisfied all requirements and conditions and have performed all covenants, duties, obligations and agreements contained in the

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Transaction Documents to be performed by such Person on or before the related Initial Purchase Date;

(x) to the extent any Purchased Mortgage Loan was not originated by Seller, all requirements of Section 9(b)(xxiv) have been fulfilled with respect to any such Purchased Mortgage Loan;

(xi) to the extent the related Mortgage Loan Documents contain notice, cure and other provisions in favor of a pledgee under a repurchase or warehouse facility, and without prejudice to the sale treatment of such Mortgage Loan to Buyer, Buyer has received evidence that Seller has given notice to the applicable Persons of Buyer’s interest in such Mortgage Loan and otherwise satisfied any other applicable requirements under such pledgee provisions so that Buyer is entitled to the rights and benefits of a pledgee under such pledgee provisions;

(xii) [reserved];

(xiii) (A) Buyer has received a copy of any interest rate protection confirmation or agreement and related documents relating to Hedging Transactions entered into with respect to a Purchased Mortgage Loan, (B) Seller has collaterally assigned to Buyer all of Seller’s rights (but none of its obligations) under such interest rate protection agreement and related documents, and (C) no termination event, default or event of default (however defined) exists thereunder;

(xiv) the representations and warranties made by Seller in any of the Transaction Documents, including those set forth in Exhibit VI hereto, shall be true and correct in all material respects as of the Initial Purchase Date for such Transaction except to the extent that such representations and warranties (x) specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, or (y) are already qualified by materiality, in which case such representations and warranties shall be true and correct in all respects;

(xv) Buyer has received payment from Seller of all fees and expenses then payable under the Fee Letter, this Agreement and the other Transaction Documents, including the Due Diligence Fee;

(xvi) Seller shall have certified to Buyer in writing the acquisition cost of such Purchased Mortgage Loan (including therein reasonable supporting documentation required by Buyer, if any) not originated by Seller or any Affiliate of Seller or Guarantor; and

(xvii) there shall not have occurred a Material Adverse Change with respect to Seller or Guarantor since the delivery of the most recent audited financial statements of Guarantor delivered pursuant to Section 11(k)(iii); and

(xviii) Seller shall have satisfied such other conditions as Buyer reasonably requires.

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By its release of its signature page to the Confirmation and delivery of the Purchase Price to Seller and funding of any applicable Transaction, except as expressly set forth in such Confirmation, Buyer acknowledges that, to its knowledge, the Transaction Conditions Precedent with respect to the applicable Transaction have been satisfied. Any waiver of a Transaction Conditions Precedent by Buyer (whether temporary or permanent) and the terms thereof will be reflected in the related Confirmation. Seller shall certify in the Confirmation that all Transaction Conditions Precedent to the related Transaction as specified in this Section 3(d) have been met other than those waived by Buyer as reflected on the related Confirmation.

(e) [Reserved].

(f) Each fully executed Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby. In the event of any conflict between the terms of such Confirmation and the terms of this Agreement, the Confirmation shall prevail. Seller hereby acknowledges that the obligations of Seller pursuant to each Transaction hereunder are a recourse obligation of Seller.

(g) Seller shall be entitled to terminate a Transaction on demand, in whole only, and repurchase the related Purchased Mortgage Loan (each, an “ Early Repurchase Date ”) on any Business Day prior to the Repurchase Date; provided , however , that Seller:

(i) notifies Buyer in writing of its intent to terminate such Transaction and repurchase such Purchased Mortgage Loan no later than five (5) Business Days prior to such Early Repurchase Date; and

(ii) on such Early Repurchase Date pays to Buyer an amount equal to the sum of the Repurchase Price for the Purchased Mortgage Loan, and any other amounts payable under this Agreement with respect to such Transaction against transfer to Seller or its agent of such Purchased Mortgage Loan.

Any notice delivered under this Section 3(g) shall be irrevocable upon delivery to Buyer. If the Early Repurchase Date is any Business Day other than a Remittance Date, Seller shall pay all of Buyer’s reasonable costs and expenses and Interest Differential incurred as a result of such repurchase.

(h) On the Repurchase Date or the Early Repurchase Date, as applicable, for each Purchased Mortgage Loan (or in connection with repayment in full of a Mortgage Note by the related Underlying Obligor), termination of the related Transactions will be effected by transfer to Seller or its agent of the Purchased Mortgage Loan relating to such Transaction and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Section 5 of this Agreement) against the simultaneous transfer of the Repurchase Price with respect to such Transaction to an account of Buyer. So long as no Event of Default has occurred and is continuing, upon receipt of the Repurchase Price for such Purchased Mortgage Loan, Buyer shall transfer to Seller such Purchased Mortgage Loan whereupon the Transaction with respect to such Purchased Mortgage Loan shall terminate. So long as no Event of Default has occurred and is continuing, upon receipt of the Repurchase Price for such Purchased

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Mortgage Loan in the Cash Management Account (or in such other account specified in writing by Buyer), Buyer shall be deemed to have simultaneously released its security interest in such Purchased Mortgage Loan and that portion of the Collateral specifically related to such Purchased Mortgage Loan (and not applicable to other Purchased Mortgage Loans), shall authorize Custodian, in accordance with the terms of the Custodial Agreement, to release to Seller the Mortgage Loan Documents for such Purchased Mortgage Loan and, to the extent any UCC financing statement filed against Seller specifically identifies such Purchased Mortgage Loan, Buyer shall deliver an amendment thereto or termination thereof evidencing the release of such Purchased Mortgage Loan from Buyer’s security interest therein. Any such transfer or release shall be without recourse to Buyer and without representation or warranty by Buyer, except that Buyer shall represent to Seller, to the extent that good title was transferred and assigned by Seller to Buyer hereunder on the related Purchase Date(s), that Buyer is the sole owner of such Purchased Mortgage Loan, free and clear of any other interests or liens caused, directly or indirectly, by Buyer’s actions or inactions.

(i) At the written request of Seller delivered to Buyer no sooner than ninety (90) days, and no later than thirty (30) days, before the Initial Facility Expiration Date or the First Extended Facility Expiration Date (defined below), as applicable, Seller shall have two (2) options to extend the Initial Facility Expiration Date, the first for an additional one (1) year term (the “ First Extension Period ”) ending on the July 31, 2020 (the “ First Extended Facility Expiration Date ”) and the second for an additional one (1) year term (the “ Second Extension Period ”) ending on July 31, 2021 (the “ Second Extended Facility Expiration Date ” and, together with the First Extended Facility Termination Date, the “ Extended Facility Expiration Date ”). The extension of the Initial Facility Expiration Date and First Extended Facility Expiration Date, as applicable shall be subject to the following conditions precedent: (a) no Default or Event of Default exists on the date of the request to extend Initial Facility Expiration Date or First Extended Facility Expiration Date, as applicable, (b) Seller shall have made a timely request to extend the Initial Facility Expiration Date or First Extended Facility Expiration Date, as applicable, (c) Seller shall have paid to Buyer the Extension Fee on or before the Initial Facility Expiration Date, or First Extended Facility Expiration Date, as applicable, (d) no Purchased Mortgage Loan Credit Event shall occur upon the Initial Facility Expiration Date or First Extended Facility Expiration Date, as applicable (based on the most recently delivered officer’s certificate pursuant to Section 11(k)(v)); (e) Seller and Guarantor are then, and will be on the first day of the First Extension Period and Second Extension Period, as applicable, in compliance with all covenants under this Agreement and the other Transaction Documents; (f) Buyer’s receipt of an officer’s certificate from Seller signed by a duly appointed officer of Seller (1) certifying as to the matters contained in clauses (d) and (e) above and (2) certifying that, before and after giving effect to such extension, the representations and warranties of Seller contained in Article 9 of this Agreement and the other Transaction Documents are true and correct on and as of the Initial Facility Expiration Date and First Extended Facility Expiration Date, as applicable, and (g) Buyer’s receipt of an officer’s certificate from Guarantor signed by a duly appointed officer of Guarantor (1) certifying as to the matters contained in cause (e) above, including Article 5 of the Guaranty and (2) certifying that, before and after giving effect to such extension, the representations and warranties of Guarantor contained in Article 11 of the Guaranty are true and correct on and as of the Initial Facility Expiration Date and First Extended Facility Expiration Date, as applicable. Notwithstanding the foregoing to the contrary, if Buyer has agreed, in its sole discretion, to extend the Facility Expiration Date for a specific Purchased Mortgage Loan and the Facility Amount

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associated with it to accommodate such Purchased Mortgage Loan (as set forth in the Confirmation with respect to such Purchased Mortgage Loan) then the First Extended Facility Expiration Date and Second Extended Facility Expiration Date shall be extended accordingly only for the specific Purchased Mortgage Loan set forth in the Confirmation, provided (1) Seller exercises the option to extend the Initial Facility Expiration Date and First Extended Facility Expiration Date and (2) the conditions to extension as set forth in this Section 3(i) are satisfied.

(j) In connection with a prepayment in full of such Purchased Mortgage Loan by any Mortgagor, Seller shall cause the related Mortgagor to make the related prepayment directly to the Cash Management Account, and not to the Servicer; provided , however , such prepayment in full may first be deposited into the Servicer Account so long as such prepayment amount remaining after the Servicer retains its fees and expenses permitted under the Servicing Agreement is deposited into the Cash Management Account on the date of such prepayment or on the next Business Day if such payment is made after 2 p.m. CT (provided that, in all cases, Buyer’s interest in such Purchased Mortgage Loan shall not be released until such payment is made to the Cash Management Account). Upon such remittance, Buyer shall, without any further action being necessary, release such Mortgaged Property from the lien of the Mortgage Loan Agreement and execute and deliver a Request for Release with respect to such Mortgaged Property to release such Mortgage Loan Documents in the possession of the Custodian as may be necessary to effect the release of such Mortgaged Property from the lien created under the Mortgage Loan Documents. Amounts received pursuant to this Section 3(j) shall be applied in accordance with Section 5(d) or (e) , as applicable.

(k) On any Business Day after an Initial Purchase Date with respect to a Purchased Mortgage Loan, Seller may submit a Subsequent Purchase Request to Buyer in the form attached hereto as Exhibit VII , and Buyer shall, deposit Dollars in the Funding Account in an amount equal to the Subsequent Purchase Price within ten (10) Business Days of satisfaction or waiver (in writing) of the following conditions precedent (each, a “ Subsequent Purchase ”):

(i) the Initial Purchase Price plus the sum of the Subsequent Purchase Prices for such Purchased Mortgage Loan (including the Subsequent Purchase Price related to such Subsequent Purchase Request) as reflected on the related Subsequent Purchase Request shall not exceed the Maximum Repurchase Price for such Purchased Mortgage Loan;

(ii) no Event of Default or Margin Deficit under this Agreement shall have occurred and be continuing as of the Subsequent Purchase Date or would result from such Subsequent Purchase;

(iii) the representations and warranties made by Seller in any of the Transaction Documents shall be true and correct in all material respects as of the Subsequent Purchase Date except to the extent that such representations and warranties (x) specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, or (y) are already qualified by materiality, in which case such representations and warranties shall be true and correct in all respects;

(iv) the covenants set forth in Sections 4(a) – (c) remain satisfied after taking into account such Subsequent Purchase, and Seller and Guarantor remain in compliance with all

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covenants under this Agreement and the other Transaction Documents, including Section 5 of the Guaranty;

(v) the amount owed under the related Mortgage Note shall increase as a result of the related Subsequent Advance;

(vi) Seller has delivered an officer’s certificate signed by a duly appointed officer of Seller certifying (a) the Subsequent Advance is made in accordance with the terms of the related Mortgage Loan Documents, (b) that Seller has made a Subsequent Advance to, at the direction or for the benefit of, the related Mortgagor, (c) the amount of such Subsequent Advance made, (d) that all conditions precedent to the making of such Subsequent Advance as set forth in the related Mortgage Loan Documents have been satisfied (without giving effect to any modification, waiver or indulgence that may be consented to, granted or made by Seller), together with evidence supporting compliance with such conditions precedent, to Buyer’s reasonable satisfaction and (e) that, before and after giving effect to such Subsequent Purchase, the representations and warranties of Seller contained in Article 9 of this Agreement and the other Transaction Documents are true and correct on and as of such date except to the extent that such representations and warranties (x) specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, or (y) are already qualified by materiality, in which case such representations and warranties shall be true and correct in all respects; and

(vii) Seller shall have paid to Buyer all reasonable, out-of-pocket costs and expenses incurred by Buyer, including reasonable attorney’s fees, in connection with the related Subsequent Advance.

For the avoidance of doubt, Seller hereby acknowledges and agrees that Buyer shall have no liability or obligation whatsoever to make any Subsequent Purchase related to any future or subsequent advances under the Mortgage Loan Documents for any Purchased Mortgage Loan, and that the obligations of Buyer to make any Subsequent Purchase hereunder in connection with such future funding obligations are pursuant to and set forth in this Agreement only (i.e., in no event shall Buyer be bound by or liable under the Mortgage Loan Documents for any Purchased Mortgage Loan).

(l) On any Business Day, but no more than once in any calendar quarter, Seller may request in writing to Buyer that the Facility Amount be permanently reduced by an amount not less than $1,000,000 (unless such request is made in connection with the release of a Mortgaged Property pursuant to Section 3(k) above, in which case the foregoing limitations shall not apply) (the “ Facility Reduction Amount ”). The Facility Amount will be deemed permanently reduced by the Facility Reduction Amount on the later to occur of (i) the next succeeding Business Day or the future date reflected in such request (or if such date is not a Business Day, the next succeeding Business Day) and (ii) the Business Day upon which the Maximum Repurchase Price for all outstanding Transactions (less any reductions in the Repurchase Price for any such Transactions resulting from amounts paid by Seller to Buyer, or Income received by Buyer from the Depository pursuant to Section 5 hereof, on or prior to the date of such determination on account of the Repurchase Price

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for such Purchased Mortgage Loan) has been reduced to the new Facility Amount, which shall be effected by Seller’s prepayment of a portion of the Repurchase Price for one or more Purchased Mortgage Loan (chosen by Buyer in its sole discretion). The Facility Expiration Date shall occur upon the date that the Facility Amount has been reduced to $0.


4.	FACILITY FINANCIAL COVENANTS, REBALANCING

(a) If at any time a Purchased Mortgage Loan Credit Event has occurred that results in a Margin Deficit, then Buyer may by notice to Seller (a “ Margin Call ”) require Seller to either (at the option of Seller): (i) repurchase the applicable Purchased Mortgage Loan or (ii) transfer to Buyer (x) cash or (y) additional collateral acceptable to Buyer, in its sole and absolute discretion, so that following such repurchase or transfer a Margin Deficit no longer exists. Any Eligible Mortgage Loan transferred as additional collateral shall be a Purchased Mortgaged Loan and shall have a Purchase Price (and other parameters set forth on the related Confirmation) as determined by Buyer in its sole and absolute discretion on the date of transfer. Failure to cure any Margin Deficit as required by the preceding sentence prior to expiration of the time period set forth in Section 4(b) below shall constitute an Event of Default and shall entitle Buyer to exercise its remedies under Section 14 of this Agreement (including the liquidation remedy provided for in Section 14(iv) of this Agreement).

(b) If any Margin Call is given by Buyer under Section 4(a) of this Agreement at or prior to the Margin Notice Deadline on any Business Day, the Seller shall transfer Dollars as provided in Section 4(a) by no later than 5:00 p.m. CST on the date that is the fifth (5th) Business Day following the Business Day on which the Margin Call is given (unless the related Margin Deficit is less than $500,000, in which case the Seller shall make such transfer no later than 5:00 p.m. CST on the date that is the thirtieth (30 ^th ) calendar day following the Business Day on which the Margin Call is given, unless such Margin Call is sooner satisfied through operation of Section 5(d) ). If any Margin Call is given by Buyer under Section 4(a) of this Agreement after the Margin Notice Deadline on any Business Day, the Seller shall transfer Dollars as provided in Section 4(a) by no later than 9:30 a.m. CST on the date that is the sixth (6th) Business Day following the Business Day on which the Margin Call is given (unless the related Margin Deficit is less than $500,000, in which case the Seller shall make such transfer no later than 5:00 p.m. CST on the date that is the thirtieth (30 ^th ) calendar day following the Business Day on which the Margin Call is given, unless such Margin Call is sooner satisfied through operation of Section 5(d) ). The failure of Buyer on any one or more occasions to exercise its rights under Section 4(a) of this Agreement shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer or Seller to do so at a later date. Buyer and Seller agree that any failure or delay by Buyer to exercise its rights under Section 4(a) of this Agreement shall not limit such party’s rights under this Agreement or otherwise existing by law or in any way create additional rights for such party.

(c) Any cash transferred to Buyer pursuant to Section 4(a) of this Agreement with respect to any Purchased Mortgage Loan shall be applied to reduce the Repurchase Price of the Purchased Mortgage Loan giving rise to the Margin Deficit until it no longer exists.


5.	CASH MANAGEMENT ACCOUNT; SERVICING DIRECTION; MONTHLY DISTRIBUTIONS

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(a) The Cash Management Account shall be established at the Depository concurrently with the execution and delivery of this Agreement by Seller and Buyer. Buyer shall have sole dominion and control (including “control” within the meaning of Section 9-104(a) of the UCC) over the Cash Management Account. Amounts on deposit in the Cash Management Account shall be remitted by the Depository in accordance with the applicable provisions of this Section 5 .

(b) All Income in respect of the Purchased Mortgage Loans as well as any interest received from the reinvestment of such Income, shall be collected by the Servicer and deposited into the Servicer Account in accordance with the Servicing Agreement or deposited directly into the Cash Management Account within two (2) Business Days of receipt. On or prior to the second Business Day immediately preceding each Remittance Date, Servicer shall transfer all Income then on deposit in the Servicer Account to the Cash Management Account (less amounts permitted to be withheld or re-directed by Servicer under the Servicing Agreement). If a Mortgagor forwards any Income with respect to a Purchased Mortgage Loan to Seller rather than directly to the Servicer, Seller shall (i) use commercially reasonable efforts to cause such Mortgagor to forward any future payments directly to the Servicer and (ii) promptly, but in any case within two (2) Business Days of receipt, forward such payment to the Servicer or deposit any such amounts into the Cash Management Account.

(c) On each Remittance Date, Seller shall pay to Buyer an amount equal to the Price Differential that has accrued during the related Pricing Rate Period for the related Transactions to the extent not previously paid to Buyer (including pursuant to the waterfall provisions of this Section 5).

(d) So long as no Default or Event of Default shall have occurred and be continuing, all Income received by the Depository in respect of the Purchased Mortgage Loan and the related Hedging Transactions during each Collection Period shall be applied by the Depository at the direction of Buyer on the related Remittance Date as follows:

(i) first , to remit to Buyer an amount equal to the Price Differential which has accrued and is outstanding in respect of all of the Purchased Mortgage Loans as of such Remittance Date;

(ii) second , to remit to Buyer an amount equal to any and all fees, costs and expenses, including, but not limited to, reasonable attorneys’ fees and expenses and enforcement costs, due and owing by Seller to Buyer (or any other Indemnified Party) under the Transaction Documents as of such Remittance Date;

(iii) third , to remit to Buyer (A) its proportionate share of any Principal Payment received with respect to a Purchased Mortgage Loan, in an amount equal to the product of (x) the amount of such Principal Payment received and (y) the Purchase Price Percentage or (B) if such Principal Payment reduces the Mortgagor’s obligation under the Mortgage Note to $0, the Repurchase Price of the related Purchased Mortgage Loan;

(iv) fourth , if a Margin Deficit exists with respect to any Purchased Mortgage Loan, to remit to Buyer an amount sufficient to eliminate such outstanding Margin Deficit

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(without limiting Seller’s obligation, if any, to satisfy a Margin Deficit in a timely manner as required pursuant to Section 4 );

(v) fifth , [reserved];

(vi) sixth , to remit to Buyer to pay in full any other outstanding obligation of Seller then due and payable to Buyer or its Affiliates under this Agreement; and

(vii) seventh , all remaining Income shall be remitted to Seller.

Notwithstanding the above, to the extent a Principal Payment on a Purchased Mortgage Loan in excess of $1,000,000 on any date is received in the Cash Management Account (other than a Principal Payment of the type described in Section 3(h) as to which no minimum amount shall apply), the Buyer shall direct the Depository to distribute such amount on the Business Day immediately succeeding notice to Buyer from Seller of deposit in immediately available funds of such amount in the Cash Management Account, as follows:

(i) first, to remit to Buyer, Custodian or Depository to pay in full any obligations of Seller to Buyer, Custodian or Depository under this Agreement or any other Transaction Document that was not paid when due on any prior Remittance Date;

(ii) second , if a Margin Deficit exists or would, upon the occurrence of such Principal Payment, exist with respect to any Purchased Mortgage Loan, including the Purchased Mortgage Loan that is the subject of such Principal Payment, to remit to Buyer an amount sufficient to eliminate such outstanding Margin Deficit (without limiting Seller’s obligation to satisfy a Margin Deficit in a timely manner as required pursuant to Section 4 );

(iii) third , to remit to Buyer (A) its proportionate share of such Principal Payment, in an amount equal to the product of (x) the amount of such Principal Payment received and (y) the Purchase Price Percentage or (B) if such Principal Payment reduces the Mortgagor’s obligation under the Mortgage Note to $0, the Repurchase Price for the related Purchased Mortgage Loan; and.

(iv) fourth , all remaining amounts shall be remitted to Seller.

(e) If a Default or Event of Default shall have occurred and be continuing, all Income received by the Depository in respect of the Purchased Mortgage Loan and the associated Hedging Transactions shall be applied by the Depository on the Business Day next following the Business Day on which such funds are deposited in the Cash Management Account as follows (provided that Buyer may change the order and manner of any such application from time to time in Buyer’s sole and absolute discretion):

(i) first , to remit to Buyer an amount equal to the Price Differential that has accrued and is outstanding in respect of all of the Purchased Mortgage Loans as of such Remittance Date;

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(ii) second, to remit to Buyer an amount equal to any and all fees, costs and expenses, including, but not limited to, reasonable attorneys’ fees and expenses and enforcement costs, due and owing by Seller to Buyer (or any other Indemnified Party) under the Transaction Documents as of such Remittance Date;

(iii) third, to remit to Depository and Custodian an amount equal to the depository and custodial fees due and payable as of such Remittance Date;

(iv) fourth , to remit to Buyer an amount equal to the aggregate Repurchase Price of all Purchased Mortgage Loans (to be applied in reduction of the aggregate Repurchase Price in such amounts, order and manner as determined by Buyer, until such Repurchase Price has been reduced to zero (0)); and

(v) fifth , to remit to Buyer or its Affiliates to pay in full any other outstanding obligation of Seller to Buyer or its Affiliates under the Transaction Documents; and

(vi) sixth , to remit to Seller the remainder.

(f) 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 amounts held by Buyer or any Affiliate of Buyer and any other obligations at any time owing by Buyer or an Affiliate of Buyer to or for the credit or the account of Seller against any of or all the obligations of Seller now or hereafter existing under this Agreement irrespective of whether or not Buyer shall have made any demand under this Agreement (and without prior notice to Seller), whereupon such obligations owing by Buyer or its Affiliates to Seller shall, to the extent (and only to the extent) of such set off actually made by Buyer, be discharged. The rights of Buyer under this Section 5(f) are in addition to other rights and remedies (including other rights of setoff) that Buyer may have.

(g) At the end of each Collection Period and prior to the Remittance Date for such Collection Period, Seller shall provide (or shall cause Servicer to provide) to Buyer a statement and analysis of all Income for such period, indicating the Purchased Mortgage Loans to which each element of Income relates and the amounts constituting interest on each Purchased Mortgage Loan, Principal Payments on each Purchased Mortgage Loan with respect to each Purchased Mortgage Loan and other Income.


6.	PRECAUTIONARY SECURITY INTEREST

(a) Buyer and Seller intend that all Transactions hereunder be one or more sales or other absolute Conveyances to Buyer of the Purchased Mortgage Loans and not a loan or loans from Buyer to Seller secured by the Purchased Mortgage Loan. However to protect and preserve Buyer’s rights with respect to the Purchased Mortgage Loan, including any Conveyance thereof pursuant to the Mortgage Loan Purchase Documents, in the event any such Transaction is deemed to be other than a sale or other absolute Conveyance, Seller hereby pledges all of its right, title, and interest in, to and under and grants a first priority lien on, and security interest in and right of set-off against, all of the property of Seller, including the following property and any and all interests of Seller

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therein, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (collectively, together with the Cash Management Account, the “ Collateral ”) to Buyer to secure the payment and performance of all amounts or obligations owing to Buyer pursuant to this Agreement and the other Transaction Documents (including the obligation of Seller to pay the Repurchase Price, or if the Transactions are recharacterized as loans, to repay such loans for the Repurchase Price):

(i) the Purchased Mortgage Loans and the Mortgage Loan Documents and the Mortgage Loan File related thereto, including all files, documents, instruments, surveys, certificates, correspondence, appraisals, computer programs, computer storage media, accounting records and other books and records relating thereto, all Servicing Rights, all “securities accounts” (as defined in Section 8-501 (a) of the UCC) to which any or all of the Purchased Mortgage Loan or any proceeds that are credited and all “securities entitlements” (as defined in Section 8-102(a)(17) of the UCC) therein;

(ii) the Servicing Agreements, Servicing Records, insurance relating to the Purchased Mortgage Loan, and all “deposit accounts” (as defined in the UCC, including, collection and escrow accounts) and securities accounts relating to the Purchased Mortgage Loan;

(iii) all of Seller’s right, title and interest in, to and under the Mortgage Loan Purchase Documents;

(iv) all Hedging Transactions and all agreements, instruments and other documents evidencing and/or securing all Hedging Transactions;

(v) all “general intangibles” (including “payment intangibles”), “accounts,” “chattel paper,” “investment property,” “documents” and “instruments” as defined in the UCC relating to or constituting any and all of the foregoing;

(vi) all “supporting obligations” and “letter of credit rights” as defined in the UCC relating to or constituting any and all of the foregoing; and

(vii) all replacements, substitutions or distributions on or proceeds, payments, Income and profits of, tort claims, insurance claims and other rights to payments, and records (but excluding any financial models or other proprietary information) and files relating to any and all of any of the foregoing.

(b) Seller hereby pledges all of its right, title, and interest in, to and under and grants a first priority lien on, and security interest in and right of set-off against, all of its right, title and interest, in, to and under the Cash Management Account, to Buyer to secure the payment and performance of all amounts or obligations owing to Buyer pursuant to this Agreement, each of the Transactions and the other Transaction Documents (including the obligation of Seller to pay the Repurchase Price, or if the Transactions are recharacterized as loans, to repay such loans for the Repurchase Price).

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(c) Buyer’s security interest in a Purchased Mortgage Loan, or the Collateral as a whole, shall terminate only upon (i) in the case of an individual Purchased Mortgage Loan, the repurchase or other release thereof in accordance with the terms of this Agreement and (ii) in the case of the Collateral as a whole, the repayment in full of all amounts payable to Buyer and termination of Seller’s obligations under this Agreement and the documents delivered in connection herewith and therewith. For purposes of the grant of the security interest pursuant to this Article 6 , this Agreement shall be deemed to constitute a security agreement under the New York Uniform Commercial Code (the “ UCC ”) and the Uniform Commercial Code as in effect in any other applicable jurisdiction. In furtherance of the foregoing, (a) Seller, at its sole cost and expense, shall cause to be filed in such locations as may be necessary to perfect and maintain perfection and priority of the security interest granted hereby, UCC financing statements and continuation statements (collectively, the “ Filings ”), and shall forward copies of such Filings to Buyer upon completion thereof, (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 (including marking its records and files to evidence the interests granted to Buyer hereunder), it being agreed that Seller shall pay any and all fees required in connection therewith, and (c) Seller hereby authorizes Buyer, at Seller’s cost and expense, to prepare and file any and all Filings, which such Filings may include a collateral description of “all assets of the debtor” or a similarly generic collateral description. In addition, Seller hereby authorizes Buyer to make Filings, at the sole cost and expense of Seller, in such locations as Buyer may determine to be necessary or advisable to perfect and maintain priority of the security interest granted hereby.

(d) If any Event of Default occurs and is continuing, (a) Buyer shall have all of the rights and remedies provided to a secured party by Requirements of Law (including the rights and remedies of a secured party under the UCC and the right to set off any mutual debt and claim) and under any other agreement between Buyer and Seller, (b) without limiting the generality of the foregoing, Buyer shall be entitled to set off the proceeds of the liquidation of the Purchased Mortgage Loans against all of the Facility Obligations, without prejudice to Buyer’s right to recover any deficiency, (d) the possession by Buyer or any of its agents, including Custodian, of the Mortgage Loan Documents, the Purchased Mortgage Loans and such other items of property as constitute instruments, money, negotiable documents, securities or chattel paper shall be deemed to be possession by the secured party for purposes of perfecting such security interest under the UCC and Requirements of Law, and (e) notifications to Persons (other than Buyer) holding such property, and acknowledgments, receipts or confirmations from Persons (other than Buyer) holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents of the secured party for the purpose of perfecting such security interest under the UCC and Requirements of Law. The assignment, pledge and grant of security interest contained herein shall be, and Seller hereby represents and warrants to Buyer that it is, a first priority perfected security interest. For the avoidance of doubt, (x) each Purchased Mortgage Loan secures the Facility Obligations with respect to all other Transactions and all other Purchased Mortgage Loans, including any Purchased Mortgage Loans that are junior in priority to the Purchased Mortgage Loan in question, and (y) if an Event of Default exists, no Purchased Mortgage Loans relating to a Purchased Mortgage Loans will be released from Buyer’s lien or transferred to Seller until the Facility Obligations are indefeasibly paid in full (unless required by

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the terms of the Mortgage Loan Documents). Notwithstanding the foregoing, the Facility Obligations shall be full recourse to Seller.

(e) The grant of a security interest under this Article 6 shall not constitute or result in the creation or assumption by Buyer of any obligation of Seller or any other Person in connection with any of the Purchased Mortgage Loans, whether or not Buyer exercises any right with respect thereto. Seller shall remain liable under the Purchased Mortgage Loans and Mortgage Loan Documents to perform all of Seller’s duties and obligations thereunder to the same extent as if the Transaction Documents had not been executed.

(f) Seller agrees, to the extent permitted by Requirements of Law, that neither it nor anyone claiming through or under it will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in force in any locality where the Purchased Mortgage Loan or any Mortgaged Property may be situated in order to prevent, hinder or delay the enforcement or foreclosure of this Agreement, or the absolute sale of any of the Purchased Mortgage Loans, or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereof, and Seller, for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may be lawful so to do, the benefit of all such laws and any and all right to have any of the properties or assets constituting the Purchased Mortgage Loans marshaled upon any such sale, and agrees that Buyer or any court having jurisdiction to foreclose the security interests granted in this Agreement may sell the Purchased Mortgage Loans as an entirety or in such parcels as Buyer or such court may determine.


7.	PAYMENT, TRANSFER AND CUSTODY

(a) On the Initial Purchase Date for each Transaction, ownership of the related Purchased Mortgage Loan shall be transferred to Buyer against Buyer’s simultaneous transfer of the Initial Purchase Price to the Funding Account. On each Subsequent Purchase Date, as part of the same Transaction that occurred on the Initial Purchase Date, Buyer will purchase the related increase in the related Mortgage Note resulting from Seller’s Subsequent Advance to or for the benefit of the related Mortgagor, subject to the terms and conditions of Section 3(k) .

(b) With respect to each Table Funded Purchased Mortgaged Loan, on or before the Purchase Date therefor, Seller shall deliver or cause to be delivered to Buyer, by facsimile or electronic transmission (i.e. electronic mail), a fully executed and completed copy of each of the following documents:

(i) the Mortgage Note;

(ii) each Mortgage;

(iii) the Mortgage Loan Agreement;

(iv) any guarantee executed in connection with such Purchased Mortgage Loan;

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(v) the attorney’s opinion of title and abstract of title or the original mortgagee title insurance policy, or if the original mortgagee title insurance policy has not been issued, a copy of the irrevocable marked commitment to issue the same;

(vi) an Assignment of Mortgage for each related Mortgage executed by Seller in blank, together with all intervening Assignments of Mortgage executed in connection with such Purchased Mortgage Loan reflecting a complete, unbroken chain of assignment from the Originator to Seller;

(vii) an allonge to the Mortgage Note executed by Seller and payable to _______, together with all intervening allonges to the Mortgage Note executed in connection with such Purchased Mortgage Loan reflecting a complete, unbroken chain of endorsement from the Originator to Seller;

(viii) an assignment of Assignment of Leases (if any such item is a document separate from the Mortgage) executed by Seller in blank, together with all intervening assignment of Assignment of Leases executed in connection with such Purchased Mortgage Loan reflecting a complete, unbroken chain of assignment from the Originator to Seller;

(ix) a General Assignment in blank of all other agreements and instruments relating to such Purchased Mortgage Loan (including any interest rate protection agreements relating to Hedging Transactions), together with all intervening assignments of all other agreements and instruments relating to such Purchased Mortgage Loan reflecting a complete, unbroken chain of assignment from the Originator to Seller;

(x) a Bailee Agreement; and

(xi) a Table Funded Trust Receipt, together with such other evidence as is satisfactory to Buyer in its sole and absolute discretion that all documents necessary to effect the transfer of such Purchased Mortgage Loan to Buyer have been delivered to the Person issuing such Table Funded Trust Receipt.

No later than three (3) Business Days following the Purchase Date for any Table Funded Purchased Mortgage Loan, Seller shall deliver or cause to be delivered and released to Custodian, all of the documents described in Section 7(c) of this Agreement for the Table Funded Purchased Mortgage Loan. Seller and Buyer hereby agree that if Seller fails to deliver or cause to be delivered to the Custodian all the documents comprising the Mortgage Loan File for Table Funded Purchased Mortgage Loan within three (3) Business Days of the related Purchase Date, such third (3rd) Business Day after the related Purchase Date shall be the Repurchase Date and Seller shall repurchase the Purchased Mortgage Loan on such date at the Repurchase Price.

(c) For each Purchased Mortgage Loan that is not a Table Funded Purchased Mortgage Loan, no later than 1:00 p.m. at least one (1) Business Day for any single Purchased Mortgage Loan and two (2) Business Days for more than one (1) but less than twenty (20) Purchased Mortgage Loans, prior to the related Initial Purchase Date, Seller shall deliver or cause to be delivered to Buyer or its designee (i) , the information contained on Appendix I to the Confirmation, (ii) a

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Mortgage Loan File Checklist and (iii) a Custodial Delivery together with the following documents (collectively, “ Mortgage Loan File ”), each of which shall be an original, fully executed, counterpart (unless otherwise noted below or otherwise acknowledged and accepted by Buyer as a copy), pertaining to each of the Purchased Mortgage Loans identified in the Custodial Delivery delivered therewith:

(i) The Mortgage Note bearing all intervening endorsements, endorsed “Pay to the order of ______ without recourse” and signed in the name of Seller by an authorized Person, and further reflecting a complete, unbroken chain of endorsement from the Originator to Seller;

(ii) an original or a copy of the Mortgage, together with, if applicable, originals or copies of any intervening assignments thereof reflecting a complete, unbroken chain of assignment from the Originatord to Seller, in each case (unless the particular item has been delivered to but not returned from the applicable recording office) with evidence of recording thereon;

(iii) the original or a copy of any related Assignment of Leases and Rents (if any such item is a document separate from the Mortgage) and, if applicable, the originals or copies of any intervening assignments thereof reflecting a complete, unbroken chain of assignment from the Originator to Seller, in each case (unless the particular item has been delivered to but not returned from the applicable recording office) with evidence of recording thereon;

(iv) an (A) Assignment of Mortgage and (B) assignment of any related Assignment of Leases and Rents (if such item is a document separate from the Mortgage), in each case, executed by Seller in blank and in recordable form;

(v) (A) copies (with evidence of filing thereon) of any prior effective UCC financing statements in favor of the Originator of such Mortgage Loan or in favor of any assignee thereof prior to and including Seller and (B) a UCC financing statement assignment thereof in blank;

(vi) the original or a copy of the policy or certificate of lender’s title insurance issued in connection with such Mortgage Loan (or, if the policy has not yet been issued, an original or copy of a written commitment “marked-up” at the closing of such Mortgage Loan, interim binder or the pro forma title insurance policy, in each case evidencing a binding commitment to issue such policy);

(vii) a copy of a current (certified within 60 days of the closing of such Mortgage Loan) Survey;

(viii) an original or a copy of any related security agreement (if such item is a document separate from the Mortgage) and an assignment of any related security agreement (if such item is a document separate from the Mortgage and has been recorded) executed by Seller, in blank and, if applicable, in recordable form, which assignment may (in any

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case) be included as part of the corresponding Assignment of Mortgage referred to in clause (iv) hereof;

(ix) originals or copies of any assumption, modification, written assurance, consolidation, extension and substitution agreements, if any, with, if applicable, evidence of recording thereon, together with any assignments thereof reflecting a complete, unbroken chain of assignment from Originator to Seller, in each case (unless the particular item has been delivered to but not returned from the applicable recording office) with evidence of recording thereon, and an assignment thereof executed by Seller in blank and in recordable form;

(x) any documents not otherwise described in the preceding clauses of this definition relating to, evidencing or constituting additional collateral, if any;

(xi) an original or copy of the related guaranty of payment under such Mortgage Loan, if any;

(xii) an original or a copy of each lock box agreement, deposit account control agreement or cash management agreement relating to such Mortgage Loan, if any;

(xiii) an original or a copy of the environmental indemnity from the related Mortgagor or other party, if any;

(xiv) an original or a copy of any intercreditor agreement or similar agreement relating to such Mortgage Loan;

(xv) an original or a copy of any management agreement with respect to the related Mortgaged Property if the manager thereunder is not an Affiliate of the Mortgagor;

(xvi) an original or a copy of any master operating lease with respect to the related Mortgaged Property;

(xvii) if the related Mortgaged Property is a hospitality property that is subject to a franchise, management or similar arrangement, (a) a copy of any franchise, management or similar agreement and (b) a signed copy of any estoppel certificate or comfort letter delivered by the franchisor or similar person for the benefit of the holder of such Mortgage Loan in connection with the origination or acquisition of such Mortgage Loan, together with such instrument(s) of notice or transfer (if any) as are necessary to transfer or assign to Buyer the benefits of such estoppel certificate or comfort letter;

(xviii) an original or copy of the Mortgage Loan Agreement;

(xix) a General Assignment in blank of all other agreements and instruments relating to such Purchased Mortgage Loan (including any interest rate protection agreements relating to Hedging Transactions), together with all intervening assignments of all other agreements and instruments relating to such Purchased Mortgage Loan reflecting a complete, unbroken chain of assignment from the Originator to Seller

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(xx) an original or copy of the disbursement letter from the Mortgagor to the Originator (if any);

(xxi) an original or copy of the Mortgagor’s opinion of counsel (if any);

(xxii) assignments of permits, contracts and agreements (if any);

(xxiii) assignments of any interest rate cap agreement or other interest rate protection agreement entered into by the Mortgagor or its affiliates, with the counterparty’s written consent to such assignment (and further assignment to Originator’s assignees) and agreement to make all payments thereunder to the Originator and its assignees;

(xxiv) the original or copy of any participation agreement and/or servicing agreement executed in connection with such Mortgage Loan;

(xxv) an original or copy of any Insurance Policy or certificates;

(xxvi) an original or copy of an assignment of permits, contracts and agreements (if any);

(xxvii) an original or copy of any environmental site assessment, appraisal and property condition report;

(xxviii) if the related Mortgagor’s interest in the Mortgaged Property is a leasehold estate, the originals of ground lease estoppel(s) (and similar agreements), with true and correct copies of the ground lease, together with all amendments and modifications thereof and other agreements between ground lessor and lessee, attached thereto (and, if recorded, with evidence of recording thereon, unless the original document has been sent for recording but has not been returned by the applicable recording office), any memorandum of ground lease, all amendments and modifications thereof (and, if recorded, with evidence of recording thereon, unless the original document has been sent for recording but has not been returned by the applicable recording office) and all other agreements with the ground lessor and any lender to the ground lessor;

(xxix) if any of the related Mortgaged Properties are a condominium:

(A) a copy of the declaration of condominium;

(B) copies of the governing documents of the condominium association;

(D) a copy of the condominium endorsement to the title policy; and

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(E) such other documents, instruments and agreements as Buyer may require in its discretion;

(xxx) if applicable, the originals or copies of any other agreements, documents and/or certificates executed in connection with the Purchased Mortgage Loan or identified on any closing checklist, closing index or the Mortgage Loan File Checklist;

(xxxi) the originals or copies of any additional documents and agreements required to be added to the Mortgage Loan File by Buyer or pursuant to this Agreement and the other Transaction Documents.

From time to time, but in no event later than three (3) Business Days following execution, Seller shall forward to the Custodian additional original documents or additional documents evidencing any assumption, modification, amendment, consolidation, extension substitution or restatement of or waiver or consent with respect to a Purchased Mortgage Loan approved in accordance with the terms of this Agreement, and upon receipt of any such documents and such other documents, the Custodian shall hold such documents and such other documents as Buyer shall request from time to time as part of the related Mortgage Loan File.

With respect to any Mortgage Loan Document that has been delivered or is being delivered to recording offices for recording or filing and has not been returned to Seller in time to permit delivery hereunder at the time and in the form required, in lieu of delivering such Mortgage Loan Document, Seller shall deliver to Custodian a true duplicate original thereof certified by Seller to be a true and correct copy of the original delivered to the appropriate recording office, and Seller shall deliver to Custodian such Mortgage Loan Document in the form required hereunder, together with any related policy of title insurance not previously delivered to Custodian (with evidence of recording or filing, as applicable, thereon or therein, as applicable), promptly after its receipt for inclusion in the Mortgage Loan File, and the delivery requirements of this Section 7(c) shall be deemed provisionally satisfied with respect to such Mortgage Loan Document. If the original or a copy of any such Mortgage Loan Document that is required to bear evidence of recording or filing cannot be delivered with evidence of recording or filing thereon on or prior to the 90 ^th day following the related Purchase Date (or such later date, not to exceed 12 months after such Purchase Date) because of a delay caused by the public recording office where such original Mortgage Loan Document has been delivered for recordation or filing, then the delivery requirements of this Section 7(c) shall be deemed provisionally satisfied if, a certificate of an authorized officer of Seller or a statement from the title agent delivered to Buyer and Custodian to the effect that such original Mortgage Loan Document has been sent to the appropriate public recording official for recordation or filing and detailing any communications with the recording office or actions taken by Seller (or by others on its behalf) to consummate such recordation or filing. Seller shall, until the recorded or filed Mortgage Loan Document in the form required hereunder has been received by the Custodian, deliver an officer’s certificate as described above on the 90 ^th day following the related Purchase Date and every 90 ^th day thereafter (or on the next succeeding Business Day if any such 90 ^th day is not a Business Day). No Default or Event of Default shall occur as a result of the Seller’s failure to provide any such officer’s certificate unless Seller, after the earlier of actual knowledge by Seller

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or notice by Buyer that the provision of such officer’s certificate is past due, fails to deliver such officer’s certificate as provided herein within five (5) Business Days of such knowledge or notice.

With respect to all of the Purchased Mortgage 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, which appointment is irrevocable and coupled with an interest, with full power following the occurrence and during the continuance of an Event of Default to (i) complete and record Assignments of Mortgage and other recordable Mortgage Loan Documents delivered “in blank”, (ii) complete endorsement of Mortgage Note delivered “in blank”, (iii) modify any other documents described in this Section 7(c) to the extent necessary to make them acceptable for recording or filing in the appropriate governmental recording office and (iv) take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Mortgage Loans and the related Mortgage Loan Files and the Servicing Records and to create a first priority perfected security interest in favor of Buyer, as secured party, therein. Buyer shall deposit the Mortgage Loan Files representing the Purchased Mortgage Loans, or direct that the Mortgage Loan Files be deposited directly, with the Custodian. The Mortgage Loan Files shall be maintained in accordance with the Custodial Agreement. Any Mortgage Loan Document constituting part of the Mortgage Loan File not delivered to Buyer or its designee (including the Custodian) is 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 Mortgage Loan File. Any originals of the Mortgage Loan Documents that come into the possession of Seller or any Affiliate shall be forwarded by or at the direction of Buyer as promptly as possible to Custodian pursuant to a Custodial Delivery. The possession of a Mortgage Loan File by Seller or its designee is at the will of Buyer for the sole purpose of servicing the related Purchased Mortgage Loan, and such retention and possession by Seller or its designee is in a custodial capacity only. The books and records (including any computer records or tapes) of Seller or its designee shall be marked appropriately to reflect clearly the sale of the related Purchased Mortgage Loan to Buyer. Seller shall release its custody of the Mortgage Loan File to any Person other than the Custodian only in accordance with written instructions from Buyer.

Unless an Event of Default shall have occurred and be continuing, subject to Article 24 , Seller (or, to the extent necessary, Buyer in accordance with Seller’s written instructions) shall exercise all voting and corporate rights with respect to the Purchased Mortgage Loans; provided , however , that Buyer shall not be required to follow Seller’s instructions concerning any vote or corporate right that constitutes a Material Purchased Mortgage Loan Modification if doing so would, in Buyer’s good faith business judgment, impair the Purchased Mortgage Loans or be inconsistent with or result in any violation of any provision of the Transaction Documents. Upon the occurrence and during the continuation of an Event of Default, Buyer shall be entitled to exercise all voting and corporate rights with respect to the Purchased Mortgage Loans without regard to Seller’s instructions.


8.	SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE LOANS

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(a) Title to all Purchased Mortgage Loans, including the Servicing Rights related thereto, shall pass to Buyer on the applicable Purchase Date, and Buyer shall have free and unrestricted use of all Purchased Mortgage Loans subject to the terms of this Agreement. Nothing in this Agreement or any other Transaction Document shall preclude Buyer from engaging in repurchase transactions with the Purchased Mortgage Loans, or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating the Purchased Mortgage Loans (any of the foregoing, a “ Secondary Market Transaction ”), in each case to any Eligible Assignee, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Mortgage Loans to Seller pursuant to Article 3 of this Agreement or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Article 5 hereof. Seller shall, at no additional expense to Seller, cooperate reasonably with Buyer to facilitate any Secondary Market Transaction, which cooperation shall continue until Seller’s obligations under this Agreement are indefeasibly repaid in full. Any Secondary Market Transaction shall not affect the aggregate Price Differential, Repurchase Date or other economic terms hereof and shall not materially increase or decrease the obligations and liabilities, or rights, of Seller hereunder.

(b) Nothing contained in this Agreement or any other Transaction Document shall obligate Buyer to segregate any Purchased Mortgage Loans delivered to Buyer by Seller. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, no Purchased Mortgage Loan shall remain in the custody of Seller or any Affiliate of Seller (other than temporary custody to the extent provided in the Custodial Agreement).


9.	REPRESENTATIONS

(a) Seller represents and warrants to Buyer on the date hereof and on each Purchase Date that (i) it is duly authorized to execute and deliver this Agreement, to enter into Transactions contemplated hereunder and to perform its obligations hereunder and under the other Transaction Documents to which it is a party and has taken all necessary action to authorize such execution, delivery and performance, (ii) it will engage in such Transactions as principal (or, if agreed in writing, in the form of an annex, schedule or exhibit hereto or otherwise, in advance of any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal), (iv) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect, and (v) the execution, delivery and performance of this Agreement, the other Transaction Documents to which it is a party and the Transactions will not violate any law, ordinance or rule applicable to it or its formation, organizational and other governing documents or any agreement by which it is bound or by which any of its assets are affected.

(b) In addition to the representations and warranties appearing in subsection (a) above and elsewhere in this Agreement, Seller represents and warrants to Buyer that as of each Purchase Date for the purchase of any Purchased Mortgage Loans by Buyer from Seller and any Transaction thereunder and as of the date of this Agreement and, except as otherwise specified below, at all times while this Agreement and any Transaction thereunder is in full force and effect:

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(i) Organization . 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 where the failure to satisfy any of the foregoing would not be reasonably likely to have a Material Adverse Change. Seller has the power to own and hold the assets it purports to own and hold, and to carry on its business as now being conducted and proposed to be conducted, and has the power to execute, deliver, and perform its obligations under this Agreement and the other Transaction Documents.

(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 . Neither the execution and delivery of the Transaction Documents, nor consummation by Seller of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by Seller with the terms, conditions and provisions of the Transaction Documents (or any of them) will conflict with or result in a breach of any of the terms, conditions or provisions of (i) the formation, organizational or other governing documents of Seller, (ii) any contractual obligation to which Seller is now a party or the rights under which have been assigned to Seller or the obligations under which have been assumed by Seller 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, that, in the cases of clauses (ii) through (iv) above, could reasonably be expected to result in a Material Adverse Change. Seller has all necessary licenses, permits and other consents from Governmental Authorities necessary to acquire, own and sell the Purchased Mortgage Loans and for the performance of its obligations under the Transaction Documents.

(iv) Litigation: Requirements of Law . As of the date hereof and each Purchase Date, there is no action, suit, proceeding, investigation, or arbitration pending or, to the knowledge of Seller, threatened against Seller or Guarantor or any of their respective assets that could reasonably be expected to result in a Material Adverse Change. Seller is in compliance in all material respects with all Requirements of Law. Seller is not in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

(v) No Broker . Seller has not dealt with any broker, investment banker, agent, or other Person (other than Buyer or an Affiliate of Buyer) who may be entitled to any commission or compensation in connection with the sale of Purchased Mortgage Loans pursuant to any of the Transaction Documents.

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(vi) Good Title to Purchased Mortgage Loans . Immediately prior to the purchase of any Purchased Mortgage Loans by Buyer from Seller, such Purchased Mortgage Loans are free and clear of any lien, encumbrance or impediment to transfer (including any “adverse claim” as defined in Section 8-102(a)(l) 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 Mortgage Loans to Buyer and, upon transfer of such Purchased Mortgage Loans to Buyer, Buyer shall be the owner of such Purchased Mortgage Loans free of any adverse claim subject to the rights of Seller pursuant to the terms of this Agreement. If, contrary to the intent of the parties hereto, any Transaction is recharacterized as a secured financing of the related Purchased Mortgage Loans, the provisions of this Agreement are effective to create in favor of Buyer a valid security interest 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 the Purchased Mortgage Loans.

(vii) [Reserved] .

(viii) No Default . As of the date of this Agreement and each Purchase Date, no Default or Event of Default exists.

(ix) Representations and Warranties Regarding Purchased Mortgage Loans; Delivery of Mortgage Loan File . Seller represents and warrants to Buyer that each Purchased Mortgage Loan sold in a Transaction hereunder, as of the related Initial Purchase Date for such Transaction, conforms to the applicable representations and warranties set forth in Exhibit VI attached hereto, except as disclosed to Buyer in writing prior to the related Initial Purchase Date for the Transaction in which such Purchased Mortgage Loan is purchased by Buyer and reflected in the related Confirmation. It is understood and agreed that the representations and warranties set forth in Exhibit VI hereto, if any, shall survive delivery of the respective Mortgage Loan File to Buyer or its designee (including the Custodian) to the extent permitted by applicable law. With respect to each Purchased Mortgage 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 Mortgage Loan have been delivered to Buyer or the Custodian on its behalf. As of each Purchase Date, Seller or its designee is in possession of a complete, true and accurate Mortgage Loan File with respect to each Purchased Mortgage Loan, except for such documents the originals of which have been delivered to the Custodian.

(x) Adequate Capitalization: No Fraudulent Transfer . As of the date hereof and after giving effect to each Transaction on each Purchase Date, Seller has adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations. As of the date hereof and after giving effect to each Transaction on each Purchase Date, Seller is generally able to pay, and as of the date hereof is paying, and intends to continue paying its debts as they come due. As of the date hereof and after giving effect to each Transaction on each Purchase Date, Seller is neither presently financially insolvent nor will Seller be made insolvent by virtue of Seller’s execution of or performance under any of the Transaction Documents or Mortgage Loan

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Purchase Documents within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction applicable to Seller. Seller has not entered into any Transaction Document, the Mortgage Loan Purchase Documents or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

(xi) [Reserved] .

(xii) Consents . No consent, approval or other action of, or filing by Seller with, any Governmental Authority or any other Seller Party is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of any of the Transaction Documents (other than consents, approvals and filings that have been obtained or made, as applicable).

(xiii) Ownership . As of the date hereof, Seller does not have any stockholders, partner, members or other holders of ownership interests other than ACRC Warehouse Holdings LLC. As of the date hereof, set forth on Exhibit IX attached hereto is a true, complete and correct ownership chart for the Seller and Guarantor.

(xiv) Organizational Documents . As of the date delivered, Seller has delivered to Buyer certified copies of its formation, organizational and other governing documents, together with all amendments thereto, if any.

(xv) [Reserved] .

(xvi) Investment Company Act Federal Regulations . Seller is not required to register as an “investment company,” or a company “controlled by an “investment company” within the meaning of the Investment Company Act of 1940.

(xvii) Taxes . Seller has filed or caused to be filed all material tax returns that to the knowledge of Seller would be delinquent if they had not been filed on or before the date hereof and has paid all material 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 material taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority; no tax liens have been filed against any of Seller’s assets and, to Seller’s knowledge, no claims are being asserted with respect to any such taxes, fees or other charges, except for any such tax claims (or liens associated therewith) 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.

(xviii) ERISA Compliance . (a) Except as would not reasonably be expected to result in a Material Adverse Change, none of the Seller, Guarantor or any ERISA Affiliate has established, maintains, contributes to, or has any liability (contingent or otherwise) with respect to, any Plan; and (b) the underlying assets of each of Seller and Guarantor have not and do not constitute Plan Assets.

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(xix) Judgments/Bankruptcy . As of the date hereof and on each Purchase Date, there are no judgments against the Seller Parties that are, unsatisfied of record or docketed in any court located in the United States of America and no Act of Insolvency has ever occurred with respect to any Seller Party.

(xx) Full and Accurate Disclosure . No information with respect to any Seller Party contained in the Transaction Documents, or any written statement furnished by or on behalf of any Seller Party pursuant to the terms of the Transaction Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made, in each case, as of the date provided or specified therein, as applicable.

(xxi) Financial Information . All financial data concerning any Seller Party that has been delivered by or on behalf of such Seller Party to Buyer is true, complete and correct in all material respects as of the date reflected thereon and, to the extent purported to be in accordance with GAAP, has been prepared in accordance with GAAP. All financial data concerning the Purchased Mortgage Loans that has been prepared by or on behalf of Seller to Buyer is true, complete and correct in all material respects as of the date provided or specified therein, or if prepared by a third-party, is, to Seller’s knowledge, true and correct in all material respects as of the date provided or specified therein. As of the date hereof and each Purchase Date, since the delivery of such data, except as otherwise disclosed in writing to Buyer, there has been no change in the financial position of any Seller Party or, to the knowledge of Seller, the Purchased Mortgage Loans, or in the results of operations of any Seller Party, or, to the knowledge of Seller, the financial position of the Purchased Mortgage Loans, which change will, or is reasonably likely to, result in a Material Adverse Change.

(xxii) Notice Address; Jurisdiction of Organization Location of Books and Records . Seller’s jurisdiction of formation is Delaware. The location where the Seller keeps its books and records, including all computer tapes and records relating to the Collateral, is its notice address reflected in Annex I (unless otherwise changed in accordance with Section 15 ).

(xxiii) Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws .

(a) The Seller Parties and their respective Affiliates, officers and employees and to the knowledge of the Seller, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of the Seller Parties any Affiliate or to the knowledge of the Seller any of their respective directors, officers or employees is a Sanctioned Person. The Facility, use of the proceeds of the Facility or other transactions contemplated hereby will not violate any Anti-Corruption Laws or applicable Sanctions.

(b) Neither the making of the facility hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V) or any enabling legislation or executive order

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relating thereto or successor stature thereto or successor statute thereto. The Seller Parties and their respective Affiliates are in compliance in all material respects with the PATRIOT Act.

(xxiv) Purchased Mortgage Loans Acquired from Transferors . With respect to each Purchased Mortgage Loan purchased by Seller or an Affiliate of Seller, (a) such Purchased Mortgage Loan was Conveyed pursuant to a purchase agreement or assignment (“ Purchase Agreement ”) between Seller or such Affiliate and the transferor of such Purchased Mortgage Loan (“ Transferor ”) pursuant to which Seller or such Affiliate purchased or acquired an Eligible Mortgage Loan that is subsequently sold to Buyer, (b) such Transferor received reasonably equivalent value in consideration for the Conveyance of such Purchased Mortgage Loan, (c) no such Conveyance was made for or on account of an antecedent debt owed by such Transferor to Seller or such Affiliate and (d) no such Conveyance is or may be voidable or subject to avoidance under the Bankruptcy Code. To the extent Seller and/or such Affiliate of Seller have been granted a security interest in each such Purchased Mortgage Loan, Seller or such Affiliate shall have filed one or more UCC financing statements against the Transferor to perfect such security interest and assigned such financing statements in blank and delivered such assignments to Buyer or Custodian.

(xxv) Hazardous Substances . As of the date hereof and as of each Purchase Date, no Seller Party: (a) has received any notice or other communication or otherwise learned of any Environmental Liability that would individually or in the aggregate reasonably be expected to have a material adverse effect arising in connection with: (i) any non-compliance with or violation of the requirements of any Environmental Law by an Underlying Obligor, or any permit issued under any Environmental Law to such Underlying Obligor; or (ii) the release or threatened release of any Hazardous Material into the environment; and (b) to its knowledge, has threatened or actual liability in connection with the release or threatened release of any Hazardous Material into the environment that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.

(xxvi) [Reserved ].

(xxvii) Cash Management Account . Seller has the legal right to pledge the Cash Management Account to Buyer. The funds held in the Cash Management Account are not held for the benefit of a third party, other than Buyer and there are no liens or encumbrances with respect to the Cash Management Account in favor of any Person other than Buyer.


10.	NEGATIVE COVENANTS OF SELLER

On and as of the date hereof and until this Agreement is no longer in force with respect to any Transaction, Seller shall not (and with respect to subsection (o) below, shall not permit Guarantor or any ERISA Affiliate to) without the prior written consent of Buyer:

(a) take any action that would directly or indirectly impair or adversely affect Buyer’s title to the Purchased Mortgage Loans;

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(b) transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge or hypothecate, directly or indirectly, any interest in the Purchased Mortgage Loans (or any of them) or Hedging Transactions to any Person other than Buyer, or engage in repurchase transactions or similar transactions with respect to the Purchased Mortgage Loans (or any of them) with any Person other than Buyer;

(c) create, incur or permit to exist any Lien in or on the Purchased Mortgage Loans, except as described in Section 6 of this Agreement;

(d) create, incur or permit to exist any Lien in or on any of the other Collateral subject to the security interest granted by Seller pursuant to Section 6 of this Agreement;

(e) modify or amend in any material respect, or terminate the Seller LLC Agreement or any other organizational documents of Seller; provided that, any modification or amendment to the Special Purpose Provisions shall be deemed material;

(f) change its name, organizational number, tax identification number, method of accounting, identity, structure or jurisdiction of organization unless it shall have provided Buyer thirty (30) days’ prior written notice of such change;

(g) consent or assent to any Material Purchased Mortgage Loan Modification to any Purchased Mortgage Loan (or other material agreement or instrument) other than in accordance with this Agreement;

(h) [Reserved;]

(i) [Reserved];

(j) after the occurrence and during the continuation of any Default or Event of Default, make any Distribution;

(k) contract, create, incur, assume or permit to exist any Investments, except to the extent arising under this Agreement, the other Transaction Documents, the Mortgage Loan Documents or Hedging Transactions;

(l) file a financing statement in which the Seller is the debtor (as opposed to the secured party) other than in favor of Buyer;

(m) enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind-up of dissolve itself (or suffer any liquidation, winding-up or dissolution), or discontinue its business or engage in any other business other than the business of acquiring or originating Eligible Mortgage Loans, or sell all or substantially all of its assets;

(n) Seller will not request any Transaction, and shall not use, and the Seller shall ensure that the Seller and its respective directors, officers, employees and agents acting or benefiting in any capacity in connection with the Transactions shall not use, the proceeds or permit the use of any proceeds of the Transactions to be used, directly or indirectly (i) in furtherance of an offer,

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payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws or (ii) in any manner that would result in the violation of any applicable Sanctions;

(o) Except as would not reasonably be expected to result in a Material Adverse Change, (i) establish, maintain, contribute to, or incur any liability (contingent or otherwise) or with respect to, any Plan; and (ii) take any action that would cause its underlying assets to constitute Plan Assets;

(p) amend, modify, supplement or terminate the Mortgage Loan Purchase Documents or waive any term or provision thereof other than any Permitted Purchased Mortgage Loan Modification; or

(q) enter into any acknowledgement or agreement that gives any other Person or entity (except Buyer) control over, or any other security interest, lien or title in, the Cash Management Account.


11.	AFFIRMATIVE COVENANTS OF SELLER

On and as of the date hereof and until this Agreement is no longer in force with respect to any Transaction, Seller shall observe the following covenants:

(a) Seller shall promptly notify Buyer of any Material Adverse Change promptly upon its obtaining actual knowledge thereof, but in no event later than the second (2nd) Business Day after obtaining actual knowledge of such event.

(b) Seller shall provide Buyer with copies of such documents within its possession or available to Seller without unreasonable effort or expense as Buyer may request evidencing the truthfulness of the representations set forth in Article 9 other than documents that Seller is not permitted to disclose pursuant to a confidentiality obligation (in which case, Seller shall deliver redacted versions of such documents, to the extent permitted under such confidentiality obligation).

(c) Seller (1) 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, Liens, claims and demands of all Persons (other than security interests by or through Buyer) and (2) shall, at Buyer’s request, take all actions necessary to ensure that Buyer will have a first priority security interest in the Purchased Mortgage Loans created or intended to be created hereby, in the event such Transactions are recharacterized as secured financings.

(d) Seller shall notify Buyer and the Depository of the occurrence of any Default or Event of Default with respect to Seller as soon as possible but in no event later than the second (2nd) Business Day after obtaining actual knowledge of such event.

(e) With respect to each Purchased Mortgage Loan, Seller shall provide evidence of any Hedging Transaction. Seller shall not amend, modify, grant any waiver, consent to any departure, terminate or fail to keep in full force and effect, each interest rate protection agreement relating to a Hedging Transaction.

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(f) Seller shall promptly (and in any event not later than two (2) Business Days following receipt) deliver (or cause the Servicer to deliver) notice to Buyer of the occurrence of (i) any receipt of written notice of default under any material agreement, contract or other instrument to which Seller or Guarantor is a party or any acceleration of the maturity of any indebtedness owing by Seller or Guarantor; provided that with respect to Guarantor the default in question is in excess of $15,000,000; (ii) receipt of notice of the commencement of, and any material determination in, any litigation with any third party or any proceeding before any Governmental Authority affecting any Seller Party that, if adversely determined, could reasonably be expected to result in a Material Adverse Change, (iii) any written notice of the occurrence of a default or an event of default received or sent by a Seller Party or Servicer pursuant to the Mortgage Loan Documents, (iv) any written notice of any Environmental Complaint or any claim, demand, action, event, condition, report or investigation indicating any potential or actual liability arising in each case with regard to a Purchased Mortgage Loan in connection with: (a) the non-compliance with or violation of the requirements of any Environmental Law or any permit issued under any Environmental Law; or (b) the release or threatened release of any Hazardous Material into the environment; (c) the existence of any Environmental Lien on any Mortgaged Property or assets of such Underlying Obligor; (d) any material remedial action taken by any Underlying Obligor in response to any order, consent decree or judgment of any Governmental Authority or any Environmental Liability; or (e) the listing of any of such Mortgaged Properties on CERCLIS to the extent that such Seller obtains knowledge of such listing, (v) receipt of written notice of a Material Condemnation or Material Damage or Destruction to any Mortgaged Property; (vi) any other information with respect to the Purchased Mortgage Loans as may be reasonably requested by Buyer from time to time, or (vii) any principal prepayment (in full or partial) of any Purchased Mortgage Loan.

(g) Seller shall provide such information and take such actions as are reasonably requested by Buyer in writing in order to assist Buyer in maintaining compliance with the PATRIOT Act.

(h) [Reserved].

(i) 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 the Purchased Mortgage Loans, 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 in the exact form received, duly endorsed by Seller to Buyer, if required. If any sums of money or property so paid or distributed in respect of the Purchased Mortgage Loans shall be received by Seller, 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.

(j) 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 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 first priority security interest 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

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or in connection with any of the Collateral shall be or become evidenced by any subsequent promissory note, other instrument, negotiable document, certificated security or chattel paper, such note, instrument, document, security or chattel paper shall be immediately delivered to Buyer, duly endorsed in a manner satisfactory to Buyer, to be held as Collateral pursuant to this Agreement, and the documents delivered in connection herewith. Seller hereby irrevocably authorizes Buyer at any time and from time to time to file in any filing office in any jurisdiction any initial financing statements and amendments thereto that (1) indicate the Collateral (i) as all assets of Seller or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or such jurisdiction, 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 (i) whether Seller is an organization, the type of organization and any organization identification number issued to Seller, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Seller agrees to furnish any such information to Buyer promptly upon reasonable request.

(k) Seller (or Servicer on its behalf) shall provide, and shall cause Guarantor to provide, to Buyer the following financial and reporting information:

(i) [reserved];

(ii) within sixty (60) days after the last day of the first three calendar quarters, Seller’s and Guarantor’s unaudited statements of income or consolidated statements of income, as applicable, and cash flow for such quarter and balance sheets as of the end of such quarter;

(iii) within one hundred and twenty (120) days after the last day of its fiscal year, Guarantors’ audited consolidated statements of income and cash flow for Guarantor for such year and balance sheet as of the end of such year for Guarantor and its consolidated Subsidiaries, 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;

(iv) within ninety (90) days after the last day of the fourth calendar quarter, Seller’s unaudited statements of income or consolidated statements of income, as applicable, and cash flow for such quarter and balance sheets as of the end of such quarter;

(v) within sixty (60) days after the last day of each of the first three calendar quarters and within one hundred twenty (120) days after the last day of each calendar year, a Compliance Certificate from Guarantor certifying that, as of such date and as of the end of such prior calendar quarter or prior calendar year, as applicable, Guarantor is in compliance with all of the covenants and requirements set forth in Section 5 of the Guaranty (including all calculations supporting the same);

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(vi) within sixty (60) days after the last day of each of the first three calendar quarters and within ninety (90) days after the last day of each calendar year, a Compliance Certificate from Seller certifying that, as of such date and as of the end of such prior calendar quarter or calendar year, as applicable, (x) Seller is in compliance with all of the terms, conditions and requirements of this Agreement and the other Transaction Documents, including that no (1) Margin Deficit (including all calculations supporting the same), or (2) Default or Event of Default exists (except as may be specified in such certificate) with calculations reflecting the Buyer’s Debt Service Coverage Ratio, Buyer’s Debt Yield and Buyer’s LTV as of the last day of the prior calendar quarter and (y) a list of all Purchased Mortgage Loans that are part of the Facility and the applicable Repurchase Price therefor;

(vii) such other information regarding the financial condition, operations, business or cash flow of Seller and Guarantor as Buyer may reasonably request to determine (i) compliance with any covenant set forth in this Agreement or any other Transaction Document, (ii) the existence of a Default or Event of Default or (iii) the existence of any Margin Deficit.

(l) Seller shall at all times comply in all material respects with all applicable Requirements of Law (including all applicable Environmental Laws, Anti-Corruption Laws and Sanctions); 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.

(m) 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.

(n) 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. 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.

(o) 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 Buyer’s designated representative, with information reasonably obtainable by Seller with respect to the Collateral and the conduct and operation of its business.

(p) In the event a Governmental Authority deems the transactions contemplated herein to be a “securitization”, Buyer will be required by such Governmental Authority to demonstrate a comprehensive understanding of the securitization exposure to the satisfaction of such Governmental Authority. Seller and Guarantor agree to cooperate with Buyer’s requirement to satisfy specific due diligence requirements in connection therewith and shall deliver such information requested by Buyer with respect to the Facility and the Purchased Mortgage Loans,

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including, but not limited to, (i) structural features, which would include, contractual cash flow waterfalls, waterfall related trigger events, credit and liquidity enhancements, market value triggers, the performance of any servicer retained by the Seller or Buyer, (ii) performance features, which would include default rates, identity of Impaired Assets, Mortgaged Property classifications, occupancy rates, loan-to-value ratios, credit scores or other measures of creditworthiness and industry and geographic diversification and (iii) relevant market data, which would include sales prices, trading volume, implied market rating and the size, depth and concentration level of the market for such securitization.

(q) Seller shall provide Buyer with reasonable access to operating statements, the occupancy status and other property level information, with respect to the Mortgaged Properties, plus any such additional reports as Buyer may reasonably request.

(r) Within ten (10) days of an Appraisal Trigger Event, the Seller (or, at its discretion, the Buyer) will, if requested by Buyer, retain an Appraiser to prepare an Appraisal of the related Mortgaged Property (or, with respect to an Appraisal Trigger Event caused by a Default or Event of Default, such Mortgaged Properties requested by the Buyer). Such Appraisal shall be delivered to the Buyer within forty-five (45) days of the retention of such Appraiser; provided that if in the Buyer’s judgment such Appraiser and the Seller are working diligently on the preparation and completion of the Appraisal, the Seller shall have an additional ten (10) days to deliver such Appraisal.

(s) No part of the Purchase Price will be used, directly or indirectly and whether immediately, incidentally or ultimately, for any purpose that violates or that is inconsistent with, the provisions of the regulations of the Board of Governors of the Federal Reserve System, including Regulations T, U or X. Neither the consummation of the Transactions hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V) or any enabling legislation or executive order relating thereto or successor statute thereto.

(t) Seller shall not replace any Independent Manager except in accordance with the Seller LLC Agreement and without at least thirty (30) days prior written notice to Buyer.

(u) If requested by Buyer, Seller shall provide Buyer information reasonably acceptable to Buyer relating to any Hedging Transactions.

(v) Seller shall observe and perform the obligations imposed upon Seller under the Mortgage Loan Purchase Documents and shall enforce the terms, covenants and conditions contained in the Mortgage Loan Purchase Documents to be observed or performed by Originator.

(w) In the event Depository is removed, replaced or resigned; Seller shall enter into an account control agreement with respect to the Cash Management Account in form and substance reasonably acceptable to Buyer.

(x) Seller shall promptly deliver to Buyer copies of (i) reservation of rights letters entered into in connection with a Purchased Mortgage Loan, (ii) forbearance agreements entered into in

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connection with a Purchased Mortgage Loan or (iii) any other material notices sent to Mortgagor under any Purchased Mortgage Loan.


12.	SPECIAL-PURPOSE ENTITY

Seller hereby represents and warrants to Buyer, and covenants with Buyer, that as of the date hereof and so long as any of the Transaction Documents shall remain in effect that it shall be a Special-Purpose Entity and that:

(a) It is, as of each Purchase Date, and intends to remain solvent and it has paid and intends to 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 formation, organizational and other governing documents, including the Seller LLC Agreement.

(c) It has done or caused to be done and will do all things necessary to observe applicable entity 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, partners, shareholders, owners and any other Person, (except to the extent consolidation of financial statements is required under GAAP or as a matter of law) and it will file its own tax returns to the extent required by law.

(e) It has been, is and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself as a division or part of any of its Affiliates, shall maintain and utilize separate stationery, invoices and checks, and shall 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) [Reserved].

(g) [Reserved].

(h) It has not entered into, and will not enter into, any contract or agreement with any of its Affiliates, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arm’s-length basis with Persons other than such Affiliate.

(i) It has not incurred and will not incur any indebtedness or obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than (A) obligations under the Transaction Documents, the Mortgage Loan Documents and the Hedging Transactions and (B) unsecured trade payables, in an aggregate amount not to exceed $100,000 at any one time outstanding, incurred in the ordinary course of acquiring, owning, financing and disposing of the Purchased Mortgage Loans; provided, however, that any such trade payables incurred by Seller shall be paid within 90 days of the date incurred.

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(j) It has not made and will not make any loans or advances to any other Person, other than Eligible Mortgage Loans that are intended to be part of the Purchased Mortgage Loans, and shall not acquire obligations or securities of any member or any Affiliate of any member or any other Person (other than other than Eligible Mortgage Loans that are intended to be part of the Purchased Mortgage Loans).

(k) It 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 , however , that this shall not require any equity party to contribute capital to Seller.

(l) It will not commingle its funds and other assets with those of any of its Affiliates or any other Person.

(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) 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, and shall not permit its members to take, any of the following actions with respect to Seller: (i) dissolve or liquidate, in whole or in part; (ii) consolidate or merge with or into any other entity or, except as permitted by this Agreement convey or transfer all or substantially all of its properties and assets to any entity; or (iii) without the affirmative unanimous consent of all members and each Independent Manager, institute any proceeding to be adjudicated as bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against it, or file a petition or answer or consent seeking reorganization or relief under the Bankruptcy Code or consent to the filing of any such petition or to the appointment of a receiver, rehabilitator, conservator, liquidator, assignee, trustee or sequestrator (or other similar official) of Seller or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, or make an assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or take any action in furtherance of any of the foregoing.

(p) [Reserved.]

(q) It shall not have any employees.

(r) It shall at all times maintain at least one Independent Manager. For so long as the Seller’s obligations under this Agreement and the other Transaction Documents are outstanding, Seller shall not take any of the actions contemplated by Section 12(o) above (including when applicable without the affirmative vote of each Independent Manager).


13.	EVENTS OF DEFAULT

With respect to each Transaction, each of the following clauses (i) through (xix) shall constitute an Event of Default under this Agreement:

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(i) Seller fails to repurchase a Purchased Mortgage Loan upon the applicable Repurchase Date;

(ii) Seller fails to comply in all respects with Section 4 hereof (after giving effect to any cure periods reflected therein);

(iii) an Act of Insolvency occurs with respect to any Seller Party;

(iv) Seller shall admit in writing to the Buyer its inability to, or its intention not to, perform any of its obligations hereunder;

(v) either (A) the Transaction Documents shall for any reason not cause, or shall cease to cause, Buyer to be the owner free of any Lien or adverse claim of any of the Purchased Mortgage Loans (other than the rights of Seller hereunder), (B) if a Transaction is recharacterized by a court of competent jurisdiction as a secured financing or 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 Mortgage Loans or (C) any Transaction Document shall for whatever reason (other than with the consent of Buyer) be terminated or cease to be in full force and effect, or the enforceability thereof or of any Purchase Agreement shall be contested by any Seller Party or Affiliate of any Seller Party, unless, in any such case, Seller shall repurchase each affected Purchased Mortgage Loan within five (5) Business Days of the earlier of (i) receipt of notice by Seller and (ii) actual knowledge of Seller;

(vi) [Reserved];

(vii) failure of Buyer to receive on any Remittance Date the accreted value of the Price Differential or Unused Fee (less any amount of such Price Differential or Unused Fee previously paid by Seller to Buyer) (including in the event the Income paid or distributed on or in respect of the Purchased Mortgage Loan into the Cash Management Account is insufficient to make such payment and Seller does not make such payment or cause such payment to be made) and Seller fails to cure such failure within two (2) Business Days (except that such failure shall not be an Event of Default if sufficient Income is on deposit in the Cash Management Account and the Depository fails to remit such funds to Buyer);

(viii) failure of Buyer to receive the Repurchase Price (or any portion thereof) for any Purchased Mortgage Loans or the Extension Fee, on the date the same is due under this Agreement (whether on the Repurchase Date, Early Repurchase Date or otherwise as provided herein);

(ix) failure of Seller to make any other payment (i.e., a payment of a type not specified in any other clause of this Section 13 ) owing to Buyer that has become due, whether by acceleration or otherwise under the terms of this Agreement which failure is not remedied within the applicable period (in the case of a failure pursuant to Section 4 ) or five (5) Business Days after written notice from Buyer to Seller (in the case of any other such failure);

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(x) any Governmental Authority shall have taken any action to remove, limit, restrict, suspend or terminate the rights, privileges, or operations of Seller or Guarantor, that results or could be reasonably expected to result in a Material Adverse Change;

(xi) [Reserved];

(xii) a Change of Control shall have occurred;

(xiii) any proceeding or action, including any insolvency proceeding, is commenced or threatened (in writing) by any Seller Party or any Affiliate of a Seller Party that attempts to recharacterize the sale (or purported sale) of a Purchased Mortgage Loan pursuant to a Purchase Agreement as a secured loan or anything other than an absolute conveyance and true sale to Seller;

(xiv) any representation, warranty or certification made or deemed made herein or, in any other Transaction Document made by a Seller or Guarantor or in any certificate furnished to Buyer pursuant to the provisions hereof or thereof shall have been incorrect or untrue (but not intentionally incorrect or untrue) in any material respect when made or repeated or deemed to have been made or repeated which incorrect or untrue representation, if capable of cure, is not cured within thirty (30) days of the earlier of (i) the receipt of notice by such Person and (ii) the obtaining of actual knowledge by such Person; provided, however, that if such default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and provided further that Seller shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Seller, in the exercise of due diligence, to cure such default, such additional period not to exceed sixty (60) days (other than the representations and warranties set forth in Section 9(b)(ix) made by the Seller, which shall not be considered an Event of Default if incorrect and or untrue, provided the Seller repurchases the related Purchased Mortgage Loan on an Early Repurchase Date no later than three (3) Business Days after receiving notice of such incorrect or untrue representation and terminates the related Transaction; provided further that Seller shall not have made any such representation with actual knowledge that it was untrue at the time made);

(xv) Guarantor shall fail to observe any of the financial covenants set forth Section 5 of the Guaranty, or shall have defaulted or failed to perform under the Guaranty;

(xvi) 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 $15,000,000 (in the case of Guarantor) shall have been rendered against Seller or Guarantor, 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 or other means acceptable to Buyer;

(xvii) if Seller shall breach or fail to perform any of the terms, covenants, obligations or conditions of this Agreement, other than as specifically otherwise referred to in this

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definition of “Event of Default”, and such breach or failure to perform is not remedied within five (5) Business Days after notice thereof to Seller from Buyer or, as to any breach or failure to perform which by its nature cannot be remedied with the payment of money and which is capable of being cured within thirty (30) days after the occurrence such breach or failure but not within five (5) Business Days, such longer period of time as is reasonably necessary to effectuate a cure, not to exceed thirty (30) days after notice of such breach or failure is given to Seller by Buyer, so long as Seller is diligently acting to remedy such breach or failure during such period of cure;

(xviii) either (i) commencement of any enforcement action (including acceleration of indebtedness) by an obligee against Seller or Guarantor with respect to any other note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party, which default involves the failure to pay a matured obligation in excess of $250,000 in the case of Seller or $15,000,000 in the case of Guarantor, or (ii) Seller or Guarantor shall have defaulted making any payment required to be made under one or more agreements for borrowed money, repurchase agreements, reverse repurchase agreements, Specified Securities Contract (for the purpose of financing commercial real estate mortgage or interests therein in a manner similar to this Agreement) or derivative transactions to which it is a party in an aggregate amount in excess of $250,000 with respect to such Seller, or $15,000,000 with respect to Guarantor, and any such failure in not cured within applicable cure period, if any, provided for under the related agreement; or

(xix) if a receiver, liquidator or trustee shall be appointed for any Seller Party, or if any Seller Party shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by any Seller Party, or if any proceeding for the dissolution or liquidation of any Seller Party shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by such Seller Party, upon the same not being discharged, stayed or dismissed within sixty (60) days.


14.	REMEDIES

If an 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 notice is given, immediately upon the occurrence of an event specified in Section 13(xix)), 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 14(i) of this Agreement:

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(A)	Seller’s obligations hereunder to repurchase all Purchased Mortgage Loans shall become immediately due and payable on and as of the Accelerated Repurchase Date; and

(B)

to the extent permitted by applicable law, the Repurchase Price with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall be increased by the aggregate amount obtained by daily application of, on a 360 day per year basis for the actual number of days during the period from and including the Accelerated Repurchase Date to but excluding the date of payment of the Repurchase Price (as so increased), (x) the Pricing Rate for such Transaction multiplied by (y) the Repurchase Price for such Transaction (decreased by (I) any amounts actually remitted to Buyer by the Depository or Seller from time to time pursuant to Section 5 of this Agreement and applied to each Repurchase Price, and (II) any amounts applied to the Repurchase Price pursuant to Section 14(iii) of this Agreement);


(C)	Buyer may order Appraisals for each Mortgaged Property related to a Purchased Mortgage Loan; and


(D)	the Custodian shall, upon the request of Buyer, deliver to Buyer all instruments, certificates and other documents then held by the Custodian relating to the Purchased Mortgage Loans.

(iii) Buyer, in its sole discretion, immediately, at any time, and from time to time, exercise either of the following remedies with respect to any or all of the Purchased Mortgage Loans: (A) may sell such Purchased Mortgage Loans on a servicing-released basis and/or without providing any representations and warranties on an "as-is where is" basis, in a recognized market and by means of a public or private sale at such price or prices as Buyer accepts, and apply the net proceeds thereof in accordance with Section 5(e) or (B) may in lieu of selling all or a portion of such Purchased Mortgage Loans, retain such Purchased Mortgage Loans and give Seller credit against the Repurchase Price for such Purchased Mortgage Loans (or if the amount of such credit exceeds the Repurchase Price for such Purchased Mortgage Loans, to credit against any other obligations due and any other amounts then owing to Buyer by any other Person pursuant to any Repurchase Document, in such order and in such amounts as determined by Buyer), in an amount equal to the Current Mark-to-Market Value of such Purchased Mortgage Loans at the time of such election (as determined by Buyer in its commercially reasonable discretion and, in any event, no less than the value at which Buyer would carry such Purchased Mortgage Loan if held for its own account). Until such time as Buyer exercises either such remedy with respect to a Purchased Mortgage Loan, Buyer may hold such Purchased Mortgage Loan and apply all Income with respect thereto in accordance with Section 5(e) . For a period of thirty (30) days following the occurrence of an Event of Default, and prior to the exercise by Buyer of the remedy in clause (iii)(A) above, Seller shall the right to purchase all of the Purchased

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Mortgage Loans for an amount equal to the aggregate Repurchase Price for all Purchased Mortgage Loans together with any other amounts owing to Buyer under this Agreement, such purchase to take place the Business Day following exercise by Seller of such right.

(iv) The parties recognize that it may not be possible to purchase or sell all of the Purchased Mortgage 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 Mortgage Loans may not be liquid at such time. In view of the nature of the Purchased Mortgage Loans, the parties agree that liquidation of a Transaction or the Purchased Mortgage Loans 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 discretion, the time and manner of liquidating any Purchased Mortgage Loans, and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Mortgage Loans on the occurrence and during the continuance of an Event of Default or to liquidate all of the Purchased Mortgage 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 or Hedging 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 with respect to Seller.

(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, foreign, and local laws (including, without limitation, if the Transactions are recharacterized as secured financings, the rights and remedies of a secured party under the applicable UCC, 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 Mortgage Loans against all of Seller’s obligations to Buyer, whether or not such obligations are then due, without prejudice to Buyer’s right to recover any deficiency.

(vii) Subject to any 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. All rights and remedies arising under the Transaction Documents, as amended from time to time, are cumulative and not exclusive of any other rights or remedies that 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 Mortgage Loans, or from any other election of remedies. Seller

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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.

(ix) Intentionally Omitted.

(x) Buyer shall not be required to make any demand upon, or pursue or exhaust any of its rights or remedies against, Seller, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the obligations of Seller hereunder or to pursue or exhaust any of its rights or remedies with respect to any Collateral therefor or any direct or indirect guarantee thereof. Buyer shall not be required to marshal the Collateral or any guarantee of the obligations of Seller hereunder or to resort to the Collateral or any such guarantee in any particular order, and all of its rights hereunder or under any other document or instrument executed in connection herewith shall be cumulative. To the extent it may lawfully do so, Seller absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against Buyer, any valuation, stay, appraisement, extension, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise.

(xi) Seller hereby appoints Buyer as attorney-in-fact of Seller for the purpose, after the occurrence and during the continuance of an Event of Default, 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.

(xii) Buyer, by entering into the Transactions, shall not have, does not assume and shall have no obligation to make any Advances, “future advances” or other additional advances of loan proceeds under any of the Purchased Mortgage Loans, all of which obligations shall be retained by Seller and fully and timely performed by Seller.


15.	NOTICES AND OTHER COMMUNICATIONS

Unless otherwise provided under this Agreement, all notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of 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 telecopier (with answerback acknowledged) provided that such telecopied 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 15 . 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 or the first attempted delivery on a Business Day, (c) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day, or (d) in the case telecopier, upon receipt of answerback confirmation, provided

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that such telecopied notice was also delivered as required in this Section 15 . A party receiving a notice which does not comply with the technical requirements for notice under this Section 15 may elect to waive any deficiencies and treat the notice as having been properly given.


16.	SINGLE AGREEMENT

Seller acknowledges that Buyer has entered into this Agreement and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that Buyer shall be entitled to set off claims and apply property held by it in respect of any Transaction against obligations owing to it in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by Buyer in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.


17.	CONFIDENTIALITY.

(a) All information regarding the terms set forth in any of the Transaction Documents shall be kept confidential and shall not be disclosed by either party to any Person except (i) to the Affiliates of such party or its or their respective directors, officers, employees, agents, advisors and other representatives who are informed of the confidential nature of such information and instructed to keep it confidential, (ii) to the extent requested by any regulatory authority or required by Requirements of Law or necessary or advisable in connection with any public company filing requirements under federal securities laws, (iii) to the extent required to be included in the financial statements of either party or an Affiliate thereof, (iv) to the extent required to exercise any rights or remedies under the Transactions Documents, Purchased Mortgage Loans or related Mortgaged Properties, (v) to the extent required to consummate and administer a Transaction, (vi) to any actual or prospective participant, Eligible Assignee or counterparty to a Hedging Transaction that agrees to comply with this Section 17(a) , and (vii) in connection with a private or public offering of a REIT or a public market transaction of Guarantor, but only to the extent such disclosure is legally required pursuant to an applicable Requirement of Law; 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.

(b) All written information regarding the terms set forth in any of the Mortgage Loan Documents or otherwise provided by Seller or any Affiliate thereof to Buyer in connection with the Transactions shall be kept confidential and shall not be disclosed by Buyer to any Person, except (i) to the Affiliates of Buyer or its or their respective directors, officers, employees, agents, advisors, attorneys, accountants and other representatives who are informed of the confidential nature of such information and instructed to keep it confidential, (ii) to the extent requested by any regulatory authority or required by Requirements of Law (including, without limitation, if and to the extent

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required under applicable securities laws), (iii) to the extent required to be included in the financial statements of Buyer or an Affiliate thereof, (iv) to the extent required to exercise any rights or remedies under the Transaction Documents, Purchased Mortgage Loans, Mortgage Loan Documents or related Mortgaged Properties, (v) to the extent required to consummate and administer a Transaction, (vi) to any actual or prospective Eligible Assignee that agrees to comply with this Section 17 , (vii) to the extent required in connection with any litigation between the parties in connection with any Transaction Document; or (viii) if the Transaction Documents and/or Mortgage Loan Documents and/or such information is generally known or a matter of public record (but not by virtue of a breach by the disclosing party of its obligations hereunder); provided, that no such disclosure made with respect to any Transaction Documents or Mortgage Loan Documents shall include a copy of such Transaction Document or Mortgage Loan Document to the extent that a summary would suffice, but if it is necessary for a copy of any Transaction Document or Mortgage Loan Document to be disclosed, all pricing and other economic terms set forth therein shall be redacted before disclosure to the extent such disclosure can be satisfied by a redacted copy of such Transaction Document or Mortgage Loan Document.


18.	ASSIGNABILITY

(a) The rights and obligations of Seller under the Transaction Documents and under the Transactions shall not be assigned by Seller without the prior written consent of Buyer.

(b) Buyer shall be entitled to assign all or a portion of its rights and obligations under the Transaction Documents and/or under any Transaction to any Eligible Assignee without the consent of, but with prior written notice to, Seller. Subject to the immediately foregoing sentence, in addition, Buyer shall have the right at any time to participate all or any portion of its interest in the Transaction Documents or under any Transaction to one or more Eligible Assignees; provided that with respect to any sale or assignment by Buyer of less than 100% of Buyer’s rights and obligations under the Transaction Documents or any participation of its interests, Seller shall not be obligated to deal directly with any party other than Buyer in connection with such Transactions.

(c) In connection with any participations in or to all or any portion of Buyer’s rights or obligations under the Transaction Documents and/or under any Transaction, (i) Buyer’s obligations under this Agreement shall remain unchanged and (ii) Buyer shall remain solely responsible to Seller for the performance of such obligations, subject to and in accordance with the terms and provisions hereof and of the other Transaction Documents.

(d) Subject to the foregoing, the Transaction Documents and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. Nothing in the Transaction Documents, express or implied, shall give to any Person, other than the parties to the Transaction Documents and their respective successors and assigns, any benefit or any legal or equitable right, power, remedy or claim under the Transaction Documents.

(e) Seller shall maintain a copy of each assignment as to which it is notified and a register for the recordation of the names and addresses of assignees and the amounts (and stated interest) owing to, each assignee pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and the Buyer, Seller and any applicable

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Lending Installation shall treat each person whose name is recorded in the Register pursuant to the terms hereof as a Buyer or applicable Lending Installation hereunder for all purposes of this Agreement. No assignment, sale, negotiation, pledge, hypothecation or other transfer of any part of any persons interest hereunder shall be effective or permitted under this Agreement until such person's name and address has been registered in the Register. The Register shall be available for inspection by Seller and Buyer and any applicable Lending Installation or assignee, at any reasonable time and from time to time upon reasonable prior notice.

(f) If Buyer sells a participation, it shall, acting solely for this purpose as non-fiduciary agent of the Seller, maintain a register on which it enters the name and address of each participant (a “ Participant ”) and the principal amounts (and stated interest) of each Participant's interest in this Agreement and other Transaction Documents (the “ Participant Register ”); provided that Buyer shall not 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 commitments, loans, letters of credit or its other obligations under any Transaction Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in “registered form” under Section 5f.103-1(c) of the United States Treasury Regulations promulgated under the Code. The entries in the Participant Register shall be conclusive absent manifest error, and Buyer shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.


19.	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.


20.	GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

(a) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE OF NEW YORK.

(B) EACH PARTY IRREVOCABLY AND UNCONDITIONALLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK COUNTY, 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.

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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 20 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.


21.	NO RELIANCE

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, the Transaction Documents and each Transaction thereunder:

(a) 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.

(b) 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;

(c) 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;

(d) 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

(e) 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,

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business, investment, financial accounting or otherwise) of the Transaction Documents or any Transaction thereunder.


22.	INDEMNITY

Seller hereby agrees to indemnify Buyer and each of its officers, directors, employees and agents (“ Indemnified Parties ”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral other than income taxes of Buyer), fees, costs, expenses (including, without limitation reasonable attorney’s fees and disbursements) or disbursements (all of the foregoing, collectively “ Indemnified Amounts ”) that may at any time (including, without limitation, such time as this Agreement shall no longer be in effect and the Transactions shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, this Agreement or any Transactions thereunder or any action taken or omitted to be taken by any Indemnified Party under or in connection with any of the foregoing; provided , that Seller shall not be liable for Indemnified Amounts resulting from the gross negligence or willful misconduct of any Indemnified Party. Without limiting the generality of the foregoing, Seller agrees to hold Indemnified Parties harmless from and indemnify the Indemnified Parties against all Indemnified Amounts with respect to all Purchased Mortgage Loans relating to or arising out of any violation or alleged violation of ERISA, any Environmental Law, rule or regulation or any consumer credit laws, including without limitation the Truth in Lending Act and/or the Real Estate Settlement Procedures Act, that, in each case, results from anything other than Indemnified Parties’ gross negligence or willful misconduct. In any suit, proceeding or action brought by Indemnified Parties in connection with any Purchased Mortgage Loan for any sum owing thereunder, or to enforce any provisions of any Purchased Mortgage Loan, Seller will save, indemnify and hold Indemnified Parties harmless from and against all expense (including, without limitation, reasonable attorneys’ fees and expenses), loss or damage 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 all Buyer’s costs and expenses incurred in connection with the enforcement or the preservation of Buyer’s rights under this Agreement or any Transaction contemplated hereby, including without limitation the reasonable fees and disbursements of its counsel. Seller hereby acknowledges that, the obligations of Seller hereunder are a recourse obligation of Seller.


23.	DUE DILIGENCE

Seller acknowledges that, at reasonable times and upon reasonable notice, Buyer has performed due diligence reviews, and has the right to perform continuing due diligence reviews with respect to the Purchased Mortgage Loans, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise. Seller agrees that upon reasonable prior notice to Seller, Buyer or Buyer’s authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Mortgage

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Loan Files, Servicing Records and any and all documents, records, agreements, instruments or information relating to such Purchased Mortgage Loans in the possession or under the control of Seller, the Servicer or any subservicer and/or the Custodian (provided that, unless an Event of Default has occurred and is continuing, or unless Buyer has a commercially reasonable basis for doing so, Buyer shall not be permitted to conduct more than one (1) such review during any calendar year). Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Loan Files and the Purchased Mortgage Loans. 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, either itself or through its authorized representative, to conduct a partial or complete due diligence review on some or all of the Purchased Mortgage Loans. Buyer may underwrite such Purchased Mortgage Loans itself or engage a third party underwriter to perform such underwriting. Seller agrees to reasonably cooperate with Buyer and any third party underwriter 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, agreements, instruments or information relating to such Purchased Mortgage Loans in the possession, or under the control, of Seller. Seller further agrees that Seller shall reimburse Buyer for any and all costs and expenses incurred by Buyer in connection with Buyer’s due diligence reviews with respect to the Purchased Mortgage Loan incurred pursuant to this Section 23 , including, without limitation, reasonable attorneys’ fees and expenses (provided that, the due diligence conducted in connection with the initial purchase of an Eligible Mortgage Loan shall be limited to the Due Diligence Fee).


24.	SERVICING

(a) Notwithstanding the purchase and sale of the Purchased Mortgage Loans hereby, unless a Default or an Event of Default shall have occurred and is continuing, Seller and Buyer shall cause the Purchased Mortgage Loans to be serviced for the benefit of Buyer pursuant to the Servicing Agreement. Notwithstanding use of expressions such as “Repurchase Date”, “Repurchase Price”, “margin” and “substitution”, which are used to reflect terminology used in the market for transactions of the kind provided for in this Agreement, it is hereby expressly acknowledged that the Servicing Rights relating to each Mortgage Loan purchased by Buyer hereunder are sold, assigned, and transferred by Seller to Buyer along with such Mortgage Loan.

(b) Seller agrees that 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 Mortgage Loans (the “ Servicing Records ”) so long as the Purchased Mortgage Loans are subject to this Agreement. Seller grants Buyer a security interest in all servicing fees and rights relating to the Purchased Mortgage Loans and all Servicing Records to secure the obligation of Seller or its designee to service in conformity with this Section 24 and any other obligation of Seller to Buyer subject to the Servicing Agreement. Seller covenants to safeguard such Servicing Records (if in its possession) and to deliver them promptly to Buyer or its designee (including the Custodian) at Buyer’s request.

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(c) Upon the occurrence and during the continuance of an Event of Default, Buyer may, in its sole discretion, (i) subject to Section 14, sell its right to the Purchased Mortgage Loans on a servicing released basis or (ii) terminate each Servicer or any sub-servicer of the Purchased Mortgage Loans with or without cause, in each case without payment of any termination fee. Notwithstanding any provision of this Agreement to the contrary, upon the occurrence of an Event of Default, Buyer shall have sole control over all decisions, approvals or determinations made with respect to the servicing and administration of the Purchased Mortgage Loans and the exercise of all rights and remedies with respect to the Purchased Mortgage Loans and the related loan and securitization documents evidencing and securing the Purchased Mortgage Loans.

(d) As of the date hereof, Seller and Buyer have engaged Servicer as servicer of the Purchased Mortgage Loans pursuant to the Servicing Agreement. Seller may engage an additional Servicer; provided that (i) Seller has delivered (x) notice of its intention to engage such Servicer to Buyer and (y) such Servicer’s form of tri-party servicing agreement, in each case, at least sixty (60) days prior to such engagement and (ii) Seller, Buyer and such Servicer enter into a tri-party servicing agreement in form and substance satisfactory to Buyer.

(e) With respect to each Purchased Mortgage Loan, Seller shall deliver to the Servicer, a servicing direction letter (the “ Servicing Direction Letter ”) in the form attached hereto as Exhibit X to this Agreement (or such other evidence acceptable to Buyer that notifies the Servicer that such Purchased Mortgage Loan is subject to the related Servicing Agreement), which may be delivered to the Servicer by electronic mail or other electronic means instructing the Servicer to deposit all amounts payable under the related Purchased Mortgage Loan to the Cash Management Account and service the Purchased Mortgage Loan pursuant to the related Servicing Agreement and shall provide to Buyer proof of such delivery.


25.	MISCELLANEOUS

(a) Time is of the essence under the Transaction Documents and all Transactions thereunder and all references to a time shall mean New York time in effect on the date of the action unless otherwise expressly stated in the Transaction Documents.

(b) 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 that this Agreement is determined to create a security interest, Buyer shall have all rights and remedies of a secured party under the UCC.

(c) The Transaction Documents may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. Other than with respect to the signature pages to this Agreement, the Fee Letter, the Guaranty and the Custodial Agreement, delivery by facsimile or other electronic transmission of an executed counterpart of a signature page to this Agreement and each other

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Transaction Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Transaction Documents.

(d) The headings in the Transaction Documents are for convenience of reference only and shall not affect the interpretation or construction of the Transaction Documents.

(e) Without limiting the rights and remedies of Buyer under the Transaction Documents, Seller shall pay Buyer’s reasonable actual out-of-pocket costs and expenses, including appraisal fees, reasonable fees and expenses of accountants, attorneys and advisors, incurred in connection with the preparation, negotiation, execution and consummation of, and any amendment, supplement or modification to, the Transaction Documents and the Transactions thereunder (subject to any limitations set forth in the Fee Letter). Seller agrees to pay Buyer on demand all costs and expenses (including reasonable expenses for legal services of every kind) of any subsequent enforcement of any of the provisions hereof, or of the performance by Buyer of any obligations of Seller in respect of the Purchased Mortgage Loans, or any actual or attempted sale, or any exchange, enforcement, collection; compromise or settlement in respect of any 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 reasonable costs and expenses (including reasonable expenses for legal services) incurred in connection with the maintenance of the Cash Management Account and registering the Collateral in the name of Buyer or its nominee. Furthermore, Buyer shall have the right to require Seller to order or shall itself have the right to order (in its discretion) an Appraisal of any Mortgaged Property securing a Purchased Mortgage Loan (i) no more than every twelve (12) months, to determine whether such Purchased Mortgage Loan is an Impaired Asset, (ii) if Buyer determines that a Material Adverse Change has occurred, (iii) if Seller or Guarantor have ordered an appraisal of such Mortgaged Property that does not meet the defined term “Appraisal”, (iv) if an event of default has occurred under the terms of the Mortgage Loan Documents for such Mortgaged Property, (v) when the terms of the Mortgage Loan Documents for such Purchased Mortgage Loan requires an appraisal to be ordered and (vi) for any Purchased Mortgage Loan remaining on the Facility during the First Extension Period and Second Extension Period, as applicable (each of the foregoing, an “Appraisal Trigger Event”) and, in all cases, Seller agrees to pay Buyer’s out-of-pocket costs and expenses for such Appraisal promptly upon demand. All such expenses shall be recourse obligations of Seller to Buyer under this Agreement.

(f) 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.

(g) Intentionally Omitted.

(h) This Agreement, the Fee Letter and each Confirmation contains a final and complete integration of all prior expressions by the parties with respect to the subject matter hereof and thereof and shall constitute the entire agreement among the parties with respect to such subject matter, superseding all prior oral or written understandings.

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(i) 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.

(j) 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.

(k) Any notice, acknowledgment, statement or certificate (including, without limitation, any Confirmation) given by Buyer to Seller shall be effective as, and shall be deemed to be, a notice, acknowledgment, statement or certificate given to Seller. Buyer may, without necessity of any inquiry, rely solely upon any notice, acknowledgment, statement or certificate of any of (1) Seller or (2) any authorized representative of Seller set forth on Exhibit II or otherwise designated by Seller from time to time. Any disbursements of funds to Seller provided for in Article 5 of this Agreement or otherwise in this Agreement or the Transaction Documents shall be deemed properly made to Seller if disbursed to Seller or its designee.


26.	INTENT

(a) Buyer and Seller intend (a) for 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 this Agreement are deemed “margin payments” or “settlement payments,” as defined in Section 101 of the Bankruptcy Code, (b) for the grant of a security interest set forth in Section 6 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 the “safe harbor” benefits and protections afforded under the Bankruptcy Code with respect to a “securities contract,” including (x) the rights, set forth in Article 14 and in Section 555, 559 and 561 of the Bankruptcy Code, to liquidate the Purchased Mortgage Loans and terminate this Agreement, and (y) the right to offset or net out as set forth in herein and in Section 362(b)(6) of the Bankruptcy Code.

(b) Buyer and Seller acknowledge and agree that Buyer’s right to liquidate Purchased Mortgage Loans delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Article 14 and as otherwise provided in the Transaction Documents is a contractual right to liquidate such Transactions as described in Section 555, 559 and 561 of the Bankruptcy Code.

(c) Buyer and Seller acknowledge and agree that if either Buyer or Seller is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act (“ FDIA ”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in FDIA and

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any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

(d) Buyer and Seller acknowledge and agree 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 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). Buyer and Seller expressly represent, warrant, acknowledge and agree that this Agreement constitutes a “master netting agreement,” as defined in Section 101(38A) of the Bankruptcy Code.


27.	CHANGE IN CIRCUMSTANCES

(a) Taxes .

(i) Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.

(A) Any and all payments by or on account of any Facility Obligation of Seller or Guarantor hereunder or under any other Transaction Document shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable Laws. If any applicable Laws (as determined in the good faith discretion of Buyer) require the deduction or withholding of any Tax from any such payment by Buyer, Seller or Guarantor, then Buyer, Seller, or Guarantor shall be entitled to make such deduction or withholding, upon the basis of the information and documentation to be delivered pursuant to subsection (vi) below.

(B) If Seller, Guarantor or Buyer shall be required by the Code to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then: (1) Seller, Guarantor or Buyer shall withhold or make such deductions as are determined Buyer to be required based upon the information and documentation it has received pursuant to subsection (vi) below; (2) Seller, Guarantor or Buyer shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code; and (3) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by Seller or Guarantor shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

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(C) If Seller, Guarantor or Buyer shall be required by any applicable Laws other than the Code to withhold or deduct any Taxes from any payment, then: (1) Seller, Guarantor or Buyer, as required by such Laws, shall withhold or make such deductions as are determined by it to be required based upon the information and documentation it has received pursuant to subsection (vi) below; (2) Seller, Guarantor or Buyer, to the extent required by such Laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws; and (3) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the Seller or Guarantor shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section (a)) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

(ii) Payment of Other Taxes by Seller . Without limiting the provisions of subsection (i) above, Seller shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of Buyer, timely reimburse it for the payment of, any Other Taxes.

(iii) Tax Indemnifications .

Seller shall, and does hereby, indemnify each Recipient, and shall make payment in respect thereof within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any penalties, interest and 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 any such payment or liability delivered to Seller by Buyer, shall be conclusive absent manifest error.

(iv) Evidence of Payments . Upon request by Buyer after any payment of Taxes by Seller to a Governmental Authority as provided in this Section, 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 any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to Buyer.

(v) Mitigation . If the Buyer or any applicable Lending Installation claims any additional amount in respect of Taxes payable pursuant to this Section 27, it shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its applicable lending office or file any certificate or document, if, in the judgment of Buyer or such Lending Installation, such action would avoid the need for or reduce the amount of any such Taxes and would not subject Buyer or such Lending Installation to any unreimbursed cost or expense and would not otherwise be disadvantageous to Buyer or such Lending Installation. The Seller hereby agrees to pay all

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reasonable costs and expenses incurred by any such Person in connection with any such action.

(vi) Status of Buyer; Tax Documentation .

(a) If Buyer or any Person that acquires the rights and obligations of Buyer under this Agreement is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Transaction Document, the Buyer or such Person shall deliver to Seller or Buyer, at the time or times reasonably requested by Seller or Buyer, such properly completed and executed documentation reasonably requested by Seller or Buyer as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, Buyer or any Person that acquires the rights and obligations of Buyer under this Agreement, if reasonably requested by Seller, or Buyer, shall deliver such other documentation prescribed by applicable law or reasonably requested by Seller or Buyer as will enable Seller or Buyer to determine whether or not Buyer or such Person 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 any such documentation set forth in subsection (b) hereof) shall not be required if in the Buyer or such Person’s reasonable judgment such completion, execution or submission would subject Buyer or such Person to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of Buyer or such Person.

(b) Without limiting the generality of the foregoing, if Seller is a U.S. Person:

(A) Buyer and any Person that acquires the rights and obligations of Buyer under this Agreement that is a U.S. Person shall deliver to Seller, Guarantor and Buyer on or prior to the date on which such Person becomes a party to this Agreement (and from time to time thereafter upon the reasonable request of Seller, Guarantor or Buyer), executed copies of IRS Form W-9 certifying that Buyer is exempt from U.S. federal backup withholding tax;

(B) any Foreign Buyer shall, to the extent it is legally entitled to do so, deliver to Seller and Buyer (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Buyer becomes a party under this Agreement (and from time to time thereafter upon the reasonable request of Seller, Guarantor and Buyer), whichever of the following is applicable:

(a) 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

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Transaction Document, executed copies of IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty; and (y) with respect to any other applicable payments under any Transaction Document, executed copies of IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(b) executed copies of IRS Form W-8ECI;

(c) 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 substantially in the form of Exhibit XI-A 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 or Guarantor within the meaning of Section 871(h)(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 W-8BEN-E; or

(d) 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, a U.S. Tax Compliance Certificate substantially in the form of Exhibit XI-B or Exhibit XI-C , IRS Form W-9, 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 substantially in the form of Exhibit XI-D on behalf of each such direct and indirect partner;

(C) any Foreign Buyer shall, to the extent it is legally entitled to do so, deliver to Seller, Guarantor and Buyer (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Buyer becomes a party under this Agreement (and from time to time thereafter upon the reasonable request of Seller, Guarantor and Buyer), 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,

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together with such supplementary documentation as may be prescribed by applicable law to permit Seller, Guarantor and Buyer to determine the withholding or deduction required to be made; and

(D) if a payment made to Buyer or any Person that acquires the rights and obligations of Buyer under this Agreement would be subject to U.S. federal withholding Tax imposed by FATCA if Buyer or such Person 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 or such Person shall deliver to Seller, Guarantor and Buyer at the time or times prescribed by law and at such time or times reasonably requested by Seller, Guarantor or Buyer 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, Guarantor or Buyer as may be necessary for Seller, Guarantor and Buyer to comply with their obligations under FATCA and to determine that Buyer or such Person has complied with such Person’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.

(c) Each Person providing documentation under this Section 27(a)(iv) agrees that if any IRS form or related certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or related certification or promptly notify Seller, Guarantor or Buyer, as applicable, of its legal inability to do so.

(vii) Treatment of Certain Refunds . If any Recipient determines, in its sole discretion, exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by Seller or Guarantor, or with respect to which Seller or Guarantor has paid additional amounts pursuant to this Section, it shall promptly notify Seller of such refund and promptly pay to Seller or Guarantor, as applicable, an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by Seller or Guarantor under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that Seller or Guarantor, upon the request of such Recipient, agree to repay the amount paid over to any such Seller or Guarantor (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Recipient in the event such Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection, in no event will the applicable Recipient be required to pay any amount to Seller or Guarantor pursuant to this subsection the payment of which would place the Recipient in a less favorable net after-Tax position

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than such Recipient would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This subsection shall not be construed to require the Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to Seller, Guarantor or any other Person.

(viii) Survival . Each party’s obligations under this Section shall survive the assignment of rights by Buyer, the termination of the Facility and the repayment, satisfaction or discharge of all other Facility Obligations.

(b) Illegality . If Buyer determines that any Change in Law, or in the interpretation or application thereof shall make it unlawful for Buyer to effect Transactions as contemplated by the Transaction Documents, (i) the commitment of Buyer hereunder to enter into new Transactions and to continue Transactions as such, or to make any Subsequent Purchase or pay the Supplemental Purchase Price, shall forthwith be canceled, and (ii) the outstanding Transactions shall, at Buyer’s discretion, be converted automatically to Alternative Rate Transactions, for which the Pricing Rate shall be the Alternative Rate, on the last day of the then current Pricing Rate Period or within such earlier period as may be required by law. Buyer’s method of determining any amount payable to Buyer pursuant to the immediately preceding sentence shall be substantially similar to the method used by Buyer in implementing similar provisions for similarly situated sellers and repurchase facilities similar to the Facility. 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 this Section 27(b) of this Agreement. Seller shall indemnify Buyer and hold Buyer harmless from any loss or expense (not to include any lost profit or opportunity) (including, without limitation, reasonable attorneys’ fees and disbursements) which Buyer may sustain or incur as a consequence of (x) default by Seller in terminating any Transaction after Seller has given a notice in accordance with Section 3(h) of a termination of a Transaction or (y) default by Seller in selling Eligible Mortgage Loans after Seller has notified Buyer of a proposed Transaction and Buyer has agreed to purchase such Eligible Mortgage Loans in accordance with the provisions of this Agreement.

(c) Inability to Determine Rates . If, prior to the first day of any Pricing Rate Period with respect to any Transaction, Buyer determines that: (i) Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable amount for the Pricing Rate Period; (ii) adequate and reasonable means do not exist for determining the one-month LIBOR rate for such Pricing Rate Period; or (iii) the one-month LIBOR rate for does not adequately and fairly reflect the cost to Buyer of making or maintaining Transactions or such Pricing Rate Period. Thereafter, the Pricing Rate with respect to such Transaction for such Pricing Rate Period, and for any subsequent Pricing Rate Period until notice from Buyer has been withdrawn, shall be determined based upon an alternate index selected by Buyer (the “ Alternative Rate ”), reasonably comparable to that of the one-month LIBOR rate, intended to generate a return substantially the same as that generated by one-month LIBOR rate; provided Buyer’s method of determining any amount payable to Buyer pursuant to this clause (c) shall be substantially similar to the method used by Buyer in implementing similar provisions for similarly situated sellers and repurchase facilities similar to the Facility.

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(d) Increased Costs Generally . If there shall occur any adoption or implementation of, or change to, any Regulation, or interpretation or administration thereof, which shall have the effect of imposing on Buyer (or Buyer’s holding company) any increase or expansion of or any new: Tax (other than (A) Indemnified Taxes, (B) Taxes in clauses (b) through (d) of the definition of “Excluded Taxes”, and (C) Connection Income Taxes), charge, fee, assessment or deduction of any kind whatsoever, or reserve, capital adequacy, special deposits or similar requirements against credit extended by, assets of, or deposits with or for the account of Buyer or other conditions affecting the extensions of credit under this Agreement; then Seller or Guarantor shall pay to Buyer such additional amount as Buyer deems necessary to compensate Buyer for any increased cost to Buyer attributable to the extension(s) of credit under this Agreement and/or for any reduction in the rate of return on Buyer’s capital and/or Buyer’s revenue attributable to such extension(s) of credit; provided that the Buyer’s method of determining any amount payable to Buyer pursuant to this clause (d) shall be substantially similar to the method used by Buyer in implementing similar provisions for similarly situated sellers and repurchase facilities similar to the Facility. As used above, the term “ Regulation ” shall include any federal, state or international law, governmental or quasi-governmental rule, regulation, policy, guideline or directive (including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act and enactments, issuances or similar pronouncements by Buyer for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices or any similar authority and any successor thereto) that applies to Buyer. Buyer determination of the additional amount(s) due under this paragraph shall be binding in the absence of manifest error, and such amount(s) shall be payable within 15 days of demand and, if recurring, as otherwise billed by Buyer.

(e) Delay in Requests. If Buyer becomes entitled to claim any additional amounts pursuant to this Section 27 , it shall promptly notify Seller of the event by reason of which it has become so entitled within one hundred and eighty (180) days after becoming aware thereof (the “ Change in Circumstance Notice ”). A certificate as to any additional amounts payable pursuant to this Section submitted by Buyer to Seller shall be included in the Change in Circumstance Notice setting forth the basis of calculation therefor and shall be conclusive and binding on Seller in the absence of manifest error. Seller shall pay such additional amounts on demand. Failure or delay on the part of Buyer to demand compensation pursuant to the foregoing provisions of this Section 27 shall not constitute a waiver of Buyer’s right to demand such compensation.

(f) LIBO Rate Changes. Notwithstanding anything herein to the contrary, Buyer’s method of determining any amount payable by Buyer due to an adjustment of the LIBO Rate for any reserve requirement or any subsequent costs arising from a change in government regulation (as set forth in the definition of LIBO Rate) shall be substantially similar to the method used by Buyer in implementing similar provisions for similarly situated sellers and repurchase facilities similar to the Facility.

[ Signatures follow on next page ]

LEGAL02/36513741v13

IN WITNESS WHEREOF, the parties have executed this Master Repurchase and Securities Contract as of the 1st day of August, 2016.



BUYER :

U.S. BANK NATIONAL ASSOCIATION
By:	/s/ Jason Cohan
Name:	Jason Cohan
Title:	Assistant VP

[Signatures continue on the following page.]

Master Repurchase and Securities Contract
USBank/Ares Lender US LLC



SELLER:

ACRC LENDER US LLC, a Delaware limited liability company
By:	/s/ Tae-Sik Yoon
Name:	Tae-Sik Yoon
Title:	Chief Financial Officer

Master Repurchase and Securities Contract
USBank/Ares Lender US LLC

ANNEX I

Names and Addresses for Communications between Parties

Buyer :

U.S Bank National Association

Galleria North Tower I

13737 Noel Road, Suite 800

Dallas, Texas 75240

Attention: Huvishka Ali and Jason Cohan

Telephone: (972) 581-1602/(972) 581-1628

Facsimile No.: (972) 581-1670

With copies to :

U.S Bank National Association

Galleria North Tower I

13737 Noel Road, Suite 800

Dallas, Texas 75240

Attention: Loan Administration -

Dolores Lucio

Facsimile No.: (972) 581-1670

Confirmation No.: (972) 581-1631

With copies to:

Patrick Sargent

Alston & Bird LLP

2828 N. Harwood St., Floor 18

Telephone: 214-922-3502

Seller :

ACRC Lender US LLC
c/o Ares Management
245 Park Avenue, 42nd Floor,
New York, NY, 10167
Attn: Real Estate Capital Markets & Legal Department
Telephone: 646-259-4842
Telecopy: 310-388-3041

Annex I – Page 1

LEGAL02/36513741v13

ACRC Lender US LLC
c/o Ares Management
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067
Attention: Chief Accounting Officer
Telephone: 310-201-4100
Telecopy: 310-203-8820

ACRC Lender US LLC
c/o Ares Management
One North Wacker Drive, 48th Floor
Chicago, Illinois 60606
Attn: Legal Department and Capital Markets Group
Telephone: 312-252-7500
Telecopy: 312-252-7501

Annex I – Page 2

LEGAL02/36513741v13

ANNEX II

(see attached)

Annex I – Page 3

LEGAL02/36513741v13

EXHIBIT I

FORM OF CONFIRMATION

CONFIRMATION STATEMENT

U.S. BANK NATIONAL ASSOCIATION

Ladies and Gentlemen:

U.S. Bank National Association, is pleased to deliver our written CONFIRMATION of our agreement to enter into the Transaction pursuant to which U.S. Bank National Association shall purchase from you the Eligible Mortgage Loans identified in this Confirmation, pursuant to the Master Repurchase and Securities Contract (“MRSC”) between U.S. Bank National Association (the “ Buyer ”) and ACRC Lender US LLC (“ Seller ”), dated as of August 1, 2016 (the “ Agreement ”: capitalized terms used herein without definition have the meanings given in the Agreement), as follows below and on the attached Appendix 1:



Purchase Date:		____________
Repurchase Date:
Purchased Mortgage Loan:		As identified on attached Appendix 1

Initial Purchase Price:		As identified on attached Appendix 1
Purchase Price Percentage:		%
Pricing Rate:		One month LIBOR plus [_____]% (the “Applicable Spread”)
Maximum Purchase Price Percentage:
Maximum Advance Amount:

Maximum Repurchase Price: Minimum Buyer’s Debt Yield: Minimum Buyer’s DSCR: Maximum As-is Buyer’s LTV: Other Covenants (financial or otherwise): [First Covenant Determination Quarterly Period:]

Exhibit I – Page 1



Name and address for communications:	Buyer :	U.S Bank National Association 13737 Noel Road, Suite 800 Dallas, Texas 75240 Attention: Huvishka Ali/Jason Cohan Telephone: (972) 581-1602/(972) 581-1628 Facsimile No.: (972) 581-1670 U.S Bank National Association 13737 Noel Road, Suite 800 Dallas, Texas 75240 Attention: Loan Administration - DoloresLucio Facsimile No.: (972) 581-1670 Confirmation No.: (972) 581-1631

	Seller:	ACRC Lender US LLC c/o Ares Management 245 Park Avenue, 42nd Floor, New York, NY, 10167 Attn: Real Estate Capital Markets & Legal Department Telephone: 646-259-4842 Telecopy: 310-388-3041 ACRC Lender US LLC c/o Ares Management 2000 Avenue of the Stars, 12th Floor Los Angeles, CA 90067 Attention: Chief Accounting Officer Telephone: 310-201-4100 Telecopy: 310-203-8820 ACRC Lender US LLC c/o Ares Management One North Wacker Drive, 48th Floor Chicago, Illinois 60606 Attn: Legal Department and Capital Markets Group Telephone: 312-252-7500 Telecopy: 312-252-7501*

All of the Transaction Conditions Precedent have been satisfied or, to the extent reflected on Exhibit A to this Confirmation, waived by Buyer. Any conditions to any such waivers shall be set forth on such Exhibit A.

The Mortgage Loan described in Appendix 1 to this Confirmation is an Eligible Mortgage Loan and all of the representations and warranties contained in the Repurchase Agreement (including Exhibit VI to the Repurchase Agreement as applicable to such Purchased Mortgage Loan) are true and correct except to the extent that such representations and warranties (x) specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date,

Exhibit I – Page 2

or (y) are already qualified by materiality, in which case such representations and warranties shall be true and correct in all respects), subject to any exceptions identified on Appendix 1.

No Default or Event of Default exists on the date hereof nor will exist as a result of the Transaction contemplated hereby.

After giving effect to such Transaction, the aggregate Maximum Repurchase Price for all Purchased Mortgage Loans subject to Transactions outstanding does not exceed the Facility Amount.

[FUNDING ACCOUNT WIRING INSTRUCTIONS]

Exhibit I – Page 3



U.S. BANK NATIONAL ASSOCIATION



By:
Name:
Title:







AGREED AND ACKNOWLEDGED:

ACRC LENDER US LLC , a Delaware limited liability company

By:
Name:
Title:

Exhibit I – Page 4

Appendix 1 to Confirmation

For each Eligible Mortgage Loan, describe, as applicable:



(a) Transaction Name
(b) Borrower Name
(c) Property Type
(d) City, State
(e) Appraised Value
(f) Appraisal Date
(g) Maximum Commitment
(h) Current Balance
(i) Current Interest Rate
(j) Note Date
(k) Initial Maturity Date
(l) Extended Maturity Date (if applicable)
(m) Detailed description of any Representation Exceptions (if any) – describe on separate page and cross-reference the related paragraph numbers in Schedule 1 to the Repurchase Agreement
(p) Initial Purchase Price
(q) Maximum Repurchase Price

EXHIBIT II

AUTHORIZED REPRESENTATIVES OF SELLER



Name		Specimen Signature

EXHIBIT III

FORM OF CUSTODIAL DELIVERY

On this ____ of _____, 20[__], ACRC LENDER US LLC (“ Seller ”), as Seller under that certain Master Repurchase and Securities Contract, dated as of August 1, 2016 (the “ Repurchase Agreement ”) between Seller and U.S. Bank National Association (“ Buyer ”), does hereby deliver to U.S. Bank National Association (“ Custodian ”), as custodian under that certain Custodial Agreement, dated as of August 1, 2016 (the “Custodial Agreement”) among Buyer, Seller and Custodian, the Mortgage Loan Files with respect to the Purchased Mortgage Loans to be purchased by Buyer pursuant to the Repurchase Agreement and identified on Schedule I hereto, which shall be subject to the terms of the Custodial Agreement on the date hereof.

With respect to the Mortgage Loan Files delivered hereby, for the purposes of issuing the Trust Receipt, the Custodian shall review the Mortgage Loan Files to ascertain delivery of the documents listed in Section 7(c) to the Repurchase Agreement.

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Custodial Agreement.

IN WITNESS WHEREOF, Seller has caused its name to be signed hereto by its officer thereunto duly authorized as of the day and year first above written.




__________________, a ______________

By:	____________________________________
Its: ____________________________________

SCHEDULE I

EXHIBIT IV

DUE DILIGENCE CHECKLIST

General Information

Investment Committee Report

Site Inspection Report

Maps and Photos

Credit Committee Approval (with signatures)

Borrower/Guarantor Information

Credit Reports

Financial Statements & Tax Returns

Borrower Structure or Org Chart

Bankruptcy and Foreclosure History

Property Information

Historical Operating Statements

Rent Rolls

Budget

Insurance Review

Retail Sales Figures

Market Survey

Statement of Income and Expenses

Leasing Information

Stacking Plan

Major Leases

Tenant Estoppels

SNDA’s

Third Party Reports

Appraisals

Environmental Site Assessments

Engineering and Property Condition Reports

Seismic Reports

Title Survey

Search Reports

Other Information

Hotel Franchise Compliance Reports

Hotel Franchise Agreement

Hotel Franchise Comfort Letters

Ground Lease

Management Contract

Documentation

Purchase and Sale Agreement

Closing Statement

Legal Binder

Financial Information

Debt Service Coverage Ratio

Debt Yield

Market Value

Net Operating Income

Net Cash Flow

Appendix 1 – Page 1

EXHIBIT V

FORM OF POWER OF ATTORNEY

“Know All Men by These Presents, that ACRC Lender US LLC (“ Seller ”), does hereby appoint U.S. Bank National Association (“ Buyer ”), its attorney-in-fact 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, the Purchased Mortgage Loans and the Assignments of Mortgages, (ii) the recordation of the Assignments of Mortgages and other recordable Mortgage Loan Documents and (iii) the enforcement of Seller’s rights under the Purchased Mortgage Loans purchased by Buyer pursuant to the Master Repurchase and Securities Contract dated as of August 1, 2016 (the “Master Repurchase Agreement”) between Seller and Buyer, and to take such other steps as may be necessary or desirable to enforce Buyer’s rights against the Purchased Mortgage Loans, the related Mortgage Loan Files and the Servicing Records to the extent that Seller is permitted by law to act through an agent. Capitalized terms used above that are not defined herein have the meaning assigned them in the Master 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 OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY FROM BUYER, 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 Seller has caused this Power of Attorney to be executed and Seller’s seal to be affixed this ___ day of _______________, 20__.




__________________, a ______________

By:	__________________________________
Its: __________________________________

EXHIBIT VI

REPRESENTATIONS AND WARRANTIES
REGARDING EACH PURCHASED MORTGAGE LOAN

Whole Loan; Ownership of Purchased Mortgage Loans . Each Purchased Mortgage Loan is a whole loan and not a participation interest in a Purchased Mortgage Loan. 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 the Seller), participation or pledge, and the Seller had good title to, and was the sole owner of, each Purchased Mortgage Loan free and clear of any and all liens, charges, pledges, encumbrances, participations, any other ownership interests on, in or to such Purchased Mortgage Loan other than any servicing rights appointment or similar agreement. Seller has full right and authority to sell, assign and transfer each Purchased Mortgage Loan, and the assignment to Buyer constitutes a legal, valid and binding assignment of such Purchased Mortgage Loan free and clear of any and all liens, pledges, charges or security interests of any nature encumbering such Purchased Mortgage Loan.

Loan Document Status . Each related Mortgage Note, Mortgage, Assignment of Leases and Rents (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 Mortgage 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) that certain provisions in such Mortgage 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 Mortgage 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 ”).

Except as set forth in the immediately preceding sentences, 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 Mortgage Loan Documents, including, without limitation, any such valid offset, defense, counterclaim or right based on fraud by Seller in connection with the origination of the Purchased Mortgage Loan, that would deny the mortgagee the principal benefits intended to be provided by the Mortgage Note, Mortgage or other Mortgage Loan Documents.

Mortgage Provisions . The Mortgage Loan Documents for each Purchased Mortgage 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.

Mortgage Status; Waivers and Modifications . Since origination and except by written instruments set forth in the related Mortgage Loan File (a) the material terms of such Mortgage, Mortgage Note, Purchased Mortgage Loan guaranty, and related Mortgage Loan Documents have not been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect that could reasonably be expected to have a material adverse effect on such Purchased Mortgage Loan; (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 Mortgage Loan.

Lien; Valid Assignment . Subject to the Standard Qualifications, each assignment of Mortgage and assignment of Assignment of Leases and Rents from the Seller constitutes a legal, valid and binding assignment from the Seller. Each related Mortgage and Assignment of Leases and Rents is freely assignable without the consent of the related Mortgagor, or such consent has been obtained. 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 Mortgage Loan or allocated loan amount (subject only to Permitted Encumbrances (as defined below) and the exceptions set forth in paragraph (6) (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 Seller’s knowledge, 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 Seller’s knowledge and subject to the rights of tenants (as tenants only) (subject to and excepting Permitted Encumbrances and the Title Exceptions), no circumstances 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 Uniform Commercial Code (“ UCC ”) financing statements is required in order to effect such perfection.

Permitted Liens; Title Insurance . Each Mortgaged Property securing a Purchased Mortgage 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 Mortgage Loan (or with respect to a Purchased Mortgage 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 not yet due and payable; (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; and (f) if the related Purchased Mortgage Loan is cross-collateralized and cross-defaulted with another Purchased Mortgage Loan (each a “ Crossed Purchased Mortgage Loan ”), the lien of the Mortgage for another Purchased Mortgage Loan that is cross-collateralized and cross-defaulted with such Crossed Purchased Mortgage Loan, 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 the Seller thereunder and no claims have been paid thereunder. Neither the Seller, nor to the Seller’s knowledge, any other holder of the Purchased Mortgage Loan, has done, by act or omission, anything that would materially impair the coverage under such Title Policy.

Junior Liens . It being understood that B notes secured by the same Mortgage as a Purchased Mortgage Loan are not subordinate mortgages or junior liens, except for any Crossed Purchased Mortgage Loan, there are, as of origination, and to the Seller’s knowledge, 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 materialmens liens (which are the subject of the representation in paragraph (5) above), and equipment and other personal property financing). The Seller has no knowledge of any mezzanine debt secured directly by interests in the related Mortgagor.

Assignment of Leases and Rents . There exists as part of the related Purchased Mortgage Loan File an Assignment of Leases and Rents (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 and Rents 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 and Rents, subject to applicable law, provides that, upon an event of default under the Purchased Mortgage 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.

UCC Filings . If the related Mortgaged Property is operated as a hospitality property, the 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 Mortgage 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 Mortgage Loan 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.


10.	Condition of Property . Seller or the originator of the Purchased Mortgage Loan inspected or caused to be inspected each related Mortgaged Property within six months of origination of the Purchased Mortgage Loan and within twelve months of the Purchase Date.

An engineering report or property condition assessment was prepared in connection with the origination of each Purchased Mortgage Loan no more than twelve months prior to the Purchase Date. To the Seller’s knowledge, 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 Mortgage Loan.

11.

Taxes and Assessments . All real estate taxes, governmental assessments and other similar outstanding governmental charges (including, without limitation, water and sewage charges), or installments thereof, that could be a lien on the related Mortgaged Property that would be of equal or superior priority to the lien of the Mortgage and that prior to the Purchase Date have become delinquent in respect of each related Mortgaged Property have been paid, or 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.

12.

Condemnation . As of the date of origination and to the Seller’s knowledge as of the Purchase Date, there is no proceeding pending, and, to the Seller’s knowledge 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.

13.

Actions Concerning Purchased Mortgage Loan . To the Seller’s knowledge, based on evaluation of the Title Policy (as defined in paragraph 6), an engineering report or property condition assessment as described in paragraph 10, applicable local law compliance materials as described in paragraph 24, reasonable and customary bankruptcy, civil records, UCC-1, and judgment searches of the Obligors and guarantors, and the ESA (as defined in paragraph 40) on and as of the date of origination and as of the Purchase Date, there was no pending or filed action, suit or proceeding 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 Property, (b) the validity or enforceability of the Mortgage, (c) such Mortgagor’s ability to perform under the related Purchased Mortgage 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 Mortgage Loan Documents or (f) the current principal use of the Mortgaged Property.

14.

Escrow Deposits . All escrow deposits and payments required to be escrowed with lender pursuant to each Purchased Mortgage Loan are in the possession, or under the control, of the 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 Mortgage Loan Documents are being conveyed by the Seller to Buyer or its servicer.

15.

No Holdbacks . The principal balance as of the Initial Purchase Date of the Purchased Mortgage Loan set forth on the Purchased Mortgage Loan Schedule has been fully disbursed as of the Initial Purchase Date and there is no requirement for future advances thereunder (except (i) in those cases where the full amount of the Purchased Mortgage 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 and (ii) as is reflected on the Confirmation (as reflected in the difference between the Initial Purchase Price and the Maximum Repurchase Price).

16.

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 Mortgage 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 Investors Service, Inc. or (iii) at least “A-” from Standard & Poor’s Ratings Service (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 Mortgage 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 Mortgage 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 Mortgage Loan on a single asset with a principal balance of $50 million or more, 18 months).

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.

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.

The Mortgaged Property is covered, and required to be covered pursuant to the related Mortgage 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 the 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 meeting the Insurance Rating Requirements in an amount not less than 100% of the SEL or PML, as applicable.

The Mortgage 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 Mortgage Loan, 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 Mortgage Loan together with any accrued interest thereon.

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 Mortgage 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 Mortgage 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.

17.

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 Mortgage 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 or the non-recourse carveout guarantor under the Purchased Mortgage Loan has indemnified the mortgagee for any loss suffered in connection therewith.

18.

No Encroachments . To Seller’s knowledge based solely on surveys obtained in connection with origination (which may have been a previously existing “as built” survey) and the lender’s Title Policy (or, if such policy is not yet issued, a pro forma title policy, a preliminary title policy with escrow instructions or a “marked up” commitment) obtained in connection with the origination of each Purchased Mortgage 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 Mortgage 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 material improvements encroach upon any easements except for encroachments the removal of which would not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements have been obtained under the Title Policy.


19.	No Contingent Interest or Equity Participation . No Purchased Mortgage Loan has a shared appreciation feature, any other contingent interest feature or a negative amortization feature (except that an ARD Loan may provide for the accrual of the portion of interest in excess of the rate in effect prior to the Anticipated Repayment Date) or an equity participation by Seller.


20.	Intentionally Omitted .


21.	Compliance with Usury Laws . The interest rate (exclusive of any default interest, late charges, exit fees, yield maintenance charges or prepayment premiums) of such Purchased Mortgage 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.

22.

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 Mortgage Loan by the Buyer.

23.

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 Seller’s knowledge, 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.

24.

Local Law Compliance . To the Seller’s knowledge, based upon any of a letter from any governmental authorities, a legal opinion, an architect’s letter, a zoning consultant’s report, an endorsement to the related Title Policy, or other affirmative investigation of local law compliance consistent with the investigation conducted by the Seller for similar commercial, multifamily and manufactured housing community mortgage loans intended for securitization, with respect to the improvements located on or forming part of each Mortgaged Property securing a Purchased Mortgage Loan as of the date of origination of such Purchased Mortgage 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 the 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 Commercial Mortgage Loan. The terms of the Mortgage Loan Documents require the Mortgagor to comply in all material respects with all applicable governmental regulations, zoning and building laws.

25.

Licenses and Permits . Each Mortgagor covenants in the Mortgage 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 Seller’s knowledge based upon a letter from any government authorities or other affirmative investigation of local law compliance consistent with the investigation conducted by the Seller for similar commercial, multifamily and manufactured housing community mortgage loans intended for securitization, all such material licenses, permits and applicable governmental authorizations are in effect. The Purchased Mortgage Loan requires the related Mortgagor to be qualified to do business in the jurisdiction in which the related Mortgaged Property is located.

26.

Recourse Obligations . The Mortgage Loan Documents for each Purchased Mortgage Loan provide that such Purchased Mortgage Loan is non-recourse to the related parties thereto except 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 Mortgage Loan Documents, which acts generally include the following: (i) acts of fraud or intentional material misrepresentation, (ii) misappropriation of rents (following an Event of Default), insurance proceeds or condemnation awards, (iii) intentional material physical waste of the Mortgaged Property, and (iv) any breach of the environmental covenants contained in the related Mortgage Loan Documents, and (b) the Purchased Mortgage Loan shall become full recourse to the related Mortgagor and at least one individual or entity, upon the occurrence of certain events or acts specified in the related Mortgage Loan File, including the filing by the related Mortgagor of a voluntary petition under federal or state bankruptcy or insolvency law.

27.

Mortgage Releases . The terms of the related Mortgage or related Commercial Mortgage 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 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 Commercial Mortgage Loan, (b) upon payment in full of such Commercial Mortgage Loan, (c) releases of out-parcels that are unimproved or other portions of the Mortgaged Property which will not have a material adverse effect on the underwritten value of the Mortgaged Property and which were not afforded any material value in the appraisal obtained at the origination of the Commercial Mortgage Loan and are not necessary for physical access to the Mortgaged Property or compliance with zoning requirements, or (d) as required pursuant to an order of condemnation.

28.

Financial Reporting and Rent Rolls . The Mortgage 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 Mortgage 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.

29.

Acts of Terrorism Exclusion . With respect to each Purchased Mortgage 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 (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 Mortgage 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 Mortgage Loan, and, to Seller’s knowledge, 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 Mortgage Loan, the related Mortgage 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 Mortgage 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 required under the related Mortgage Loan Documents (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance) at the time of the origination of the Purchased Mortgage Loan, 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.

30.

Due on Sale or Encumbrance. Subject to specific exceptions set forth below, each Purchased Mortgage Loan contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Purchased Mortgage 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 Mortgage Loan Documents (which provide for transfers without the consent of the lender which are customarily acceptable to the 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 Mortgage 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 Mortgage Loan Documents, (iii) transfers that do not result in a change of Control of the related Mortgagor or transfers of passive interests so long as the guarantor retains Control (iv) transfers to another holder of direct or indirect equity in the Mortgagor, a specific Person designated in the related Mortgage Loan Documents or a Person satisfying specific criteria identified in the related Mortgage Loan Documents, such as a qualified equityholder, (v) transfers of stock or similar equity units in publicly traded companies or (vi) a substitution or release of collateral within the parameters of paragraph 27 herein, or (vii) by reason of any mezzanine debt that existed at the origination of the related Purchased Mortgage Loan, or future permitted mezzanine debt or (b) the related Mortgaged Property is encumbered with a subordinate lien or security interest against the related Mortgaged Property, other than (i) any Companion Loan or any subordinate debt that existed at origination and is permitted under the related Mortgage Loan Documents, (ii) purchase money security interests, (iii) any Crossed Purchased Mortgage Loan or (iv) Permitted Encumbrances. The Mortgage or other Mortgage 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. “ Control ” and the correlative meanings of the terms “ Controlled By ” and “ Under Common Control With ” means the (i) possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting shares or partnership interests, or of the ability to exercise voting power by contract or otherwise or (ii) the direct or indirect beneficial ownership of fifty percent (50%) or more of the outstanding voting securities or voting equity of such Person.

31.

Special-Purpose Entity . Each Purchased Mortgage Loan requires the Mortgagor to be a Special-Purpose Entity for at least as long as the Purchased Mortgage Loan is outstanding. Both the Mortgage Loan Documents and the organizational documents of the Mortgagor with respect to each Purchased Mortgage Loan with a Purchase Date Principal balance in excess of $5 million provide that the Mortgagor is a Special-Purpose Entity, and each Purchased Mortgage 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 “ Special-Purpose Entity ” shall mean an entity, other than an individual, whose organizational documents (or if the Purchased Mortgage Loan has a Purchase Date Principal balance equal to $5 million or less, its organizational documents or the related Mortgage 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 Mortgage 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 Mortgage 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 Mortgage 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 Purchased Mortgage Loan), and that it holds itself out as a legal entity, separate and apart from any other person or entity.

32.

Floating Interest Rates . The interest rate of each Purchased Mortgage Loan that bears interest at a floating rate of interest is based on LIBOR plus a margin (which interest rate may be subject to a minimum or “floor” rate). For this purpose, “ LIBOR ” shall mean (a) the offered rate for deposits in U.S. dollars for a period equal to thirty (30) days, which appears on the display designated as “BBAM” on Bloomberg (or such other display as may replace “BBAM” on Bloomberg), or any successor thereto, as the London Interbank Offering Rate as of 8:00 a.m., New York City time, on the applicable determination date or (b) if such rate does not appear on said “BBAM” display, then the arithmetic mean (rounded as aforesaid) of certain offered quotations of rates to prime banks in the London interbank market as of approximately 11:00 a.m., London time, in an amount that is representative for a single transaction in the relevant market at the relevant time.


33.	Intentionally Omitted .

34.

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 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 Mortgage Loan where the Purchased Mortgage 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 Mortgage 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 (except termination or cancellation if (i) timely notice of a default under the Ground Lease is provided to lender and (ii) such default is curable by lender as provided in the Ground Lease but remains uncured beyond the applicable cure period),, and no such consent has been granted by the Seller since the origination of the Purchased Mortgage Loan except as reflected in any written instruments which are included in the related Mortgage 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 Mortgagor or the mortgagee) that extends not less than 20 years beyond the stated maturity of the related Purchased Mortgage Loan, or 10 years past the stated maturity if such Purchased Mortgage Loan fully amortizes by the stated maturity (or with respect to a Purchased Mortgage 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;

(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 Mortgage 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 Mortgage Loan and its successors and assigns without the consent of the lessor;

(f)

The Seller has not received any written notice of material default under or notice of termination of such Ground Lease. To the Seller’s knowledge, there is no material default under such Ground Lease and no condition that, but for the passage of time or giving of notice, would result in a material default under the terms of such Ground Lease and to the Seller’s knowledge, 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 the 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 Mortgage 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 Mortgage 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 Mortgage Loan, together with any accrued interest; and


(l)	Provided that the lender cures any defaults which are susceptible to being cured, the ground lessor has agreed to enter into a new lease with lender upon termination of the Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding.


35.	Servicing . The servicing and collection practices used by the Seller with respect to the Purchased Mortgage Loan have been, in all material respects, legal and have met customary industry standards for servicing of similar commercial loans

36.

Origination and Underwriting . The origination practices of the Seller (or the related originator if the Seller was not the originator) with respect to each Purchased Mortgage Loan have been, in all material respects, legal and as of the date of its origination, such Purchased Mortgage 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 Mortgage 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.

37.

No Material Default; Payment Record . No Purchased Mortgage 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 Mortgage 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 Seller’s knowledge, there is (a) no material default, breach, violation or event of acceleration existing under the related Purchased Mortgage 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 Mortgage Loan or the value, use or operation of the related Mortgaged Property; provided 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 or warranty made by Seller in this Exhibit VI. No person other than the holder of such Purchased Mortgage Loan may declare any event of default under the Purchased Mortgage Loan or accelerate any indebtedness under the Mortgage Loan Documents.


38.	Bankruptcy . As of the date of origination of the related Purchased Mortgage Loan and to the Seller’s knowledge 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.

39.

Organization of Mortgagor . With respect to each Purchased Mortgage 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 Mortgage Loan, 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 Purchased Mortgage Loan, no Purchased Mortgage Loan has a Mortgagor that is an Affiliate of another Mortgagor. (An “ Affiliate ” for purposes of this paragraph (39) means, a Mortgagor that is under direct or indirect common ownership and control with another Mortgagor.)

40.

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 Mortgage Loans, a Phase II environmental site assessment (collectively, an “ ESA ”) meeting ASTM requirements conducted by a reputable environmental consultant in connection with such Purchased Mortgage 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 pollution legal liability insurance policy that covers liability for the Environmental Condition was obtained from an insurer meeting the Insurance Rating Requirements; (E) a party not related to the Mortgagor was identified as the responsible party for such Environmental Condition and such responsible party has financial resources reasonably estimated to be adequate to address the situation; or (F) a party related to the Mortgagor having financial resources reasonably estimated to be adequate to address the situation is required to take action. To Seller’s knowledge, except as set forth in the ESA, there is no Environmental Condition (as such term is defined in ASTM E1527-05 or its successor) at the related Mortgaged Property.

41.

Appraisal . The Mortgage Loan File contains an appraisal of the related Mortgaged Property with an appraisal date within 6 months of the Purchased Mortgage Loan origination date, and within 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 Mortgage Loan.


42.	Purchased Mortgage Loan Schedule . The information pertaining to each Purchased Mortgage Loan which is set forth in the Purchased Mortgage Loan Schedule to this Agreement is true and correct in all material respects as of the Purchase Date and contains all information required by this Agreement to be contained therein.


43.	Cross-Collateralization . Each Purchased Mortgage Loan that is cross-collateralized or cross-defaulted is cross-collateralized or cross-defaulted only with other Purchased Mortgage Loans that are subject to Transactions under this Agreement.

44.

Advance of Funds by the Seller . After origination, no advance of funds has been made by Seller to the related Mortgagor other than in accordance with the Mortgage Loan Documents, and, to Seller’s knowledge, no funds have been received from any person other than the related Mortgagor or an affiliate for, or on account of, payments due on the Purchased Mortgage Loan (other than as contemplated by the Mortgage 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 Mortgage Loan Documents). Neither Seller nor any affiliate thereof has any obligation to make any capital contribution to any Mortgagor under a Purchased Mortgage Loan, other than contributions made on or prior to the date hereof.


45.	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 Mortgage Loan, the failure to comply with which would have a material adverse effect on the Purchased Mortgage Loan.

EXHIBIT VII

FORM OF SUBSEQUENT PURCHASE REQUEST

Pursuant to Section 3(k) of that certain Master Repurchase and Securities Contract, dated as of August 1, 2016 (as amended, supplemented or otherwise modified from time to time, the “ Agreement ”), between U.S. Bank National Association (“ Buyer ”) and ACRC Lender US LLC (“ Seller ”), Seller hereby requests that Buyer make a Subsequent Purchase from Sellerin an amount equal to the Subsequent Purchase Request set forth below with respect to the following Purchased Mortgage Loan:

Request Date:

Purchased Mortgage Loan Name:

Seller’s funded balance under Purchased Mortgage Loan: $

USB’s Current Purchase Price: $

Purchase Price Percentage: %

Subsequent Advance: $

Subsequent Purchase Price: $

Funding Date:

Funding Account Number:

Capitalized terms used herein without definition have the meanings given in the Repurchase Agreement.

ACRC LENDER US LLC , as Seller

By:
Name:
Title:

U.S. BANK NATIONAL ASSOCIATION, as Buyer

By:
Name:
Title:

Exhibit V – Page 1

EXHIBIT VIII

FORM OF TRANSACTION REQUEST

Ladies and Gentlemen:

Pursuant to Section 3(a) of that certain Master Repurchase and Securities Contract dated as of August 1, 2016 (the “ Agreement ”), between U.S. BANK NATIONAL ASSOCIATION (“ Buyer ”) and ACRC LENDER US LLC (“ Seller ”), Seller hereby requests that Buyer enter into a Transaction with respect to the Eligible Mortgage Loans set forth on Schedule 1 attached hereto, upon the proposed terms set forth below. Capitalized terms used herein without definition have the meanings given in the Agreement.

Exhibit VIII – Page 1



Proposed Eligible Mortgage Loans:		[_________________]
Purchase Price Percentage Proposed by Seller:		[_________________]

Proposed Initial Purchase Price:		[_________________]
Proposed Maximum Repurchase Price		[_________________]
Name and address for communications:		Buyer : U.S Bank National Association 13737 Noel Road, Suite 800 Dallas, Texas 75240 Attention: Huvishka Ali and Thomas Salmen Telephone: (972) 581-1602/(612) 303-3640 Facsimile No.: (972) 581-1670/(612) 303-4231 Seller : ACRC Lender US LLC, __________________ __________________ Attention: _____________ Telephone: ___-____ Telecopy: ___-____ with a copy to: _____________ _____________ _____________ Attention: ____________. Telephone: (___) ___-____ Telecopy: (___) ___-____
	SELLER: ACRC LENDER US LLC, a Delaware limited liability company
	By: Name: Title:

Exhibit VIII – Page 2

Schedule 1 to Transaction Request

Eligible Mortgage Loan:

Current Principal Amount of Eligible Mortgage Loan: $[______________]

Maximum Principal Amount of Eligible Mortgage Loan: $[____________]

EXHIBIT IX

OWNERSHIP CHART

(attached hereto)

EXHIBIT X

SERVICING DIRECTION LETTER

U.S. Bank

__________ ___, 20[__]

___________________

Attention: ____________


Re:	$_________ loan (the “ Loan ”) pursuant to Loan Agreement dated as of ________ ___, 20[__] (the “ Loan Agreement ”), from _____________________ (“ Payee ”) to _______________ (“ Borrower ”).

Ladies and Gentlemen:

[_______], a [___________] (“ Servicer ”) is currently servicing the Loan for Payee. Servicer is obligated to pay over to Payee the proceeds of the Loan, or the payments, dividends or distributions with respect thereto (collectively, the “ Proceeds ”). On the date hereof, Payee has assigned its interest in the Loan to U.S. Bank National Association (“ Assignee ”). Accordingly, you hereby (i) acknowledge and agree that, from and after the date hereof, the Loan shall be serviced by Servicer under and in accordance with the terms and conditions of the [Servicing Agreement] dated as of ______, 20[__] (the “ Servicing Agreement ”), between Servicer and ACRC Lender US LLC, [other parties, if applicable] and Assignee and (ii) are directed to deposit and disburse all future payments received by you which are due under the Loan in accordance with the Servicing Agreement, into the Servicer Account at [_____________], account number [____________].

No provision of this redirection letter may be revoked, amended or otherwise modified without the prior written consent of Assignee.

Please acknowledge receipt of this redirection letter by signing in the signature block below and forwarding an executed copy to Assignee and Payee promptly upon receipt.

[ Signatures follow ]

Very truly yours,

[______________________]

By:

Name:

Title:

[_____________________]

By:

Name:

Title:

ACKNOWLEDGED AND AGREED:

[______________________]

By:

Name:

Title: ]

EXHIBIT XI-A

FORM OF U.S. TAX COMPLIANCE CERTIFICATES

(For Foreign Buyers That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Master Repurchase and Securities Contract dated as of August 1, 2016 (as amended, supplemented or otherwise modified from time to time, the “ Repurchase Agreement ”), by and among ACRC Lender US LLC, as seller, and U.S. Bank National Association, as buyer.

Pursuant to the provisions of Section 27 of the Repurchase Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the obligations in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of Seller or Guarantor within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to Seller or Guarantor as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished Buyer and Seller with a certificate of its non-U.S. Person status on IRS Form W-8BEN or W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform Seller and Buyer, and (2) the undersigned shall have at all times furnished Seller and Buyer with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Repurchase Agreement and used herein shall have the meanings given to them in the Repurchase Agreement.

[NAME OF BUYER]


By:	Name: Title:

Date: ________ __, 20[ ]

Schedule 1 – Page 1

EXHIBIT XI-B

FORM OF U.S. TAX COMPLIANCE CERTIFICATES

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of Section 27 of the Repurchase Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of Seller or Guarantor within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to Seller or Guarantor as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Buyer with a certificate of its non-U.S. Person status on IRS Form W-8BEN or W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Buyer in writing, and (2) the undersigned shall have at all times furnished such Buyer with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Repurchase Agreement and used herein shall have the meanings given to them in the Repurchase Agreement.

[NAME OF PARTICIPANT]


By:	Name: Title:

Date: ________ __, 20[ ]

Exhibit XI-A – Page 1

LEGAL02/36513741v13

EXHIBIT XI-C

FORM OF U.S. TAX COMPLIANCE CERTIFICATES

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of Section 27 of the Repurchase Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of Seller or Guarantor within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to Seller or Guarantor as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Buyer with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Buyer and (2) the undersigned shall have at all times furnished such Buyer with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Repurchase Agreement and used herein shall have the meanings given to them in the Repurchase Agreement.

[NAME OF PARTICIPANT]


By:	Name: Title:

Date: ________ __, 20[ ]

Exhibit XI-B – Page 1

LEGAL02/36513741v13

Exhibit XI – Page 2

LEGAL02/36513741v13

EXHIBIT XI-D

FORM OF U.S. TAX COMPLIANCE CERTIFICATES

(For Foreign Buyers That Are Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of Section 27 of the Repurchase Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the obligations in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such obligations, (iii) with respect to the extension of credit pursuant to this Repurchase Agreement or any other Transaction Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of Seller or Guarantor within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to Seller or Guarantor as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished Buyer and Seller with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform Seller and Buyer, and (2) the undersigned shall have at all times furnished Seller and Buyer with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Repurchase Agreement and used herein shall have the meanings given to them in the Repurchase Agreement.

[NAME OF BUYER]


By:	Name: Title:

Exhibit X1- C – Page 1

LEGAL02/36513741v13

Date: ________ __, 20[ ]

Exhibit XI – Page 2

LEGAL02/36513741v13

EXHIBIT XII

FORM OF COMPLIANCE CERTIFICATE

_______, 201__

U.S. Bank National Association

13737 Noel Road, Suite 800

Dallas, Texas 75250

Attention: Loan Administration

Re:

Master Repurchase and Securities Contract, dated as of August 1, 2016 (such agreement, as amended, modified, waived, supplemented or restated from time to time, the “ Repurchase Agreement ”), by and between ACRC Lender US LLC, as seller (together with its successors and permitted assigns, “ Seller ”), and U.S. Bank National Association, as buyer (together with its successors and permitted assigns, “ Buyer ”)

This Compliance Certificate is furnished pursuant to the above Repurchase Agreement. Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the respective meanings ascribed thereto in the Repurchase Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

The Person executing this Compliance Certificate on behalf of [Seller][Guarantor] is a duly authorized officer of [Seller][Guarantor] with oversight and knowledge of the matters to which this certification relates (a “ Responsible Officer ”) and has conducted or assisted in conducting the examinations necessary to verify the information contained in this Compliance Certificate. This Compliance Certificate is being executed solely in such Person’s capacity as a Responsible Officer of [Seller][Guarantor] and not in such Person’s individual capacity.

All of the financial statements, calculations and other information set forth in this Compliance Certificate, including in any exhibit or other attachment hereto, are true, complete and correct in all material respects as of the date hereof.

[Seller][Guarantor] has reviewed the terms of the Transaction Documents and has made, or has caused to be made under the supervision of a Responsible Officer, a detailed review of the transactions and financial condition of [Seller][Guarantor] during the accounting period covered by the financial statements attached hereto (or most recently delivered to Buyer if none are attached).

Exhibit XII – Page 1

LEGAL02/36513741v13

[Seller]]Guarantor] has, during the period since the delivery of the immediately preceding Compliance Certificate, observed or performed all of its covenants, duties and agreements in all material respects, and satisfied in all material respects every condition, contained in [the Repurchase Agreement and] the [other] Transaction Documents to be observed, performed or satisfied by it, and [Seller][Guarantor] has no knowledge of the occurrence during such period, or present existence, of any [Margin Deficit or] condition or event which constitutes an Event of Default or Default (including after giving effect to any pending Transactions requested to be entered into), except as set forth below.

Attached as Exhibit 1 hereto are the calculations demonstrating the [Buyer’s LTV, Buyer’s DSCR and Buyer’s Debt Yield of each Purchased Asset.][Guarantor’s compliance with the covenants set forth in Section 5(a) of the Guaranty.]

[Seller only][Attached as Exhibit 2 hereto is a list of all Purchased Mortgage Loans that are part of the Facility.]

Except as otherwise set forth herein, all representations and warranties made by [Seller][Guarantor] in, pursuant to or in connection with the Transaction Documents or any other document, agreement, statement, affirmation, certificate, notice, report or financial or other statement delivered in connection herewith or therewith, are true and correct in all material respects on and as of the date of this Compliance Certificate as though made on and as of such day and shall be deemed to be made on such day except to the extent that such representations and warranties (x) specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, or (y) are already qualified by materiality, in which case such representations and warranties shall be true and correct in all respects.

Described below are the exceptions, if any, to the above paragraphs, setting forth in detail the nature of the condition or event, the period during which it has existed and the action which [Seller][Guarantor] has taken, is taking, or proposes to take with respect to such condition or event:

The foregoing certifications, together with the financial statements, updates, reports, materials, calculations and other information set forth in any exhibit or other attachment hereto, or otherwise covered by this Compliance Certificate, are made and delivered as of [_________], 201[__].

_____________________________________
Name:
Title:

[ Exhibit 1 : Financial covenant calculations]

[ Exhibit 2 : List of Purchased Mortgage Loans][Seller only]

Exhibit XII – Page 2

LEGAL02/36513741v13

EXHIBIT XIII

FORM OF BAILEE AGREEMENT

____________ __, 20__

[Bailee]
[Address]


Re:	Sale by ACRC Lender US LLC (“ Seller ”) to U.S. Bank National Association (“ Buyer ”) of [____________________] [description of Eligible Mortgage Loan].

Ladies and Gentlemen:

In consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned Seller, Buyer and [ Bailee ] (the “ Bailee ”) hereby agree as follows:

1. On or prior to the date Buyer is to purchase the Eligible Mortgage Loan(s) from Seller (the “ Purchase Date ”), Seller shall have delivered or caused to be delivered to Bailee, as bailee for hire, the documents set forth on Schedule I hereto (the “ Mortgage Loan Documents ”). The Bailee shall issue and deliver to Buyer no later than 1:00 p.m. (New York time) on the Purchase Date (i) by electronic mail, in the name of Buyer, an initial trust receipt and certification in the form of Attachment 1 hereto (the “ Table Funded Trust Receipt ”), (ii) this Bailee Agreement fully executed by all parties hereto and (iii) such other documents and agreements as Buyer may reasonably require.

2. In the event that Buyer fails to purchase the Eligible Mortgage Loan from Seller on the Purchase Date, Buyer shall deliver by facsimile to Bailee at [(___) _______] or by emailed PDF to the attention of [____________] ( [_________] @ [_________] .com), an authorization (the “ Buyer Authorization ”) to release the Mortgage Loan Documents to Seller. Upon receipt of such Buyer Authorization, Bailee shall release the Mortgage Loan Documents to Seller in accordance with Seller’s instructions.

3. Following the Purchase Date, Bailee shall forward the Mortgage Loan Documents to U.S. Bank National Association (the “ Custodian ”), 1133 Rankin Street, Suite 100, St. Paul, MN 55116, Attention: ACRC LENDER US LLC, by insured overnight courier

Exhibit XIII – Page 1

LEGAL02/36513741v13

(e.g. FedEx) for receipt by Custodian no later than 3:00 p.m., Minneapolis time, on the third (3 ^nd ) Business Day following the Purchase Date (the “ Delivery Date ”).

4. From and after the Purchase Date until the time of receipt of the Buyer Authorization or delivery by Bailee to the overnight courier in accordance with item 3. above, as applicable, Bailee (a) shall maintain continuous custody and control of the Mortgage Loan Documents as bailee for Buyer and (b) is holding the Eligible Mortgage Loan as sole and exclusive bailee for Buyer unless and until otherwise instructed in writing by Buyer.

5. Seller agrees to indemnify and hold Bailee and its owners, 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 and costs, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of this Bailee Agreement or any action taken or not taken by it or them hereunder unless such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (other than special, indirect, punitive or consequential damages, which shall in no event be paid by Seller) were imposed on, incurred by or asserted against Bailee because of the breach by Bailee of its obligations hereunder, which breach was caused by negligence, lack of good faith or willful misconduct on the part of Bailee or any of its owners, directors, officers, agents or employees. The foregoing indemnification shall survive any resignation or removal of Bailee or the termination or assignment of this Bailee Agreement.

6. Seller hereby represents, warrants and covenants that Bailee is not an affiliate of or otherwise controlled by Seller. Bailee represents and warrants that it is duly authorized to enter into and perform this Bailee Agreement, that this Bailee Agreement has been duly executed by it and this Bailee Agreement is the legal, valid and binding obligation of Bailee.

7. (a) In the event that Bailee fails to produce any document related to the Eligible Mortgage Loan that was in its possession within three (3) Business Days after required or requested by Buyer (a “ Delivery Failure ”), Seller shall indemnify Buyer in accordance with Section 7(b) of this Bailee Agreement. Bailee agrees to indemnify and hold Seller, and its owners, officers, directors, employees, agents, affiliates and designees, 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 and costs, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of a Delivery Failure or Bailee’s negligence, lack of good faith or willful misconduct. The foregoing indemnification shall survive any termination or assignment of this Bailee Agreement

Exhibit XIII – Page 2

LEGAL02/36513741v13

(b) Seller agrees to indemnify and hold Buyer, and its owners, officers, directors, employees, agents, affiliates and designees, 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 and costs, that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of a Delivery Failure or Bailee’s negligence, lack of good faith or willful misconduct. The foregoing indemnification shall survive any termination or assignment of this Bailee Agreement.

8. This Bailee Agreement may not be modified, amended or altered, except by a written instrument executed by all of the parties hereto.

The rights and obligations under this Bailee Agreement may not be assigned or delegated by Seller or Bailee without the prior written consent of Buyer.

9. 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. Delivery by facsimile or other electronic transmission of an executed counterpart of a signature page to this Bailee Agreement shall be effective as delivery of an original executed counterpart of this Bailee Agreement.

10. 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 without giving effect to conflict of law principles that would result in the application of any law other than the law of the State of New York.

11. The attachments and schedules hereto constitute a part of this Bailee Agreement and are incorporated into this Bailee Agreement for all purposes.

12. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including electronic mail and communication by facsimile copy) and mailed, telexed, transmitted or delivered, as to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective, upon receipt, or in the case of (a) notice by guaranteed overnight courier (e.g. FedEx), upon confirmation of delivery by such courier service or (b) notice by facsimile copy or e-mail, when verbal or electronic response of receipt is obtained.

13. No failure on the part of Buyer or Seller to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or

Exhibit XIII – Page 3

LEGAL02/36513741v13

partial exercise of any right or remedy hereunder preclude any further exercise thereof or the exercise of any other right. The rights and remedies herein provided are cumulative and not exclusive of any rights and remedies provided by applicable law.

14. This Bailee Agreement shall be binding upon and inure to the benefit of Seller, Buyer, Bailee and their respective successors and permitted assigns.

15. To the extent permitted by applicable law, each of the parties hereto hereby waives any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise between the parties hereto arising out of, connected with, related to, or incidental to the relationship between any of them in connection with this Bailee Agreement or the transactions contemplated hereby. Instead, any such dispute resolved in court will be resolved in a bench trial without a jury.

16. In case any provision in or obligation under this Bailee Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

17. This Bailee Agreement and any other documents executed in connection herewith contain the final and complete integration of all prior expressions by the parties hereto and thereto with respect to the subject matter hereof and thereof and shall constitute the entire agreement among the parties hereto and thereto with respect to the subject matter hereof and thereof, superseding all prior oral or written understandings.

18. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Master Repurchase and Securities Contract dated as of August 1, 2016, by and among Seller and Buyer, as may be amended, restated, supplemented or otherwise modified from time to time.

Very truly yours,

[_______________________],

a [________________________]

By:_________________________

Name:_______________________

Title:________________________

[Address of Seller]

Exhibit XIII – Page 4

LEGAL02/36513741v13

ACCEPTED AND AGREED:

[BAILEE],

as Bailee

By:________________________________
Name:______________________________
Title:_______________________________

[Address]
Attention: [____________]

Exhibit XIII – Page 5

LEGAL02/36513741v13

ACCEPTED AND AGREED:

U.S. BANK NATIONAL ASSOCIATION ,

as Buyer

By:________________________________
Name:
Title:

U.S. Bank National Association

Galleria North Tower I
13737 Noel Road, Suite 800
Dallas, Texas 75240



Attention:	Huvishka Ali and [__________________]
Telephone:	(972) 581-1602/[___________________]
Facsimile No.:	(972)581-1670/[____________________]
Email:	huvishka.ali@usbank.com
	[_____________________]

With copies to :

U.S. Bank National Association

13737 Noel Road, Suite 800

Dallas, Texas 75240



Attention:	Loan Administration -
	[__________________]
Facsimile No.:	(972) 581-1670
Confirmation No.:	(972) [________]
Email:	[__________________]

Exhibit XIII – Page 6

LEGAL02/36513741v13

SCHEDULE I

[List all Documents in Mortgage Loan Documents]

Items (i) –[___] (the “Basic Mortgage Loan Documents”)

Schedule I – Page 1

LEGAL02/36513741v13

ATTACHMENT 1

FORM OF TABLE FUNDED TRUST RECEIPT

VIA E-MAIL

U.S. Bank National Association

Galleria North Tower I
13737 Noel Road, Suite 800
Dallas, Texas 75240



Attention:	[_____________________]
	[___________]@usbank.com
Telephone:	[(612) 303-3640]
	[(972) 581-1603]


Re:	Bailee Agreement (the “ Bailee Agreement ”), dated as of __________ __, 20__, by and among ACRC Lender US LLC, as seller, and U.S. Bank National Association (“ Buyer ”) and [Bailee] (“ Bailee ”), as “Buyer”)

Ladies and Gentlemen:

Pursuant to the terms of the Bailee Agreement, the undersigned issues this Table Funded Trust Receipt to Buyer and certifies to Buyer that it is acting as Bailee under the Bailee Agreement and it has received and has in its possession and holds and will continue to hold as bailee the Mortgage Loan Documents for the Eligible Mortgage Loan described in the Bailee Agreement. All Mortgage Loan Documents appear regular on their face and relate to such Eligible Mortgage Loan.

With respect to such Eligible Mortgage Loan, attached hereto are copies of the Mortgage Loan Documents reflected as “Required” on Schedule I to the Bailee Agreement, the originals of which are in Bailee’s possession.

Very truly yours,

[BAILEE]

By:

Name:

Title:

Attachment 1 – Page 1

LEGAL02/36513741v13

Exhibit 10.9

Execution Version

PAYMENT GUARANTY

This PAYMENT GUARANTY (as amended, modified, supplemented or restated from time to time, this “ Guaranty ”) is made and entered into by ARES COMMERCIAL REAL ESTATE CORPORATION, a Maryland corporation, whose address is One Wacker Drive, 48 ^th Floor, Chicago, IL 60606 (“ Guarantor ”), for the benefit of U.S. BANK NATIONAL ASSOCIATION , a national banking association whose address is 13737 Noel Road, Suite 800, Galleria North Tower 1, Dallas, Texas 75240 (“ Buyer ”) on this August 1, 2016 This Guaranty is made with reference to the following facts (with some capitalized terms being defined below):

A. ACRC Lender US LLC , a Delaware limited liability company , as seller (“ Seller ”), and Buyer have entered into that certain Master Repurchase and Securities Contract, dated as of the date hereof (as the same may be amended, modified, supplemented or restated, the “ Repurchase Agreement ”), pursuant to which the Buyer may, from time to time, purchase certain Eligible Mortgage Loans from Seller with a simultaneous agreement from Seller to repurchase such Eligible Mortgage Loans at a date certain or on demand (the “ Transactions ”);

B. Buyer has requested, as a condition of entering into the Repurchase Agreement, that Guarantor deliver to Buyer this Guaranty;

C. Guarantor indirectly owns 100% of Seller;

D. Guarantor will benefit if Buyer enters into the Repurchase Agreement with Seller, and desires that Buyer enter into the Repurchase Agreement with Seller; and

E. Buyer would not enter into the Repurchase Agreement with Seller unless Guarantor executed this Guaranty. This Guaranty is therefore delivered to Buyer to induce Buyer to enter into the Repurchase Agreement.

NOW, THEREFORE, in exchange for good, adequate, and valuable consideration, the receipt of which Guarantor acknowledges, and to induce Buyer to enter into the Repurchase Agreement, 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 defined in the Repurchase Agreement but not defined in this Guaranty shall have the same meaning in this Guaranty as in the Repurchase Agreement.

(a) “ Available Borrowing Capacity ” means, with respect to any Person, on any date of determination, the total unrestricted borrowing capacity which may be drawn (taking into account required reserves and discounts) upon by such Person or its Subsidiaries, at such Person’s or its Subsidiaries’ request based upon approved but undrawn amounts, under committed credit facilities or repurchase agreements which provide financing to such Person or its Subsidiaries.

(b) “ Capital Lease Obligations ” means, with respect to any Person, the amount of all obligations of such Person to pay rent or other amounts under a lease of property to the extent and in the amount that such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person.

(c) “ Cash ” means coin or currency of the United States of America or immediately available federal funds, including such funds delivered by wire transfer.

(d) “ Cash Equivalents ” means any of the following, to the extent owned by Guarantor or any of its Subsidiaries free and clear of all Liens and having a maturity of not greater than 90 days from the date of issuance thereof: (i) readily marketable direct obligations of the government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States, (ii) certificates of deposit of or time deposits with Buyer or a member of the Federal Reserve System that issues (or the parent of which issues) commercial paper rated as described in clause (iii) below, is organized under the laws of the United states or any State thereof and has combined capital and surplus of at least $500,000,000, (iii) commercial paper in an aggregate amount of not more than $50,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P, (iv) repurchase obligations of any commercial bank satisfying the requirements of clause (ii) of this definition, having a term of not more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (v) securities with maturities of 90 days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s, (vi) securities with maturities of 90 days or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (ii) of this definition or (vii) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (i) through (vi) of this definition.

(e) “ Cash Liquidity ” means, at any date of determination, the sum of unrestricted (i) Cash plus (ii) Cash Equivalents.

(f) “ Debt Service ” means for any Test Period, the sum of (a) Interest Expense for any Person for such period, determined on a consolidated basis, and (b) all regularly scheduled principal payments made with respect to Indebtedness of such Person and its subsidiaries during such period, other than any voluntary prepayment or prepayment occasioned by the repayment of an underlying asset, or any balloon, bullet, margin or similar principal payment which repays such Indebtedness in part or in full.

(g) “ EBITDA ” means with respect to any Person and for any Test Period, an amount equal to the sum of (a) Net Income (or loss) of such Person (prior to any impact from minority or non-controlling interests or joint venture net income and before deduction of any dividends on preferred stock of such Person), plus the following (but only to the extent actually included in determination of such Net Income (or loss)): (i) depreciation and amortization expense (other than those related to capital expenditures that have not been included in the calculation of Fixed Charges), (ii) Interest Expense, (iii) income tax expense, and (iv) extraordinary or non‑recurring gains, losses and expenses, including but not limited to transaction expenses relating to business combinations, other acquisitions and unconsummated transactions, (v) unrealized loan loss reserves, impairments associated with owned real estate, and other similar charges, including but not limited to reserves for loss sharing arrangement associated with mortgage servicing rights, (vi) realized losses on loans and loss sharing arrangements associated with mortgage servicing rights and (vii) unrealized gains, losses and expenses associated with (A) derivative liabilities including but not limited to convertible note issuances and (B) mortgage servicing rights (other than the initial revenue recognition of recording an asset), plus (b) such Person’s proportionate share of Net Income (prior to any impact from minority or non-controlling interests or joint venture net income and before deduction of any dividends on preferred stock of such Person) of the joint venture investments and unconsolidated Affiliates of such Person, all with respect to such period.

(h) “ Fixed Charge Coverage Ratio ” means EBITDA (as determined in accordance with GAAP) for the immediately preceding twelve (12) month period ending on the last date of the applicable Test Period, divided by the Fixed Charges for the immediately preceding twelve (12) month period ending on the last date of the applicable Test Period; provided that the “Fixed Charge Coverage Ratio” and associated components thereof shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of the Guarantor under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP.

(i) “ Fixed Charges ” means at any time, the sum of (a) Debt Service, (b) all preferred dividends that such Person is required, pursuant to the terms of the certificate of designation or other similar document governing the rights of preferred shareholders, to pay and is not permitted to defer, (c) Capital Lease Obligations paid or accrued during such period and (d) any amounts payable under any Ground Lease.

(j) “ GAAP ” means with respect to the financial statements or other financial information of any Person, generally accepted accounting principles in the United States which are in effect from time to time, consistently applied.

(k) “ Ground Lease ” means a ground lease containing the following terms and conditions: (a) a remaining term (exclusive of any unexercised extension options) of twenty (20) years or more from the date on which such leased property was financed, (b) the right of the lessee to mortgage and encumber its interest in the leased property without the consent of the lessor or with such consent given, (c) the obligation of the lessor to give the holder of any mortgage lien on such leased property written notice of any defaults on the part of the lessee and agreement of such lessor that such ground lease will not be terminated until the holder has had a reasonable opportunity to cure or complete foreclosure, and fails to do so, (d) reasonable transferability of the lessee’s interest under such ground lease, including ability to sublease, and (e) such other rights customarily required by mortgagees making a loan secured by the interest of the holder of the leasehold estate demised pursuant to a ground lease.

(l) “ Guaranteed Obligations ” means

(i) Seller’s obligations (without regard to any limitation of recourse against Seller) under the Transaction Documents:

(a) to fully and promptly pay the Repurchase Price and other sums owed under the Transaction Documents at the times and according to the terms required by the Transaction Documents, 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 (even if any such modification, suspension, or limitation causes Seller’s obligation to become discharged or unenforceable); and

(b) to pay all other sums expended by Buyer or Buyer’s designee or nominee acting on Buyer’s behalf in exercising Buyer’s rights and remedies under the Transaction Documents, including Buyer’s Legal Costs relating to the Transactions and enforcement of remedies pursuant to the Transaction Document; and

(c) to fully and promptly pay any and all Losses actually incurred by Buyer arising out of or relating to any of the following:

(i) any misappropriation or conversion by Seller or Guarantor, or any Person that Controls Seller or Guarantor, of Income or other amounts payable to Buyer in violation of the Transaction Documents;

(ii) any action taken by Seller in violation of Section 24 of the Repurchase Agreement;

(iii) Seller’s failure to obtain Buyer’s prior written consent to any voluntary or involuntary Lien on any Purchased Mortgage Loan in violation of the Transaction Documents;

(iv) Seller or Guarantor, or any Person that Controls Seller or Guarantor, objecting, opposing or taking a position inconsistent with (A) Buyer seeking relief from the automatic stay under the Bankruptcy Code or Buyer’s position that the automatic stay under the Bankruptcy Code is inapplicable due to one or more safe harbor provisions under the Bankruptcy Code, (B) Buyer taking any action to foreclose on the Purchased Mortgage Loans in accordance with the Repurchase Agreement or (C) Buyer taking any other remedial action permitted under the Transaction Documents or Requirements of Law (other than the exercise of compulsory counterclaims);

(v) Seller or Guarantor, or any Person that Controls Seller or Guarantor, asserts any position that, or any court of competent jurisdiction holding that, (A) any transaction under the Transaction Documents or any Transaction is or constitutes a fraudulent conveyance or is otherwise voidable under any applicable Insolvency Law or (B) any transfer of a Purchased Mortgage Loan from an Affiliate of Seller to Seller was not a true sale of the Purchased Mortgage Loan to Seller;

(vi) any sale, transfer, pledge of or Lien on any Purchased Mortgage Loans in violation of the terms of the Repurchase Agreement;

(vii) a Change of Control in violation of the terms of the Repurchase Agreement;

(viii) Seller or Guarantor filing a voluntary case under any applicable Insolvency Law now or hereafter in effect by or against Seller or Guarantor or any substantial part of its assets or property;

(ix) the filing of a decree or order of relief by a court having jurisdiction with respect to Seller or Guarantor or any substantial part of its assets or property under any applicable Insolvency Law now or hereafter in effect, or appointing of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its assets or property, or ordering the winding–up or liquidation of Seller’s or Guarantor’s affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) days,

(x) any Person that Controls Seller or Guarantor filing, or joining in the filing of any involuntary petition against Seller or Guarantor under any applicable Insolvency Law, or, colluding with, soliciting or causing to be solicited petitioning creditors for any involuntary petition against Seller or Guarantor;

(xi) Seller or Guarantor filing an answer consenting to, otherwise acquiescing in, or joining in, any involuntary petition filed against it by any Person under any applicable Insolvency Law, or colluding with, soliciting or causing to be solicited petitioning creditors for any involuntary petition against Seller or any Guarantor;

(xii) Seller or Guarantor, or any Person that Controls Seller or Guarantor, consenting to, acquiescing in, or joining in, an application for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for Seller or Guarantor or any substantial part of the applicable Person’s assets or property; or

(xiii) Seller or Guarantor making any general assignment for the benefit of creditors or making a public disclosure or otherwise admitting in writing its insolvency or inability to pay its debts as they become due, which admission is used as evidence of Seller’s or Guarantor’s insolvency in connection with an involuntary petition filed against Seller or Guarantor.

(m) “ 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.

(n) “ Indebtedness ” means with respect to any Person: (i) all indebtedness, whether or not represented by bonds, debentures, notes, securities, or other evidences of indebtedness, for the repayment of money borrowed, (ii) all indebtedness representing deferred payment of the purchase price of property or assets, (iii) all indebtedness under any lease which, in conformity with GAAP, is required to be capitalized for balance sheet purposes, (iv) all indebtedness under guaranties, endorsements, assumptions or other contingent obligations, in respect of, or to purchase or otherwise acquire, indebtedness of others, and (v) all indebtedness secured by a lien existing on property owned, subject to such lien, whether or not the indebtedness secured thereby shall have been assumed by the owner thereof; provided that “Indebtedness” shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of such Person under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP.

(o) “ Insolvency Proceeding ” means any case under Title 11 of the United States Code or any successor statute or any other insolvency, bankruptcy, reorganization, liquidation, or like proceeding, or other statute or body of law relating to creditors’ rights, whether brought under state, federal, or foreign law.

(p) Interest Expense ” means with respect to any Person and for any Test Period, the amount of total interest expense incurred by such Person, including capitalized or accruing interest (but excluding interest funded under a construction loan and the amortization of financing costs), plus such Person’s proportionate share of interest expense from the joint venture investments and unconsolidated Affiliates of such Person, all with respect to such period.

(q) “ Investment Securities ” shall mean any of the following:

(1) par value of negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of less than 1 year; or

(2) par value of negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of 1-10 years; or

(3) par value of negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of more than 10 years;

(4) par value of single-class mortgage participation certificates in book-entry form backed by single-family residential mortgage loans, the full and timely payment of interest at the applicable certificate rate and the ultimate collection of principal of which are guaranteed by the Federal Home Loan Mortgage Corporation (excluding REMIC or other multi-class pass-through certificates, collateralized mortgage obligations, pass-through certificates backed by adjustable rate mortgages, securities paying interest or principal only and similar derivative securities); or

(5) par value of single-class mortgage pass-through certificates in book-entry form backed by single-family residential mortgage loans, the full and timely payment of interest at the applicable certificate rate and ultimate collection of principal of which are guaranteed by the Federal National Mortgage Association (excluding REMIC or other multi-class pass-through certificates, pass-through certificates backed by adjustable rate mortgages collateralized mortgage obligations, securities paying interest or principal only and similar derivative securities); or

(6) par value of single-class fully modified pass-through certificates in book-entry form backed by single-family residential mortgage loans, the full and timely payment of principal and interest of which is guaranteed by the Government National Mortgage Association (excluding REMIC or other multi-class pass-through certificates, collateralized mortgage obligations, pass-through certificates backed by adjustable rate mortgages, securities paying interest or principal only and similar derivatives securities); or

(7) par value of all actively and regularly traded investment-grade residential mortgage-backed securities; or

(8) such other investments as Guarantor and Buyer may agree.

(r) “ Legal Costs ” means all reasonable actual out-of-pocket costs and expenses 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 reasonable attorneys’ fees, disbursements, and other reasonable charges incurred by Buyer.

(s) “ Lien ” means any mortgage, lien, encumbrance, charge or other security interest, whether arising under contract, by operation of law, judicial process or otherwise.

(t) “ Losses ” means any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, judgments, awards, amounts paid in settlement of whatever kind or nature (including but not limited to reasonable legal fees and other costs of defense or enforcement).

(u) “ Net Income ” means, with respect to any Person for any period, the net income of such Person for such period as determined in accordance with GAAP.

(v) “ 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 (i) an Insolvency Proceeding; (ii) 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 (iii) any proceeding commenced (other than as described in clause (ii)) by Seller or Guarantor against Buyer in which Buyer prevails.

(w) “ Recourse Indebtedness ” means Indebtedness of a consolidated Subsidiary of Guarantor for which Guarantor has provided a payment guarantee.

(x) “ Security ” means any security or collateral held by or for Buyer for the Transactions or the Guaranteed 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.

(y) “ Specified Third Party Securitization ”: Any securitization transaction that was not established or sponsored by Guarantor or any of its respective Affiliates.

(z) “ Subsidiary ” means, with respect to any Person, any corporation, partnership, limited liability company or other entity (heretofore, now or hereafter established) of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership, limited liability company or other entity (without regard to the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person, and shall include all Persons the accounts of which are with those of such Person pursuant to GAAP ; provided that no issuer of a Specified Third Party Securitization shall be considered a “Subsidiary” of Guarantor or any of its Affiliates.

(aa) “ Tangible Net Worth ” means, with respect to any Person and any date, all amounts that would be included under capital or shareholder's equity (or any like caption) on the balance sheet of such Person, minus (a) amounts owing to that Person from any Affiliate thereof, or from officers, employees, partners, members, directors, shareholders or other Persons similarly affiliated with such Person or any Affiliate thereof, (b) intangible assets, and (c) prepaid taxes and/or expenses, plus deferred origination fees, net of deferred origination costs, all on or as of such date; provided that “Tangible Net Worth” shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of such Person under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP. For sake of clarity, mortgage servicing rights shall not be deemed to be intangible assets.

(bb) “ Test Period ” means the time period from the first day of each calendar quarter, through and including the last day of such calendar quarter.

(cc) “ Total Liquidity ” means, at any date of determination, the sum of (i) Cash Liquidity plus (ii) unencumbered Investment Securities; provided, that “Total Liquidity” and associated components thereof shall be determined without regard to the effects of consolidation of any issuer of a Specified Third Party Securitization on the financial statements of Guarantor under Accounting Standards Codification Section 810, as amended, modified or supplemented from time to time, or otherwise under GAAP.

2. Absolute Guaranty of All Guaranteed Obligations . Guarantor unconditionally and irrevocably guarantees Seller’s prompt and complete payment, observance, fulfillment, and performance of all Guaranteed Obligations when due. Guarantor shall be liable for, and obligated to pay and perform, all Guaranteed Obligations when due. All assets and property of Guarantor shall be subject to recourse if Guarantor fails to pay and perform any Guaranteed Obligation(s) when and as required to be paid and performed pursuant to the Transaction Documents.

3. Nature and Scope of Liability . Guarantor’s liability under this Guaranty is primary and not secondary. Guarantor’s liability under this Guaranty shall be in the full amount of all Guaranteed Obligations, including any interest, default interest, actual, out-of-pocket costs and fees (including Legal Costs) payable by Seller under the Repurchase Agreement.

4. Changes in Transaction Documents . 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 but subject, in each case, to the terms of the Transaction Documents, 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) engage in other or additional 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 principal, interest or other obligations as Buyer may determine in its discretion, and (j) otherwise deal with Seller and any other party 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 hereunder 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. Certain Financial Covenants .

(a) Maximum Indebtedness to Tangible Net Worth Ratio . At the end of each Test Period, Guarantor (and its consolidated Subsidiaries) shall have a ratio of Indebtedness to Tangible Net Worth not more than 4.00 to 1.00 .

(b) Maximum Recourse Indebtedness to Tangible Net Worth Ratio . At the end of each Test Period, Guarantor (and its consolidated Subsidiaries) shall have a ratio of Recourse Indebtedness to Tangible Net Worth not more than 3.00 to 1.00.

(c) Minimum Tangible Net Worth . At the end of each Test Period, Guarantor shall have a minimum Tangible Net Worth of at least the sum of (i) eighty percent (80%) of Guarantor’s Tangible Net Worth as of September 30, 2013 plus (ii) eighty percent (80%) of the net proceeds (after deducting transaction costs) Guarantor receives from equity issuances after September 30, 2013.

(d) Minimum Fixed Charge Coverage Ratio . Guarantor’s Fixed Charge Coverage Ratio for the immediately preceding twelve (12) month period ending on the last day of the applicable Test Period shall be at least 1.25 to 1.00, with compliance to be tested as of the end of each Test Period.

(e) Minimum Total Liquidity . At the end of each Test Period, Guarantor (and its consolidated Subsidiaries) shall have Total Liquidity of not less than the lesser of (i) $10,000,000 and (ii) the greater of (x) $5,000,000 and (y) 5% of Recourse Indebtedness; provided , that notwithstanding the foregoing or anything herein to the contrary, in the event Guarantor’s Total Liquidity shall equal or exceed $5,000,000 (such amount, the “ Guarantor’s Actual Total Liquidity Amount ”), then Guarantor may satisfy the difference between the minimum Total Liquidity requirement and the Guarantor’s Actual Total Liquidity Amount with Available Borrowing Capacity .

6. Nature of Guaranty . Guarantor’s liability under this Guaranty is a guaranty of payment of the Guaranteed 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 Guaranteed 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 pursuant to Insolvency Proceedings. Guarantor shall not be entitled to claim, and irrevocably covenants not to raise or assert, any defenses against the Guaranteed Obligations that would or might be available to Seller, other than actual payment and performance of all Guaranteed 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 Guaranteed Obligations are or become void or unenforceable (because of inadequate consideration, lack of capacity, or Insolvency Proceedings), then Guarantor’s liability under this Guaranty shall continue in full force with respect to all Guaranteed Obligations as if they were and continued to be legally enforceable, all in accordance with their terms before giving effect to the Insolvency Proceedings. Guarantor also recognizes and acknowledges that its liability under this Guaranty may be more extensive in amount and more burdensome than that of Seller. 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 Guaranteed Obligations regardless of the scope of Seller’s liability thereunder. Without limiting the generality of the foregoing, if the Guaranteed Obligations are “nonrecourse” as to Seller or Seller’s liability for the Guaranteed Obligations is otherwise limited in some way, Guarantor nevertheless intends to be fully liable, to the full extent of all of Guarantor’s assets, with respect to all the Guaranteed Obligations, even though Seller’s liability for the Guaranteed Obligations may be less limited in scope or less burdensome. Guarantor waives any defenses to this Guaranty arising or purportedly arising from the manner in which Buyer disburses the Purchase Price for the Transactions 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. Guarantor’s liability under this Guaranty shall continue until all sums due under the Transaction Documents have been paid in full and all other performance required under the Transaction Documents has been rendered in full, except as expressly provided otherwise in this Guaranty. 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.

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 Guaranteed Obligations without taking any actions against Seller and without proceeding against or exhausting any Security; provided however, that Buyer acknowledges and agrees that Seller has an unrestricted right to repurchase all of the Purchased Mortgage Loans at any time in accordance with the Repurchase Agreement (without regard to the existence of any Default or Event of Default thereunder), upon payment of all amounts due and owing under the Transaction Documents. 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 foreclosure sale or any other exercise of remedies pursuant to the UCC, to the difference between the Guaranteed Obligations and the fair market value of the property or interests sold at such foreclosure sale or any other exercise of remedies pursuant to the UCC, 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 Guaranteed Obligations within the meaning of this Guaranty. Guarantor acknowledges and agrees that any nonrecourse provision 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 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 Guaranteed Obligations. Guarantor further waives the right to invoke any and all statutes of limitation as a defense to Guarantor’s liability under this Guaranty of 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.

9. Loss Payment . 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 Guaranteed Obligations) the amount provided for in this Guaranty, without any requirement that Buyer demonstrate that the Security is inadequate for the Transactions; that Buyer has suffered any loss; 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.

10. 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 death, disability, or change in financial position), as set forth in the Transaction Documents, may be event(s) of default under the Transaction Documents.

11. Representations and Warranties . Guarantor acknowledges, represents and warrants as follows, and acknowledges that Buyer is relying upon the following acknowledgments, representations, and warranties by Guarantor in entering into the Transactions:

(a) Transaction Documents . This Guaranty has been duly authorized, executed, and delivered, and is fully valid, binding, and enforceable against Guarantor in accordance with its terms, subject to bankruptcy, insolvency and other limitations on creditors’ rights generally and to equitable principles.

(b) No Conflict . The execution, delivery, and performance of this Guaranty will not violate any provision of any applicable law, regulation, judgment, order, decree, determination, or award of any court, arbitrator or governmental authority, or of any mortgage, indenture, loan, or security agreement, lease, contract or other agreement, instrument or undertaking to which Guarantor is a party or that purports to bind Guarantor or any of Guarantor’s property or assets to the extent that such violation could reasonably be expected to result in a Material Adverse Change.

(c) No Third Party Consent Required . No consent of any person (including creditors or partners, members, stockholders, or other owners of Guarantor), other than those consents obtained as of the 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.

(d) Authority . Guarantor has full power, authority, and legal right to execute, deliver and perform its obligations under this Guaranty.

(e) 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.

(f) No Misstatements . No information, report, certificate, document, financial statement, exhibit or schedule (other than projections and information as to general economic or industry condition) prepared by or on behalf of Guarantor and concerning a Seller Party or the Mortgaged Properties, and, to Guarantor’s knowledge, all of the foregoing prepared by third parties, and, in each case, furnished by or on behalf of such Seller Party, to Buyer in connection with the Transaction Documents, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not materially misleading, in each case, as of the date provided or specified therein, as applicable.

12. 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 . Guarantor waives any right to be reimbursed by Seller for any payment(s) made by Guarantor on account of the Guaranteed Obligations, unless and until all Guaranteed Obligations have been paid in full and all periods within which such payments may be set aside or invalidated have under applicable law expired. Guarantor acknowledges that Guarantor has received adequate consideration for execution of this Guaranty by virtue of Buyer’s entering into the Transactions (which benefits Guarantor, as an 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.

(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: (a) such right of subrogation does not violate (or otherwise produce any result adverse to Buyer under) any applicable law, including any Insolvency Law; (b) 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; and (c) all periods within which such payment may be set aside or invalidated have under applicable law expired (such deferral of Guarantor’s subrogation and contribution rights, the “ Subrogation Deferral ”).

(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 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 Guaranteed Obligations have been paid in full Buyer shall release to Guarantor any further payments received on account of any such claim.

13. 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 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. 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 Guaranteed 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 Guaranteed 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 Guaranteed Obligations earlier than Guarantor would prefer to pay the Guaranteed 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. All of Guarantor’s assets will be available to satisfy Buyer’s claims against Guarantor under this Guaranty.

(d) Continuation of Liability . Guarantor’s liability for the Guaranteed Obligations shall continue at all times until the Guaranteed 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.

14. Buyer’s Disgorgement of Payments . Upon payment of all or any portion of the Guaranteed Obligations, Guarantor’s obligations under this Guaranty shall continue and remain in full force and effect 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 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. Guarantor’s liability under this Guaranty shall continue until all periods have expired within which Buyer could (on account of 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 Guaranteed Obligations.

15. Financial Information . Guarantor shall deliver to Buyer the financial statements and information required to be delivered by Guarantor pursuant to Section 11(k) of the Repurchase Agreement.

16. Consent to Jurisdiction . Each party irrevocably and unconditionally (i) submits to the non-exclusive jurisdiction of any United States Federal or New York State court sitting in New York County, 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 Guaranty or relating in any way to this Guaranty or any Transaction 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.

17. Merger; No Conditions; Amendments . This Guaranty and the documents referred to herein contain 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 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.

18. Enforcement . In the event of any Proceeding between Seller or Guarantor and Buyer 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 Legal Costs of such Proceeding.

19. Fundamental Changes . Guarantor shall not (a) wind up, liquidate, or dissolve its affairs, (b) enter into any transaction of merger or consolidation that would result in a Change of Control, or (c) sell, lease, or otherwise dispose of (or agree to sell, lease or dispose) all or substantially all of its property or assets, in each case, without Buyer’s prior written consent, provided that the foregoing shall not restrict Guarantor from originating, buying, or selling real estate mortgage, mezzanine, or other loans (or any interest therein), or accepting full or partial payment in respect thereof, or releasing any collateral securing loans, in each case in the ordinary course of Guarantor’s business operation.

20. 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 and does not increase Guarantor’s liabilities or obligations or decrease Guarantor’s rights, in other than a de minimis manner.

21. Counterparts . This Guaranty may be executed in counterparts.

22. WAIVER OF TRIAL BY JURY .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 GUARANTY, ANY OTHER TRANSACTION DOCUMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.

23. Set Off . 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 amounts held by Buyer or any Affiliate of Buyer and any other obligations at any time owing by Buyer or an Affiliate of Buyer to or for the credit or the account of Guarantor against any of or all obligations of Guarantor now or hereafter that have become due and owing under this Agreement irrespective of whether or not Buyer shall have made any demand under this Guaranty (and without prior notice to Guarantor), whereupon such obligations owing by Buyer or its Affiliates to Guarantor shall, to the extent (and only to the extent) of such set off actually made by Buyer, be discharged. The rights of Buyer under this Section 23 are in addition to other rights and remedies (including other rights of setoff) which Buyer may have.

24. Miscellaneous .

(a) Assignability . Buyer may assign this Guaranty (in whole or in party) to any successor to Buyer under the Repurchase Agreement, and any assignment of Buyer’s obligations permitted under the Repurchase Agreement or any portion thereof by Buyer shall operate to vest in the assignee, the rights and powers of Buyer hereunder to the extent of such assignment. This Guaranty shall benefit Buyer and its successors and permitted assigns and shall bind Guarantor and its successors and permitted assigns. Guarantor may not assign this Guaranty in whole or in party without the prior written consent of Buyer

(b) Notices . All notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of attempted delivery, (b) certified or registered United States mail, postage prepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (d) by telecopier or e-mail (with answerback acknowledged) provided that such telecopied notice must also be delivered by one of the means set forth in (a), (b) or (c) above, to the address above 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 24(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 or the first attempted delivery on a Business Day, (c) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day, or (d) in the case telecopier, upon receipt of answerback confirmation, provided that such telecopied notice was also delivered as required in this Section 24(b) . A party receiving a notice which does not comply with the technical requirements for notice under this Section 24(b) may elect to waive any deficiencies and treat the notice as having been properly given.

(c) Governing Law; Interpretation . This Guaranty shall be governed by the laws of the State of New York without giving effect to the conflict of laws principles thereof that would result in the application of any law other than the law of the State of New York. The word “include” and its variants shall be interpreted in each case as if followed by the words “without limitation.”

25. 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.

26. 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.

27. 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.

IN WITNESS WHEREOF , Guarantor has duly executed this Guaranty as of the date first indicated above.

GUARANTOR:

ARES COMMERCIAL REAL ESTATE CORPORATION , a Maryland corporation

By: /s/ Tae-Sik Yoon

Name: Tae-Sik Yoon

Title: Chief Financial Officer

[Signatures continue on the following page.]

Acknowledgement:

U.S. BANK NATIONAL ASSOCIATION

By: /s/ Jason Cohan

Name: Jason Cohan

Title: Assistant VP

15488715_3LEGAL02/36519115v4

Exhibit 31.1

Certification of Co-Chief Executive Officer

of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a)

I, John Jardine, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Ares Commercial Real Estate Corporation;


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


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


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


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


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


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


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


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


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


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

Date: August 4, 2016



/s/ John Jardine
John Jardine Co-Chief Executive Officer, Director and President

Exhibit 31.2

Certification of Co-Chief Executive Officer

of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a)

I, Robert L. Rosen, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Ares Commercial Real Estate Corporation;


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


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


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


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


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


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


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


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


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


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

Date: August 4, 2016



/s/ Robert L. Rosen
Robert L. Rosen Interim Co-Chief Executive Officer and Chairman

Exhibit 31.3

Certification of Chief Financial Officer

of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a)

I, Tae-Sik Yoon, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Ares Commercial Real Estate Corporation;


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


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


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


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


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


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


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


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


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


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

Date: August 4, 2016



/s/ Tae-Sik Yoon
Tae-Sik Yoon Chief Financial Officer and Treasurer

Exhibit 32.1

Certification of Co-Chief Executive Officers and Chief Financial Officer

Pursuant to

18 U.S.C Section 1350

In connection with the Quarterly Report on Form 10-Q of Ares Commercial Real Estate Corporation (the "Company") for the quarter ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), John Jardine, as Co-Chief Executive Officer of the Company, Robert L. Rosen, as Interim Co-Chief Executive Officer of the Company and Tae-Sik Yoon, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:


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


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

Date: August 4, 2016



/s/ John Jardine
John Jardine Co-Chief Executive Officer, Director and President

/s/ Robert L. Rosen
Robert L. Rosen Interim Co-Chief Executive Officer and Chairman

/s/ Tae-Sik Yoon
Tae-Sik Yoon Chief Financial Officer and Treasurer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.