10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2022

OR

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

For the transition period from to

Commission File Number: 001-39134

Broadmark Realty Capital Inc.

(Exact Name of Registrant as Specified in its Charter)

Maryland	84-2620891
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1420 Fifth Avenue, Suite 2000 Seattle, WA	98101
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (206) 971-0800

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	BRMK	New York Stock Exchange
Warrants, each exercisable for one fourth (1/4th) share of Common Stock at an exercise price of $2.875 per one fourth (1/4th) share	BRMK WS	NYSE American LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

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

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

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

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

As of June 30, 2022, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $0.9 billion, based on the closing sales price of our common stock on such date as reported on the New York Stock Exchange.

As of February 22, 2023, there were 131,749,957 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement relating to its 2023 annual meeting of shareholders (the “2023 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2023 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Broadmark Realty Capital Inc.

Table of Contents

		Page
	CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS	3
PART I.
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	14
ITEM 1B.	UNRESOLVED STAFF COMMENTS	39
ITEM 2.	PROPERTIES	39
ITEM 3.	LEGAL PROCEEDINGS	40
ITEM 4.	MINE SAFETY DISCLOSURES	40
PART II.
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	40
ITEM 6.	[RESERVED]	41
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	42
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	57
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	58
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	92
ITEM 9A.	CONTRO LS AND PROCEDURES	92
ITEM 9B.	OTHER INFORMATION	93
ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	93
PART III.
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	93
ITEM 11.	EXECUTIVE COMPENSATION	93
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	93
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	93
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	93
PART IV.
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	94
ITEM 16.	FORM 10-K SUMMARY	96
SIGNATURES		97

Broadmark Realty Capital Inc.

CAUTIONARY STATEMENT REGARDING FORWARD -LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Annual Report, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations of future operations, are forward-looking statements. Forward-looking statements reflect the Company’s current views with respect to, among other things, capital resources, portfolio performance and projected results of operations. Likewise, the Company’s statements regarding anticipated growth in its operations, anticipated market conditions, demographics and results of operations are forward-looking statements. In some cases, you can identify these forward-looking statements by the use of terminology such as “outlook,” “believes,” “expects,” “projects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases.

The forward-looking statements contained in this Annual Report are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause the Company’s actual results to differ include, but are not limited to:

•mitigation of loan default rates and ability to timely resolve loans in contractual default status with positive economic outcomes;

•the adequacy of collateral securing our loans and declines in the value of real estate property securing our loans;

•the current and future health and stability of the economy and residential housing market;

•availability of origination and acquisition opportunities acceptable to us;

•increased competition from entities engaged in construction lending activities;

•potential mismatches in the timing of asset repayments and the maturity of the associated financing agreements;

•general economic uncertainty and the effect of general economic conditions on the real estate and real estate capital markets in particular;

•general and local commercial and residential real estate property conditions;

•changes in U.S. federal government policies;

•changes in U.S. federal, state and local governmental laws and regulations that impact our business, assets or classification as a real estate investment trust;

•our ability to pay, maintain or grow the dividend in the future;

•changes in interest rates;

•the availability of, and costs associated with, sources of liquidity;

•compliance with covenants contained in our debt documents;

•the adequacy of our policies, procedures and systems for managing risk effectively;

•the ability to manage future growth;

•changes in personnel and availability of qualified personnel; and

•other factors set forth in our periodic filings with the Securities and Exchange Commission.

Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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Broadmark Realty Capital Inc.

PART I.

ITEM 1. BUSINESS

Broadmark Realty Capital Inc. (“Broadmark Realty,” “the Company,” “we,” “us” and “our”), a Maryland corporation, is an internally managed commercial real estate finance company that has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2019. Based in Seattle, Washington, we specialize in underwriting, funding, servicing and managing a portfolio generally consisting of short-term, first deed of trust loans to fund the construction and development of, or investment in, residential or commercial properties.

We generally operate in states that we believe to have favorable demographic trends and that provide more efficient and quicker access to collateral in the event of borrower default. As of December 31, 2022, our portfolio of 202 active loans had approximately $1.4 billion of total commitments and $931.0 million of principal outstanding across 162 borrowers in 20 states and the District of Columbia. We refer to loans that have outstanding commitments or principal balances that have not been repaid or retired, including loans in foreclosure, as “active loans.” Total commitments refer to the aggregate sum of outstanding principal balances, interest reserves and construction holdbacks which includes capital expenditures required to complete construction for defaulted loans that we are no longer required to pay. Historically, our loan portfolio was 100% equity funded, and we had no outstanding debt. On November 12, 2021, we closed the private placement of $100.0 million aggregate principal amount of 5.0% senior unsecured notes due 2026. We may opportunistically issue debt and raise capital in the public and private markets from time to time based on market conditions to fund the growth of our portfolio and produce attractive returns for our stockholders. On February 19, 2021, we closed on a $135.0 million revolving credit facility, which has enabled us to use a larger percentage of our cash balances for lending activities.

Properties securing our loans are generally classified as residential properties, commercial properties or land, and are typically not income producing. Each loan is generally secured by a first deed of trust lien on real estate. Our lending policy typically limits the committed amount of each loan to a maximum loan-to-value (“LTV”) ratio of up to 65% of the “as-complete” appraised value of the underlying collateral as determined by an independent appraiser at the time of the loan origination. Our lending policy also typically limits the initial outstanding principal balance of each loan to a maximum LTV of up to 65% of the “as-is” appraised value of the underlying collateral as determined by an independent appraiser at the time of the loan origination. At the time of origination, the difference between the initial outstanding principal and the total commitment is the amount held back for future release, subject to property inspections, progress reports and other conditions in accordance with the loan documents. Unless otherwise indicated, LTV is measured by the total commitment amount of the loan at origination divided by the “as-complete” appraisal. LTVs do not reflect interim activity such as construction draws or interest payments capitalized to loans, or partial repayments of the loan. As of December 31, 2022, the weighted average LTV was 60.6% across our active loan portfolio, based on the total commitment of the loan and “as-complete” appraisals as of origination or latest amendment of the loans. Loans in contractual default are designated as non-performing as we have some expectation that the repayment of the loan may not be realized in full. For our loans in contractual default status as of December 31, 2022, the weighted average LTV was approximately 124.8%, when measured by the sum of the principal outstanding, the estimated cost to complete and the accounts receivable for which collectability is reasonably assured, divided by the most recent “as-complete” appraisal. The weighted average LTV of our loans in contractual default net of our allowance for credit losses was approximately 84.9%. In addition, our loans are often personally guaranteed by the principals of the borrower or affiliated parties at our discretion to provide further credit support for the loan. The loan may also be secured by collateral through a pledge of the guarantor’s interest in other real estate or assets owned by the guarantor. Credit enhancements are excluded from the LTV calculation unless they are senior secured positions in real estate. As of December 31, 2022, a total of 40 loans were in contractual default, totaling $250.4 million in principal outstanding, or 26.9% of our aggregate principal outstanding. We are actively identifying resolutions for our non-performing loans but continue to face challenges in the current environment. We expect our non-performing loans to negatively affect our near-term financial performance.

As of December 31, 2022, the average total commitment of our active loans was $7.0 million with a weighted average interest rate of 10.2%. The weighted average term outstanding of our active loans was 22 months, which we often elect to extend based on our evaluation of the expected timeline for completion of construction. We usually receive loan origination fees, or “points,” which as of December 31, 2022, had a weighted average fee of 2.7% of total commitment at origination, along with loan amendment and extension fees, each of which varies in amount based upon the term of the loan, the credit quality of the borrower and the loan otherwise satisfying our underwriting criteria. In addition, we charge late fees on past due receivables and receive reimbursements from borrowers for costs associated with services provided by us, such as closing costs, collection costs on defaulted loans and construction draw inspection fees.

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Broadmark Realty Capital Inc.

Our typical borrowers include real estate investors, developers and other commercial borrowers. We do not lend to owner-occupants of residential real estate. Loan proceeds are generally used to fund the vertical construction, horizontal development, investment, land acquisition and refinancing of residential properties and commercial properties. We also make loans to fund the renovation and rehabilitation of residential and commercial properties. Our loans are generally structured with an initial advance at closing and additional loan installments disbursed to the borrower upon satisfactory completion of previously agreed stages of construction.

A principal source of new transactions has been repeat business from our customers and their referral of new business. We also receive leads for new business from real estate brokers and mortgage brokers, a limited amount of advertising and through our website.

We seek to preserve capital through our disciplined underwriting standards. We originate and fund loans generally secured by first deed of trust liens on residential and commercial real estate located in states that we believe have favorable demographic trends and that provide more efficient and quicker access to collateral in the event of borrower default.

We built our business on a deep knowledge of the residential and commercial real estate market combined with a risk management approach that is designed to protect and preserve capital. We believe our flexibility and ability to structure loans that address the needs of our borrowers without compromising our standards on risk, our expertise in the loan market and our focus on newly originated first deed of trust loans have been the basis for our success.

We primarily compete on the basis of borrower relationships, loan structure, terms and service rather than on price. Additionally, starting in 2021, competitive pressures have led us in many cases to originate loans with terms that deviate from our historical practice. Increased competition and readily available sources of capital through 2021 and into mid 2022 led to lower interest rates on our originated loans in those periods, lower loan origination fees, absence of minimum interest provisions in our mortgage notes, and a change in our general requirement that all of our loans be secured by personal guarantees on a recourse basis.

In the latter part of the third quarter of 2022 and continuing into the fourth quarter of 2022, market interest rates have risen markedly and rapidly as a result of the Federal Reserve's actions to curb rising inflation. This led to a significant slowdown in real estate transactions and less capital available in the marketplace to finance real estate projects. Rising interest rates and macroeconomic uncertainties in the capital markets have led to a decrease in the availability of capital from traditional lenders for longer-term financing of completed construction and development projects, which may negatively affect our borrowers' ability to sell or refinance their loan collateral and repay our loans.

We have tightened our lending standards and, in some instances, we are not originating loans that have previously met our lending policy. We are focused on capital preservation and ensuring we are positioned to capture opportunities that emerge from this rapidly changing economic environment.

As a result of rising interest rates and associated pressures to service or refinance their debt capital, we have started to see many of our competitors slow or pause their loan origination activities. This may lead to decreased competition and pricing pressure on our loan origination activities, although there are no assurances that this will take place. In addition, we continue to believe that the demand/supply imbalance for residential construction-related real estate loans presents significant opportunities for us over the long-term to selectively originate high-quality first deed of trust loans on attractive terms.

Markets

At December 31, 2022, we have active loans in 20 states and the District of Columbia with the majority of loans located in Washington, Colorado, Utah and Texas. We strategically focus on these states as they have exhibited strong population growth. At December 31, 2022, more than 70% of our portfolio was secured by properties located in states ranked in the top ten for migration for the two year period of 2021 and 2022 according to the Census Bureau, including Washington, North Carolina, Georgia, Arizona, South Carolina, Tennessee, Utah, Texas, Florida and Idaho. Additionally, each of Washington, Colorado, Utah, Texas, Oregon and Idaho are non-judicial foreclosure states, which we believe encourages borrowers to comply with the loan terms and provides us the option to take control of the collateral more quickly in the event of borrower default.

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Broadmark Realty Capital Inc.

Industry and Market Opportunity

Real estate investment is a capital-intensive business that typically relies heavily on debt capital to acquire, develop, improve, construct, renovate and maintain properties. We focus on providing construction, development and investment loans for the U.S. housing and real estate industries. Due to structural changes in banking, regulation and monetary policies over the last decade, there has been a reduction in the number of conventional lenders extending credit for acquisition, construction and development loans. We believe there continues to be a significant market opportunity to originate real estate loans secured by the underlying real estate as collateral. Our management team further believes that the demand for relatively small real estate loans to construct, develop or invest in residential or commercial real estate, located in states with favorable demographic trends presents a compelling opportunity to generate attractive risk-adjusted returns.

As a result of limited residential housing supply, net migration trends and tightening of credit for our highly leveraged competitors, we believe the longer-term outlook for new housing demand in our markets remains strong. Per the U.S. Census Bureau, construction spending, measured as construction put in place, totaled $1.8 trillion in 2022, an increase of 10.2% over 2021. With the continued housing deficit expected in 2023 and beyond, as construction costs continue to stabilize and both buyers and sellers settling in on the normalcy of higher rates, we believe the back half of 2023 will be positive for the construction and real estate industry.

Business and Growth Strategy

Our objective is to preserve and protect stockholder capital while producing attractive risk-adjusted returns primarily through dividends generated by current income from our loan portfolio. Our business strategy is to directly originate, fund, manage and service short-term loans secured by first mortgage liens on real property to enable us to generate attractive returns.

We believe our ability to react quickly and have flexibility in terms of structuring loans to meet the needs of borrowers, consistency and expediency in funding future construction draws, intimate knowledge of the relevant markets in which we operate and general focus on newly originated first deed of trust loans positions us to generate strong and consistent income. Our strategy to achieve our objective and grow our business includes the following:

•continue to increase market share in existing states to satisfy unmet demand;

•increase geographic footprint by focusing on states with favorable economic and demographic trends that provide efficient access to collateral in the event of borrower default;

•capitalize on opportunities created by the long-term structural changes in the real estate lending market resulting from consolidation and increased regulatory oversight of commercial banks and savings institutions;

•utilize the relative strength of our balance sheet to grow our customer and asset base while competitors with weaker balance sheets may be capital constrained;

•maximize earnings generation from deployed capital through timely resolution of loans in contractual default;

•optimize working capital through efficient cash management and the use of our revolving credit facility;

•fund growth via strategic and structured capital sourcing to gradually lower our weighted average cost of capital while maintaining modest leverage relative to our peers;

•remain flexible in order to capitalize on changing sets of investment opportunities that may be present in various points of an economic cycle; and

•operate so as to qualify as a REIT for U.S. federal income tax purposes and distribute annually at least 90% of our REIT taxable income.

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Broadmark Realty Capital Inc.

Loan Portfolio

The following table highlights certain information regarding our real estate lending activities as of the dates indicated:

(dollars in millions)	December 31, 2022			December 31, 2021
Number of loans outstanding		202			215
Total principal outstanding (end of period balance)	$	931.0		$	924.7
Total commitment	$	1,417.3		$	1,489.1
Average total commitment	$	7.0		$	6.9
Weighted average contractual interest rate per annum(1)		10.2	%		10.7	%

(1)Does not include loan fees.

The following table sets forth aggregate number of loans and the total original commitment for loans originated during each of the calendar years set forth below:

Year (dollars in millions)	Number of Loans		Total Commitment(1)
2022		75	$	488.3
2021		137	$	873.0
2020		81	$	463.0
2019		116	$	446.6
2018 and prior		934	$	1,568.3

(1)Based on total original loan commitment amounts and excluding amendments.

We categorize our loans into seven distinct purposes:

•Vertical Construction. Loans which fund the building or installing of vertical improvements on real property.

•Horizontal Development. Loans which fund the building or installing of horizontal improvements on real property including initial site preparation, ground clearing, installing utilities, and road, sidewalk and gutter paving.

•Acquisition. Loans which fund the acquisition of a property where the intent is generally subsequent financing.

•Land Entitlement. Loans which fund the entitlement of land and to obtain zoning, permitting or legal use to further develop the property.

•Rehabilitation. Loans which fund the renovation or improvement of the physical existence of a real property.

•Bridge. Loans collateralized by completed properties used by borrowers to lease and stabilize an asset with sufficient cash flows to obtain permanent financing.

•Investment. Loans which do not fit into the other purposes described above, such as a cash out refinance or partnership buyout.

The following table sets forth the number of loans and total commitment amount based on the intended loan purpose, and the percentage of the total commitment by purpose as compared to the total portfolio, in each case at December 31, 2022:

	At December 31, 2022
Loan Purpose (dollars in millions)	Number of Loans		Total Commitment		% of Portfolio
Vertical Construction		128	$	970.8		68.4	%
Horizontal Development		34		287.6		20.3
Investment		15		47.9		3.4
Rehabilitation		10		45.1		3.2
Land Entitlement		4		26.6		1.9
Bridge		4		23.9		1.7
Acquisition		7		15.4		1.1
Total		202	$	1,417.3		100.0	%

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Broadmark Realty Capital Inc.

We categorize our loans into five property types:

•For Sale Residential. All for sale residential product including single family homes, apartments, townhomes, condominiums and other attached product.

•For Rent Residential. All rental residential product including multifamily rental apartments, student housing and senior housing.

•Commercial/Other. Non-residential real estate including medical office, retail, office, self-storage, industrial and hotels.

•Horizontal Development. Vertical construction ready sites including finished single-family lots, finished townhome lots and multifamily and commercial development sites.

•Raw Land. Undeveloped land prior to horizontal development.

The following table sets forth the number of loans and total commitment amount based on the types of properties securing our mortgage loans, and the percentage of the total commitment by property security of the loan as compared to the total portfolio at December 31, 2022:

	At December 31, 2022
Property Type (dollars in millions)	Number of Loans		Total Commitment		% of Portfolio
For Sale Residential		96	$	488.3		34.4	%
For Rent Residential		42		411.2		29.0
Commercial/Other		31		242.0		17.1
Horizontal Development		19		147.1		10.4
Raw Land		14		128.7		9.1
Total		202	$	1,417.3		100.0	%

The following table sets forth the number of loans and total commitment by state, and the percentage of the total commitment by state as compared to the total portfolio at December 31, 2022:

	At December 31, 2022
State (dollars in millions)	Number of Loans		Total Commitment		% of Portfolio
Washington		48	$	335.5		23.7	%
Colorado		29		244.4		17.2
Utah		22		208.7		14.7
Texas		17		206.2		14.5
Florida		24		84.9		6.0
Oregon		11		57.5		4.1
Idaho		8		52.5		3.7
Minnesota		1		48.6		3.4
North Carolina		16		39.8		2.8
Tennessee		1		32.3		2.3
Illinois		1		22.9		1.6
Nevada		1		19.9		1.4
Pennsylvania		7		19.3		1.4
Georgia		6		14.3		1.0
South Carolina		1		14.3		1.0
Maryland		2		3.8		0.3
District of Columbia		2		3.2		0.2
Virginia		2		3.0		0.2
Other states		3		6.2		0.4
Total		202	$	1,417.3		100.0	%

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Broadmark Realty Capital Inc.

Operations Overview

Loan Origination and Due Diligence

We are experienced in secured lending, with substantial combined real estate and financial services experience. Our senior management team spends a significant portion of its time on development of borrower relationships as well as on underwriting and structuring the loans in our portfolio. A principal source of our new transactions has been repeat business from existing and former customers and their referral of new business. We are a collateral-based lender and when underwriting a prospective loan, the primary focus of our analysis includes the current and finished property, the borrower’s experience and existing equity in the project and local market conditions. Prior to making a final decision on a loan application, we conduct extensive due diligence of the property as well as of the borrower and its principals.

The mortgage loans that we originate generally meet the following criteria:

•Collateral. New loans are generally secured by a first deed of trust lien on real estate.

•Amount. The average total commitment of our active loans was $7.0 million at December 31, 2022. Our lending policy limits exposure to any single borrower or guarantor to 15% of our total assets.

•Loan to Value. The LTV ratio for a loan at origination is typically no more than 65% of the “as-complete” or “as-stabilized” appraised value of the underlying collateral on the basis of total loan commitment. The maximum initial outstanding principal balance of the loan at origination is typically 65% of the “as-is” appraised value of the underlying collateral, in each case as determined by an independent appraiser at the time of the loan origination.

•Interest rate. Our portfolio weighted average interest rate was 10.2% at December 31, 2022 with a late fee of 10% of the principal and receivables outstanding and a default interest rate of 24% per annum for loans in contractual default status.

•Origination fees. Our portfolio weighted average fee was 2.7% of the total commitment at origination at December 31, 2022. In addition, if the term of the loan is extended, additional points are payable upon the extension.

•Term. The weighted average term outstanding of our active loans was 22 months at December 31, 2022. We may agree to extend the maturity date (typically for one to three months) and charge an extension fee, so long as the borrower complies with all loan covenants and the loan otherwise satisfies our underwriting criteria.

•Covenants. To timely pay all taxes, insurance, assessments, and similar charges with respect to the property; to maintain hazard insurance; and to maintain and protect the property.

•Events of default. Include: (i) failure to make the required monthly interest-only loan payment when due; (ii) failure to repay the loan at maturity date if we have not agreed to extend maturity and (iii) breach of covenant.

•Payment terms. Interest only is payable monthly in arrears. Principal is due in a “balloon” payment at the maturity date. Interest earned from an interest holdback is capitalized in the loan principal balance.

•Escrow. Generally, none required, other than where it is required to obtain the necessary insurance to title.

•Construction Holdbacks. Construction loans typically include a holdback for future construction draws which are funded in arrears following confirmation of work completion.

•Interest Reserves. Loans may also include funds witheld for interest reserves for the purpose of satisfying monthly interest payments over all or part of the term of the loan due to a lack of income generated by the real estate during construction.

•Security. Each loan is evidenced by a promissory note, which is generally secured by a first deed of trust lien on real property owned by the borrower and is typically personally guaranteed on a recourse basis by the principals of the borrower and/or others, at our discretion. The guaranty may be collaterally secured by a pledge of the guarantor’s interest in the borrower or other real estate owned by the guarantor.

•Insurance. Each loan is required to carry minimum insurance policies for general liability and builders' risk, which are verified as a part of the underwriting process and monitored on an ongoing basis.

•Fees and Expenses. As is typical in real estate finance transactions, the borrower incurs all expenses in connection with securing the loan, including the cost of a property appraisal, the cost of an environmental assessment report, if any, the cost of a credit report and all title, recording and legal fees.

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Broadmark Realty Capital Inc.

Upon receipt of a potential borrower’s executed loan application, we will commence the underwriting process. Before approving and funding a loan, we undertake extensive due diligence of the borrower, its principals, the guarantor(s) and the property that will be mortgaged to secure the loan. Such due diligence generally includes:

•Borrower and Guarantor Information. Review of a borrower’s credit application, operating agreement or other organizational documents, and review of business and guarantor financial statements and tax returns.

•Confirmatory Collateral Information. Review of an independent appraisal report, preliminary title report, tax records and documentation evidencing proper hazard insurance for improved property and other property information. Loans secured by existing commercial properties require a Phase I environmental site assessment.

•Project Transaction Information. Review of the property purchase and sale agreement, title insurance, itemized construction budget, project schedule with milestones, building permits/entitlements, building plans, and building specifications and architectural renderings, resumes and recent projects of builder and architect and marketing plans and materials.

•Physical Inspection. We perform a physical inspection of the property, which includes a check of the property’s location, characteristics, qualities, and potential value as represented by the borrower, as well as a review of the comparable properties identified in the independent appraisal report in order to confirm that the properties identified as comparable in the appraisal report are truly comparable.

Loan Servicing

We service all of our loans internally, and manage loan payments, draw requests and loan accounting records. The loan draw process in particular is an important part of our business as it provides borrowers with quick access to capital in order to keep their projects moving and allows us to inspect the quality and pace of the borrower’s work. Once a borrower has submitted a draw request, we often will have the property physically inspected by an approved third-party to ensure that the work for which funding is being requested has been completed in a manner satisfactory to us. In addition, any required county and city inspections are completed, and a date-down endorsement of the title policy is typically provided by the title company indicating no liens have been placed on the property since its original issuance of the title insurance policy before funds are disbursed. If the request is made for the final draw of a project, a certificate of occupancy or sign-off by the city is required prior to disbursement. Although the process is thorough, we make a point of responding to draw requests as quickly as possible as timing is of paramount importance to a project’s success.

In addition, we conduct periodic testing, process loan payoff requests, and collect past due and delinquent payments. In the case of a contractual loan default, we have broad authority to take such actions as we believe best in working out the defaulted loan, including selling the defaulted loan or foreclosing on the real property serving as collateral for the loan.

Loan Funding

We intend to fund our growth through issuance of debt and equity capital in the public and private markets and use of cash management tools such as our revolving credit facility.

Competition

Real estate lending is a competitive business. We compete for lending opportunities with a variety of institutional lenders and investors, including “hard money” lenders, mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage banks, credit unions, insurance companies, mutual funds, pension funds, private equity real estate funds, hedge funds, institutional investors, investment banking firms, non-bank financial institutions, governmental bodies, family offices and high net worth individuals. New parties continue to enter the market resulting in increased competition and pricing pressure.

We primarily compete on the basis of borrower relationships, product offerings, loan structure, terms and service rather than on price. Our success depends on our ability to maintain and capitalize on relationships with borrowers and their representatives, offer creative structures and attractive loan terms and, most importantly, provide superior service.

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Seasonality

While we typically originate loans year-round, incremental loan disbursements are made with greater frequency during the spring, summer and fall, when weather is generally more favorable for construction, and borrowers complete previously agreed stages of construction, allowing developers to draw down on additional amounts of capital available under their loan agreements. As a result of these more frequent disbursements, we generally maintain greater total liquidity to fund disbursements during these seasons.

Human Capital

Our culture is defined by our core values of integrity, collaboration, diversity, accountability, reliability and community. Our employees represent our greatest asset. We value our employees by investing in a healthy work-life balance, competitive compensation and benefit packages and a vibrant, team-oriented environment centered on open and compassionate communication. We strive to build and maintain a high-performing culture by creating a work environment that attracts and retains outstanding, engaged employees who embody our company mission of “Empowering real estate developers and investors to improve places and spaces in our communities.” The most significant human capital measures or objectives that we focus on in managing our business and our related human capital initiatives include the following:

•Demographics. As of December 31, 2022, we employed 63 full-time employees across the United States.

•Diversity and Inclusion. We strive toward having a diverse team of employees, knowing we are better together with our combined wisdom and intellect. With a commitment to equality, inclusion and workplace diversity, we focus on understanding, accepting and valuing the differences between people. We value and embrace diversity in our employee recruiting, hiring and development practices. Of our employee population, as of December 31, 2022, approximately 43% are women and approximately 43% have self-identified as Hispanic or Latino, Native American, Pacific Islander, Asian, Black or African American, or of two or more races. We have a long-standing commitment to equal employment opportunity. We do not tolerate discrimination or harassment.

•Compensation and Benefits. We provide a competitive compensation and benefits program to help meet the needs of our employees. In addition to salaries, these programs include discretionary annual bonuses and stock awards, a 401(k) Plan with an employer matching contribution and no service-based vesting requirement, healthcare and insurance benefits, health savings, paid time off, family leave and an employee assistance program.

•Communication and Engagement. We strongly believe that our success depends on employees understanding how their work contributes to the Company’s overall strategy. To this end, we communicate with our workforce through a variety of channels and encourage open and direct communication, including semi-monthly company-wide calls with executives and frequent email corporate communications. To continuously monitor and improve employee performance and engagement, we conduct annual performance reviews. We also provide training to our people managers on management and leadership development.

•Health, Safety and Wellness. In 2022 and continuing to the present, we have prioritized the health, safety, and wellness of our employees as we continue to adapt to the post-COVID world. To ensure their well-being, we have implemented a hybrid work schedule and provided necessary resources such as ergonomic equipment. We have also established policies and procedures to maintain a safe and healthy work environment. In addition, we make a point to regularly communicate with and be responsive to the needs and concerns of our employees.

•Community Partnership. We match each employee’s financial contribution to eligible nonprofit organizations on a dollar-for-dollar basis, up to $1,000 per employee each calendar year, to increase the impact of their charitable gifts. Each employee also receives eight hours per calendar year of paid volunteer time off to use at the eligible non-profit(s) of his or her choice, and we donate $25 to the organization for each hour volunteered by our employees.

Regulation and Compliance

Our operations are subject, in certain circumstances, to supervision and regulation by state and U.S. federal government authorities and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions. In addition, Broadmark Realty and our subsidiaries may rely on exemptions from various requirements of the Securities Act and the Investment Company Act. These exemptions are sometimes highly complex and may, in certain circumstances, depend on compliance by third parties who we do not control.

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Regulation of Commercial Real Estate Lending Activities

In general, commercial real estate lending is a highly regulated industry in the United States. Certain states have adopted laws or regulations that may, among other requirements, require licensing of lenders and financiers, prescribe disclosures of certain contractual terms, impose limitations on interest rates and other charges, and limit or prohibit certain collection practices and creditor remedies. We are required to comply with the applicable laws and regulations in the states in which we do business. We are also required to comply with, among other statutes and regulations, certain provisions of the Equal Credit Opportunity Act that are applicable to commercial loans, the USA Patriot Act and regulations promulgated by the Office of Foreign Asset Control.

Exemptions from Investment Management Regulation

Although we reserve the right to modify our business methods at any time, we believe that none of the Company or our subsidiary that issues and holds the mortgages (the “Mortgage Subsidiary”) is currently required to register as an investment company under the Investment Company Act. However, our business strategies may evolve over time.

Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Excluded from the term “investment securities” are, among other things, securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of “investment company” set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

The Company believes it will not be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because it will not engage primarily, or propose to engage primarily, or hold itself out as being engaged primarily, in the business of investing, reinvesting or trading in securities. Rather, the Company is primarily engaged in the non-investment company business of its wholly owned subsidiaries.

The Company believes that it will not be considered an investment company under Section 3(a)(1)(C) of the Investment Company Act. The Company is a holding company that conducts its operations and holds assets primarily through its wholly-owned subsidiaries, including the Mortgage Subsidiary. The Mortgage Subsidiary is excluded from the definition of investment company pursuant to Section 3(c)(5)(C) of the Investment Company Act, which provides an exclusion for companies engaged primarily in investment in mortgages and other liens on or interests in real estate. In order to qualify for this exclusion, the Mortgage Subsidiary must maintain, on the basis of positions taken by the SEC’s Division of Investment Management in interpretive and no-action letters, a minimum of 55% of the value of its total assets in mortgage loans and other related assets that are considered “mortgages and other liens on and interests in real estate” (“Qualifying Interests”), and a minimum of 80% in Qualifying Interests and real estate-related assets. In the absence of SEC guidance that supports the treatment of other investments as Qualifying Interests, the Mortgage Subsidiary will treat those other investments appropriately as real estate-related assets or miscellaneous assets depending on the circumstances. With respect to the Company’s other subsidiaries that maintain this exclusion or another exclusion or exception under the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) thereof), or otherwise do not meet the definition of “investment company,” the Company’s interests in these subsidiaries do not and will not constitute “investment securities.”

Neither the Company nor any of its subsidiaries is required to register under the Investment Advisers Act of 1940, as amended, or under any state securities laws, based on their current activities.

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Corporate Information

Our principal executive offices are located at 1420 Fifth Avenue, Suite 2000, Seattle, Washington 98101, and our telephone number is (206) 971‑0800. We maintain a website on the Internet at http://www.broadmark.com. The information contained on the website is not incorporated by reference into this Report. Broadmark Realty makes available on or through its website certain reports and amendments to those reports that it files with or furnishes to the Commission in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include Broadmark Realty’s Annual Reports on Form 10‑K, its Quarterly Reports on Form 10‑Q and its Current Reports on Form 8‑K and any amendments thereto. Broadmark Realty makes this information available on its website free of charge as soon as reasonably practicable after it electronically files the information with, or furnish it to, the Commission. Additionally, the Commission maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including us, at www.sec.gov.

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ITEM 1A. RISK FACTORS

Summary of Risk Factors

The risk factors summarized and detailed below could materially and adversely impact our business, financial condition, results of operations, cash flows, liquidity, the market price of our common stock, and our ability to, among other things, satisfy our debt service obligations and to make distributions to our stockholders, which in turn could cause our stockholders to lose all or a part of their investment. These are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. Material risks that may affect our business, financial condition and results of operations include, but are not necessarily limited to, those relating to:

Risks Related to Our Business

•We operate in a highly competitive market and competition could have a material adverse effect on our business, financial condition and results of operations.

•Our inability to manage future growth effectively could have a material adverse impact on our business, financial condition and results of operations.

•Loss of one or more members of our senior management team or our inability to hire and retain qualified loan originators or grow and maintain our relationships with key loan brokers, may limit our ability to implement our business and growth strategies.

Market Risks Related to Real Estate Loans

•A prolonged economic slowdown, or lengthy or severe recession or declining real estate values, particularly in a market where our loans are concentrated, could increase loans in contractual default and impairments on the carrying value of our loans.

•An increase in interest rates could adversely affect our ability to originate new loans in order to generate income and pay dividends.

Risks Related to Our Loan Portfolio

•We may be adversely affected by the economies and other conditions of the markets in which we operate, and in particular, that of certain states in which we have a high concentration of loans.

•Our inability to mitigate increases in loan default rates and our inability to manage loans in default could have a material adverse effect on our business, financial condition and results of operation.

•We make short-term construction loans, which are subject to additional risks as compared to loans secured by existing structures or land.

•Declining real estate valuations could result in impairment charges, the determination of which involves a significant amount of judgment on our part.

•Our reserves for credit losses may prove inadequate.

•We may need to foreclose on certain of the loans we originate or acquire, which could result in losses on our loans.

Risks Related to Our Financing

•If we do not increase our working capital, we will not be able to grow our business.

•We may increase the amount of leverage we use in our financing strategy, which would subject us to greater risk of loss.

•Covenants in our debt documents limit our operational flexibility, and a covenant breach and our repayment obligations could materially adversely affect our operations, financial condition and our ability to pay dividends to our stockholders.

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Risks Related to Our REIT Qualification and Investment Management Regulation

•Our failure to qualify or maintain our status as a REIT, subjecting us to taxation as a regular “C” corporation, creating a substantial tax liability and would reduce the amount of cash available for distribution to our stockholders.

•Even if we qualify as a REIT, we may be subject to some taxes that will reduce our cash flow.

•The REIT distribution requirements could adversely affect our ability to execute our business plan and may force us to incur debt or sell assets during unfavorable market conditions to make such distributions.

•We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our stock.

•We may be subject to adverse tax consequences if the U.S. Internal Revenue Service (“IRS”) were to determine that one or more of our Predecessor Companies (as hereinafter defined) failed to qualify as a REIT for U.S. federal income tax purposes.

Risks Related to Ownership of Our Securities

•Our management team has broad discretion in the use of proceeds of securities offerings and, despite our efforts, we may invest or spend the proceeds of offerings in ways with which you may not agree or in ways which may not yield a significant return.

•The development or identification of a material weakness could result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations.

•Certain provisions of Maryland law and our Charter could inhibit changes of control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests.

•We could increase or decrease the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval.

General Risks

•Public health crises and epidemics such as COVID-19 may adversely affect our business, financial condition and results of operations.

•Litigation may adversely affect our business, financial condition and results of operations.

•Cybersecurity threats and other security breaches and disruptions could compromise sensitive information belonging to us or our employees, borrowers and other counterparties and expose us to liability, which would cause our business and reputation to suffer.

•If our common stock becomes subject to the “penny stock” rules of the SEC, the trading market in our common stock may become significantly more limited, which would make transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.

•There can be no guarantee that we will make distributions or generate yields comparable to our current or historic levels.

Risks Related to Our Business

We operate in a highly competitive market and competition could have a material adverse effect on our business, financial condition and results of operations.

We operate in a highly competitive market and we believe these conditions will persist for the foreseeable future as the financial services industry continues to consolidate, producing larger, better capitalized and more geographically diverse companies with broad product and service offerings, and new entrants come into the real estate lending market. As a result, our profitability depends, in large part, on our ability to compete effectively.

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Our existing and potential future competitors include “hard money” lenders, mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage banks, credit unions, insurance companies, mutual funds, pension funds, private equity funds, hedge funds, institutional investors, investment banking firms, non-bank financial institutions, governmental bodies, family offices and high net worth individuals. We may also compete with companies that partner with and/or receive financing from the U.S. government. Many of our competitors are substantially larger and have considerably greater financial, technical, marketing and other resources than we do. In addition, larger and more established competitors may enjoy significant competitive advantages, including enhanced operating efficiencies, more extensive referral networks, greater and more favorable access to investment capital and more desirable lending opportunities. Several of these competitors, including mortgage REITs, are expected to raise significant amounts of capital, which enables them to make larger loans or a greater number of loans. Some competitors may also have a lower cost of funds and access to funding sources that may not be available to us, such as funding from various governmental agencies or under various governmental programs for which we are not eligible. Many of these competitors have been aggressively pursuing yields. This has resulted in pricing pressure on our business, which has driven, and we expect will continue to drive, increased variability in the amount of our loan originations from quarter-to-quarter and the yields we are able to achieve on new loans. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of possible loan transactions or to offer more favorable financing terms than we could. For example, we may find that the pool of potential qualified borrowers available to us is limited. Finally, as a REIT and because we operate in a manner intended to be exempt from the requirements of the Investment Company Act of 1940, as amended (the “Investment Company Act”), we may face further restrictions to which some of our competitors may not be subject. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders. As a result of these competitive factors, we may not in the future be able to originate and fund mortgage loans on favorable terms, which could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Our inability to manage future growth effectively could have an adverse impact on our financial condition and results of operations.

Our ability to implement our business strategy and grow our business depends upon our ability to identify and originate additional mortgage loans that meet our underwriting criteria, which may include making loans in additional geographic areas where we have little experience and understanding of the market. Additionally, we may not be able to hire and train sufficient personnel or develop management, information and operating systems suitable for our growth. Any failure to effectively manage our future growth could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

In the future, we may modify our underwriting standards and methods of obtaining financing to make mortgage loans without stockholder approval, which may increase the level of risk in an investment in our securities.

While we have no current intention of modifying the historical loan initiation standards in any material manner, we have evolved our underwriting criteria in some respects and may in the future alter them more significantly if we believe it would be favorable to our business. For example, we have recently modified our requirement that all of our loans be secured by personal guarantees by the project sponsor on a recourse basis. In addition, the criteria necessary for a borrower to qualify for a loan may be made less stringent, which could result in an increased amount of loan defaults. We may also determine in the future to issue preferred stock and may incur additional indebtedness to fund an increase of our loan portfolio or for other working capital purposes. Any such actions may be taken without stockholder approval. Issuing preferred stock or incurring additional indebtedness may reduce the amount of capital that will be available for distribution to stockholders and the amount available to make new loans if the funds are necessary to make required payments under such instruments. Any such changes could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

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We depend on our management teams, the loss of any of whom could threaten our ability to operate our business successfully.

Our future success depends, to a significant extent, upon the continued services of our management team. The mortgage lending experience of our management team and the extent and nature of relationships they have developed with developers and owners of residential and commercial properties are critical to our success. We cannot assure their continued employment. For example, on November 7, 2022, we announced the resignation of our Chief Executive Officer and the appointment of an interim Chief Executive Officer and interim President. In addition, on October 14, 2022, we announced the resignation of our Chief Financial Officer and the appointment of a new Chief Financial Officer, effective December 1, 2022. Also in 2022, we eliminated the positions of Chief Operating Officer and Chief Credit Officer. Recent and potential future management turnover may make it more challenging to effectively manage and lead our business and to attract and retain personnel, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may not be able to hire and retain qualified loan originators or grow and maintain our relationships with key loan brokers, and if we are unable to do so, our ability to implement our business and growth strategies could be limited.

We depend on our loan originators to generate borrower clients by, among other things, developing relationships with commercial property owners, real estate agents and brokers, developers and others, which we believe leads to repeat and referral business. Accordingly, we must be able to attract, motivate and retain skilled loan originators. The market for loan originators is highly competitive and may lead to increased costs to hire and retain them. We cannot guarantee that we will be able to attract or retain qualified loan originators. If we cannot attract, motivate or retain a sufficient number of skilled loan originators, at a reasonable cost or at all, our business could be materially and adversely affected. We also depend on our network of loan brokers, who generate a significant portion of our loan originations. While we strive to cultivate long-standing relationships that generate repeat business for us, brokers are free to transact business with other lenders and have done so in the past and will do so in the future. Our competitors also have relationships with some of our brokers and actively compete with us in bidding on loans shopped by these brokers. We also cannot guarantee that we will be able to maintain or develop new relationships with additional brokers.

We may not be able to obtain or maintain required licenses and authorizations to conduct our business and may fail to comply with various state and U.S. federal laws and regulations applicable to our business.

In general, lending is a highly regulated industry in the United States and we are required to comply with, among other statutes and regulations, certain provisions of the Equal Credit Opportunity Act that are applicable to commercial loans, the USA Patriot Act, regulations promulgated by the Office of Foreign Asset Control, and U.S. federal and state securities laws and regulations. In addition, certain states have adopted laws or regulations that may, among other requirements, require licensing of lenders and financiers, prescribe disclosures of certain contractual terms, impose limitations on interest rates and other charges, and limit or prohibit certain collection practices and creditor remedies.

There is no guarantee that we will be able to obtain, maintain or renew any required licenses or authorizations to conduct our business or that we would not experience significant delays in obtaining these licenses and authorizations. As a result, we could be delayed in conducting certain business if we were first required to obtain certain licenses or authorizations or if renewals thereof were delayed. Furthermore, once licenses are issued and authorizations are obtained, we are required to comply with various information reporting and other regulatory requirements to maintain those licenses and authorizations, and there is no assurance that we will be able to satisfy those requirements or other regulatory requirements applicable to our business on an ongoing basis, which may restrict our business and could expose us to penalties or other claims.

Any failure to obtain, maintain or renew required licenses and authorizations or failure to comply with regulatory requirements that are applicable to our business could result in material fines and disruption to our business and could have a material adverse effect on our business, financial condition, operating results and our ability to make distributions to our equity holders.

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The accuracy of our financial statements may be materially affected if our estimates, including allowance for credit losses, prove to be inaccurate.

Financial statements prepared in accordance with accounting principles generally accepted in the United States, or “GAAP,” require the use of estimates, judgments and assumptions that affect the reported amounts. Different estimates, judgments and assumptions reasonably could be used that would have a material effect on the financial statements, and changes in these estimates, judgments and assumptions are likely to occur from period to period in the future. Significant areas of accounting requiring the application of management’s judgment include but are not limited to assessing the adequacy of the allowance for credit losses and assessing impairments on real estate held for use or held for sale. These estimates, judgments and assumptions are inherently uncertain, especially in turbulent economic times, and, if they prove to be wrong, then we face the risk that charges to income will be required, which could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

We may be subject to “lender liability” litigation.

A number of judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of various legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or stockholders. From time to time, borrowers or other participants in projects we have financed have threatened lender liability claims against us and may do so in the future. We cannot assure you that such claims will not arise or that we will not be subject to significant liability if a claim of this type were to arise.

Several members of our senior management team do not have prior experience in operating a public company.

Our interim Chief Executive Officer did not have experience in managing a publicly traded company prior to the business combination (“Business Combination”) consummated November 14, 2019. Our new Chief Financial Officer, as of December 1, 2022, does not have experience in managing a publicly traded company. As such, our management team may encounter difficulties in successfully or effectively complying with our reporting and other obligations under U.S. federal securities laws and other regulations and in connection with operating as a public company. Our management team has been and may continue to be required to devote significant time to these activities, which could result in less time being devoted to our management and growth.

If members or former members of our management engage in business activities of the types conducted by us, we may be materially adversely affected.

Certain members and former members of our management and their affiliates have in the past provided management services to other real estate lending companies that originate and acquire mortgages. In prior years, such persons invested in second deed of trust liens for their own accounts or for the accounts of others, where we have generally made a first deed of trust lien, or in the equity of a borrower or the developer that owns the secured property. Certain members and former members of our management have entered into restrictive covenant agreements with non-competition provisions. If these agreements are not effective in preventing these parties from engaging in business activities that are competitive with us, it could have a material adverse effect on our business, financial condition, results of operations or prospects and our ability to make distributions to our equity holders.

Market Risks Related to Real Estate Loans

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

A prolonged economic slowdown, a recession or declining real estate values could impair the performance of our loans and harm our financial condition and results of operations and limit our ability to raise capital. As a result, we believe the risks associated with our business will be more severe during periods of economic slowdown or recession because these periods are likely to be accompanied by declining real estate values and declining demand for new mortgage loan originations. Declining real estate values have in the past and are likely in the future to have one or more of the following adverse consequences:

•reduce the level of new mortgage loan originations since borrowers often use appreciation in the value of their existing properties to support the purchase or investment in additional properties;

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•make it more difficult for existing borrowers to remain current on their payment obligations;

•significantly increase the likelihood that we will incur losses on our loans in the event of default because the value of collateral may be insufficient to cover our cost on the loan; and

•reduce the speed or ability for our mortgages to be repaid at maturity through the sale or refinance of our collateral.

Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect both our interest income from loans in our portfolio as well as our ability to originate new loans, which could adversely affect our business, financial condition and operating results and our ability to make distributions to our equity holders.

In addition, public health crises, pandemics and epidemics, such as the COVID-19 pandemic, which has broadly impacted the economy, could have a material adverse effect on economic activity, including our business by reducing the demand for commercial or residential real estate that our borrowers might have developed or increasing the time and expense of such development projects.

An increase in interest rates could adversely affect our ability to originate new loans in order to generate income and pay dividends.

Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing. The rising cost of borrowing may cause reduced demand for real estate, possibly resulting in declining real estate values. In the later part of third quarter of 2022, market interest rates rose markedly and rapidly primarily as a result of the Federal Reserve's actions to curb rapidly rising inflation, which has led to a significant slowdown in real estate transactions and less capital available in the marketplace to finance real estate projects. Rising interest rates and macroeconomic uncertainties in the capital markets have, and may in the future, led to a decrease in the availability of capital from traditional lenders for longer-term financing of completed construction and development projects, which may negatively affect our borrowers' ability to sell or refinance their collateral and repay our loans. Declining real estate values significantly increase the likelihood that we will incur losses on our loans in the event of default. In addition, rising interest rates may also cause loans that we originated prior to an interest rate increase to provide yields that are below prevailing market interest rates. These factors could adversely affect our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Prepayment rates are difficult to predict and may result in excess capital; the inability to redeploy this capital at comparable yields or risk could result in lower income.

The frequency at which prepayments (including both voluntary prepayments by the borrowers and liquidations due to defaults and foreclosures) occur on our mortgage loans is difficult to predict and is affected by a variety of factors, including the prevailing level of interest rates, economic, demographic, tax, social, legal, legislative and other factors. To the extent that faster prepayment rates occur, the principal payments received from prepayments may be reinvested in lower-yielding mortgage loans, which may reduce our income in the long run. Therefore, if actual prepayment rates differ from anticipated prepayment rates, then there could be an adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Risks Related to Our Loan Portfolio

We may be adversely affected by the economies and other conditions of the markets in which we operate, and in particular, that of certain states in which we have a high concentration of loans.

The geographic distribution of our loan portfolio exposes us to risks associated with the real estate and commercial lending industry in general, and to a greater extent within the states and regions in which we have concentrated our loans. These risks include, without limitation:

•declining real estate values;

•overbuilding;

•extended vacancies of properties;

•increases in operating expenses such as property taxes and energy costs;

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•changes in zoning laws;

•rising unemployment rates;

•occurrence of environmental events;

•rising casualty or condemnation losses; and

•uninsured damages from floods, hurricanes, earthquakes or other natural disasters.

At December 31, 2022, our mortgage loans were most concentrated in the following four states:

	At December 31, 2022
State (dollars in millions)	Total Commitment		% of Portfolio
Washington	$	335.5		23.7	%
Colorado		244.4		17.2
Utah		208.7		14.7
Texas		206.2		14.5
Total top four states		994.8		70.1
Other		422.5		29.9
Total	$	1,417.3		100.0	%

While we make loans in additional markets, we remain particularly subject to the general economic and market conditions in the four states identified above. The occurrence of any one or more of the above enumerated conditions in such states could cause a decline in the value of properties securing our loans which would reduce the value of the collateral and the potential proceeds available to borrowers to repay their loans.

In the event that we should foreclose on a property, we may be unable to sell it at a value that would allow us to recoup the proceeds of the loan. Any such events that would increase volatility of values of residential and commercial properties could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Additionally, other neighboring states may become more attractive for investors, developers, builders and other commercial borrowers based on favorable costs and other conditions to construct or improve or renovate real estate properties. Changes in other markets may result in increased development and demand for loans in those markets and result in a corresponding decrease in development and demand for loans in the markets in which we concentrate our loan activity. Any adverse economic or real estate developments or any adverse changes in the local business climate in any such states could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Borrowers that incur mortgage loans from us may not qualify for conventional bank financing or would be regarded as higher risk borrowers, and on such basis, may be more likely to default on repayment of their loans.

Borrowers who are obligated under the mortgage loans that we issue are sometimes persons who do not qualify for conventional bank financing or who could be regarded to be higher risk borrowers. Consequently, these borrowers are more likely to default on the repayment of their obligations. In the event of any default under a mortgage loan issued by us, we will bear a risk of loss to the extent of any deficiency between the value of the collateral and the outstanding principal and accrued interest of the mortgage loan, and any such losses could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

In addition, we extend mortgage loans to borrowers who are not organized as single purpose entities. A single purpose entity structure can allow a lender to better isolate the borrower and its assets from consolidation into a bankruptcy case filed on behalf of its affiliates. Because we extend mortgage loans to borrowers not organized as single purpose entities, there could be an increased risk that we may not be able to maintain our security interest in the mortgage collateral, thereby decreasing recovery in the event of a default in a mortgage loan.

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Short-term loans may involve a greater risk of loss than traditional mortgage loans.

Borrowers usually use the proceeds of a long-term mortgage loan or sale to repay a short-term loan. Typically, we issue short-term mortgage loans with initial terms less than 22 months, subject to extension at our option. We may therefore depend on a borrower’s ability to obtain permanent financing or sell the property to repay our loan, which could depend on market conditions and other factors. In a period of rising interest rates or tightening credit markets, it may be more difficult for borrowers to obtain long-term financing, which increases the risk of non-payment. Short-term loans are also subject to risks of borrower defaults, bankruptcies, fraud, losses and special hazard losses that are not covered by standard hazard insurance. In the event of a default, we bear the risk of loss of principal and non-payment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount and unpaid interest of the loan. To the extent we suffer any such losses with respect to our mortgage loans, such losses could result in a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

We make construction loans, which are subject to additional risks as compared to loans secured by existing structures or land.

Substantially all of our loans are construction loans, which are subject to additional risks that may not be applicable to loans secured by existing structures and land. Construction budgets may be unrealistic or unforeseen variables may arise, prolonging the development and increasing the costs of the construction project, which may delay the borrower’s ability to sell or rent the finished property, which could adversely affect repayment of the loan. While we believe we have reasonable procedures in place to manage construction funding loans, there can be no certainty that we will not suffer losses on construction loans. In addition, if a builder fails to complete a project, we may be required to complete the project. Any such default could result in a substantial increase in costs in excess of the original budget and delays in completion of the project.

Furthermore, construction loans are subject to risks of cost overruns and non-completion for construction, renovation, refurbishment or expansion by a borrower of a mortgaged property. Costs of construction or renovation to bring a property up to market standards for the intended use of that property may exceed original estimates, possibly making a project uneconomical. Other risks may include environmental risks, permitting risks, other construction risks, and subsequent leasing of the property not being completed on schedule or at projected rental rates. If such construction or renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged reduction of net operating income and may be unable to make payments of interest or principal to us, which could materially and adversely affect us.

Additionally, we may make construction loans without having all the funds on hand that will ultimately be required for final funding of the loan. In the event that we suffer substantial borrower defaults, overestimate the pace of repayments of loans or are unable to obtain or raise additional capital, we may be unable to fund all of our construction loan commitments. In the event that we suffer substantial borrower defaults, or are unable to raise additional capital, we may be unable to fund a performing construction loan.

Any default on a construction loan by a borrower, or our default in funding a construction loan as called for in the loan agreement, could have a material adverse effect to our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Loans secured by first deed of trust liens on real estate are subject to increased risk.

None of our loans secured by real property are guaranteed by the U.S. government or any government sponsored enterprise. Therefore, the value of mortgages on such loans is significantly impacted by the value of the underlying property, the creditworthiness and financial position of the borrower and the enforceability of the lien. In the event of a foreclosure, we may assume direct ownership of the underlying collateral. The liquidation proceeds upon sale of such real estate may not be sufficient to recover our cost basis in the loan, and any costs or delays involved in the foreclosure or liquidation process may increase losses.

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Further, mortgage loans are also subject to “special hazard” risk (property damage caused by hazards, such as earthquakes or environmental hazards, not covered by standard property insurance policies), and to bankruptcy risk (reduction in a borrower’s mortgage debt by a bankruptcy court). In addition, claims may be assessed against us on account of our position as a mortgage holder or property owner, including assignee liability, responsibility for tax payments, environmental hazards and other liabilities. In some cases, these liabilities may be “recourse liabilities” or may otherwise lead to losses in excess of the purchase price of the related mortgage or property, which could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders. In addition, our loans are or will be illiquid, and if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments.

Most of our loans include a balloon payment at maturity, which payment commonly represents the full amount due under the loan. Failure by borrowers to make the balloon payments when due could have a material adverse impact on our financial condition.

Our loan payment terms customarily require a balloon payment at maturity. Given the fact that many of the properties securing our loans are not income producing, and most of the borrowers are entities with no assets other than the single property that is the subject of the loan, borrowers may have considerable difficulty making the balloon payment at maturity. Borrowers’ inability to repay loans at maturity, together with all the accrued interest thereon, could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Many of the properties securing our mortgage loans are not income producing, thus increasing the risks of delinquency and foreclosure.

Most of our loans are secured by properties, whether residential or commercial, that are under development, construction or renovation and are not income producing. The risks of delinquency and foreclosure on these properties may be greater than similar risks associated with loans made on the security of income producing properties. In the case of income producing properties, the ability of a borrower to repay the loan typically depends primarily upon the successful operation of such property. If the net operating income of the subject property is reduced, the borrower’s ability to repay the loan, or our ability to receive adequate returns on its loans, may be impaired.

In the case of non-income producing properties, the expectation is that our loans will be repaid out of sale or refinancing proceeds. Thus, the borrower’s ability to repay our mortgage loans will depend, to a great extent, on the value of the property at the maturity date of the loan. In the event of any default under a mortgage loan issued by us, we will bear a risk of loss to the extent of any deficiency between the value of the collateral and the outstanding principal and accrued interest of the mortgage loan, and any such losses could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a mortgage loan may be an expensive and lengthy process, which could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

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Declining real estate valuations could result in impairment charges, the determination of which involves a significant amount of judgment on our part. Any impairment charge could have a material adverse effect on us.

We review our loan portfolio for impairment on a quarterly and annual basis and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment include, but are not limited to, a sustained significant decrease in the value of the collateral securing the loan, including the value of the real estate and other assets pledged to secure the loan as well as personal guarantees by the principals of the borrower, or a borrower’s inability to stay current with respect to its obligations under the terms of the loan. A significant amount of judgment is involved in determining the presence of an indicator of impairment. When we determine that the value of the collateral is less than the amount outstanding on the loan or the amount that may become due upon the maturity of the loan, a loss must be recognized for the difference between the fair value of the property and the carrying value of the loan. The evaluation of the market value of the underlying collateral requires a significant amount of judgment on our part. Any impairment charge could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Our reserves for credit losses may prove inadequate, which could have a material adverse effect on us.

We evaluate our loans, and we will evaluate the adequacy of any future reserves for credit losses we are required to recognize, on a quarterly basis. In the future, we may maintain varying levels of credit loss reserves. Our determination of asset-specific credit loss reserves may rely on material estimates regarding the fair value of any loan collateral. The estimation of ultimate credit losses, provision expenses and loss reserves is a complex and subjective process. As such, there can be no assurance that our judgment will prove to be correct and that any future credit loss reserves will be adequate over time to protect against losses inherent in our portfolio at any given time. Any such losses could be caused by various factors, including, but not limited to, unanticipated adverse changes in the economy or events adversely affecting specific assets, borrowers, industries in which our borrowers operate or markets in which our borrowers or their properties are located. If our future reserves for credit losses prove inadequate, we may suffer losses, which could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

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

We may find it necessary or desirable to foreclose on certain of the loans we originate through foreclosure or deed-in-lieu of foreclosure, and the ownership of real property collateral securing our loans and the foreclosure process may be lengthy and expensive. If we foreclose on an asset, we may take title to the property securing that asset, and if we do not or cannot sell the property on terms attractive to us, we would own and operate it as “real estate owned.” Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a loan secured by that property. The costs associated with operating and redeveloping real estate owned property, including any operating shortfalls and significant capital expenditures, could materially and adversely affect our results of operations, financial condition and liquidity. These risks are heightened based upon our limited experience owning and operating properties. In addition, at such time that we elect to sell such property, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis, resulting in a loss to us. Furthermore, any costs or delays involved in the maintenance or liquidation of the underlying property will further reduce the net proceeds and, thus, increase the loss that we recognize upon sale of such property.

We cannot assure you as to the adequacy of the protection of the terms of the applicable loan, including the validity or enforceability of the loan and the maintenance of the anticipated priority and perfection of the applicable security interests. Furthermore, claims may be asserted by borrowers that might interfere with enforcement of our rights. Borrowers may resist foreclosure actions by asserting numerous claims, counterclaims and defenses against us, including, without limitation, lender liability claims and defenses, even when the assertions may have no basis in fact, in an effort to prolong the foreclosure action and seek to force the lender into a modification of the loan or a favorable buy-out of the borrower’s position in the loan. At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process and potentially resulting in a reduction or discharge of a borrower’s debt. Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value.

We may also be subject to environmental liabilities arising from such properties acquired in the foreclosure process. See the risk factor entitled “Liability relating to environmental matters may impact the value of properties that we may acquire or the properties underlying our loans” for additional information regarding potential environmental liabilities.

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To the extent that our loan documentation or files contain defects, inaccuracies or inconsistencies, or our loan due diligence processes prove to be inadequate, we could experience decreased recoveries in the event of foreclosure and thereby potentially reduce the amount of distributions to our common stockholders.

While we endeavor to maintain accurate and complete loan documentation and loan files, from time to time, our loan documentation and files may contain defects, inaccuracies or inconsistencies, or information that is incorrect or out of date. To the extent this occurs, or our loan due diligence processes prove to be inadequate, there is a risk that, in the event of a default, we will not be able to enforce our rights to foreclose upon the collateral securing such defaulted loans. If this were to occur, the amount available to our common stockholders for distributions could potentially be reduced.

Liability relating to environmental matters may impact the value of properties that we may acquire or the properties underlying our loans.

Liability relating to environmental matters may decrease the value of the underlying properties securing our loans and may adversely affect the ability of a person to sell or rent such property or borrow using such property as collateral. Under various U.S. federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on, about, under or in its property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. We do not always conduct a Phase I environmental survey as part of our underwriting process. To the extent that an owner of an underlying property becomes liable for removal costs, testing, monitoring, remediation, bodily injury or property damage, the ability of the owner to make debt payments may be reduced, which in turn may adversely affect the value of the relevant mortgage asset related to such property. If we acquire any properties by foreclosure or otherwise, the presence of hazardous substances on a property may adversely affect the property’s value and our ability to sell the property. Additionally, we may incur substantial remediation costs, thereby harming our financial condition. The discovery of environmental liabilities attached to such properties could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our equity holders. Moreover, some U.S. federal, state and local laws provide that, in certain situations, a secured lender, such as ourselves, may be liable as an “owner” or “operator” of the real property, regardless of whether the borrower or previous owner caused the environmental damage. Therefore, the presence of hazardous substances on certain property could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Our due diligence may not reveal all of the risks associated with a mortgage loan or the property that will be mortgaged to secure the loan, which could lead to losses.

Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control. Our credit policies and procedures may not be successful in limiting future delinquencies, defaults and losses, or they may not be cost effective. Our underwriting reviews and due diligence procedures may not be effective in identifying all potential credit risks. Borrower and guarantor circumstances could change during the term of the loan. The value of the properties collateralizing or underlying the loans may decline. The frequency of default and the loss severity on loans upon default may be greater than we anticipate. If properties securing our mortgage loans become real estate owned as a result of foreclosure, we bear the risk of not being able to sell the property and recover our investment and of being exposed to the risks attendant to the ownership of real property.

Before approving and funding a mortgage loan, we undertake due diligence of the borrower, its principals (if the borrower is not an individual) and the property that will be mortgaged to secure the loan. Such due diligence includes review of (i) the credit history of the borrower if an individual, and to the extent available and considered materially significant, a business entity, if applicable, (ii) the borrower and guarantor or guarantors’ financial statements and tax returns, (iii) the independently appraised value of the property, (iv) legal and lien searches against the borrower, the guarantors and the property, (v) where deemed appropriate, a certificate or insurance binder of hazard insurance, (vi) a review of the documentation related to the property, including title information and (vii) other reviews and/or assessments that we may deem appropriate to conduct. There can be no assurance that we will conduct any specific level of due diligence, or that, among other things, the due diligence process will uncover all relevant facts, which could result in losses on the loan in question, which, in turn, could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

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Third-party diligence reports are made as of a point in time and are therefore limited in scope.

Appraisals, engineering and environmental reports, as well as a variety of other third-party reports, are generally obtained with respect to each of the mortgaged properties underlying our loans at or about the time of origination. Appraisals are not guarantees of present or future value. One appraiser may reach a different conclusion than the conclusion that would be reached if a different appraiser were appraising that property. Moreover, the values of the properties may fluctuate significantly after the date that appraisals are performed. In addition, any third-party report, including any engineering report, environmental report, site inspection or appraisal represents only the analysis of the individual consultant, engineer or inspector preparing such report at the time of such report, and may not reveal all necessary or desirable repairs, maintenance, remediation and capital improvement items. Any missing or incomplete information in the appraisal and engineering and environmental reports prepared by third parties may affect our loan underwriting, and if foreclosure on the property became necessary, could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Climate change and regulatory and other efforts to reduce climate change could adversely affect our business.

We cannot predict the rate at which climate change will progress. However, the physical effects of climate change could have a material adverse effect on our business, financial conditions and results of operations. To the extent that severe weather events or significant changes in climate occur in the geographic locations where the properties securing our loans are located, our borrowers may experience cost increases, construction delays and decreased demand for properties located in such geographic areas or affected by such changes.

Recently, there has been growing concern from advocacy groups, government agencies and the general public over the effects of climate change on the environment. Government restrictions, standards or regulations intended to reduce greenhouse gas emissions and potential climate change impacts, are emerging and may increase in the future in the form of restrictions or additional requirements on the development of commercial real estate. Such restrictions and requirements could increase our costs or require additional technology and capital investment by our borrowers, which could adversely affect our results of operations.

If casualty insurance is prohibitively expensive or unavailable for certain events, or the borrower were to allow its casualty insurance to lapse, then, in the event a casualty were to occur, our loan may not be adequately secured.

Our policy is to require fire and/or casualty insurance on property improvements that would be sufficient, together with the value of the underlying land, to pay off all obligations, including the subject mortgage. There are certain disasters, however, for which no insurance is available or for which insurance may be deemed to be too expensive (examples would include flood and earthquake insurance). Furthermore, we have no control over the borrower’s actions or the state of the property that might reduce available coverage, call for economically prohibitive premiums, or otherwise render the subject real property uninsurable. In addition, should insurance coverage lapse due to premiums not paid by the borrower, or should a policy be cancelled for other reasons, we may not be protected unless substitute or new insurance is in force. In this event, we may be required to pay the premiums to maintain such insurance, to the extent available, which could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

Risks Related to Our Financing

Our loan origination activities, revenues and profits are limited by available funds. If we do not increase our working capital, we will not be able to grow our business.

As a commercial real estate finance company, our revenue and net income is limited to interest and fees received or accrued on our loan portfolio. Our ability to originate real estate loans is limited by the funds at our disposal. We intend to use the proceeds from the repayment of outstanding loans and any additional capital, raised publicly or privately, to originate real estate loans. We cannot assure you that such funds will be available in sufficient amounts to enable us to expand our business.

We may increase the amount of leverage we use in our financing strategy, which would subject us to greater risk of loss.

Our charter and bylaws do not limit the amount of indebtedness we can incur; although we are limited by certain financial covenants under our debt documents.

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We may increase the amount of leverage we utilize at any time without approval of our stockholders. Incurring substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that:

•our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt or we may fail to comply with all of the other covenants contained in the debt documents, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow unused amounts under our revolving credit facility, even if we are current in payments on borrowings under the credit facility and/or (iii) the loss of some or all of our assets to foreclosure or sale;

•our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that yields on our real estate loans will increase with higher financing costs;

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

•we may not be able to refinance debt that matures prior to the investment it was used to finance on favorable terms, or at all.

Covenants in our debt documents restrict our activities and could adversely affect our business.

Our credit agreement for our revolving credit facility contains customary covenants that limit our incurrence of indebtedness, liens, asset dispositions, dividends and distributions to our stockholders, stock repurchases, loans, advances and investments, payments to affiliates, optional prepayments and other modifications of certain other indebtedness, amendments, terminations and waivers of certain material agreements, and acquisitions, mergers and consolidations. The note purchase agreement for our senior unsecured notes contain customary covenants that limit our incurrence of indebtedness, liens and entry into mergers or transfer all or substantially all of our assets. We are also required under the credit agreement and note purchase agreement to comply with a tangible net worth requirement, a total debt to equity ratio requirement and a coverage ratio requirement. These covenants limit our operational flexibility and could prevent us from taking advantage of business opportunities as they arise, growing our business or competing effectively. Among other things, the credit agreement provides that we may not pay cash dividends that would result in non-compliance with the financial covenants under the credit agreement or during an event of default under the credit agreement, except in the case of defaults other than payment defaults, for dividends in amounts necessary to maintain our REIT status. Our ability to meet these requirements may be affected by events beyond our control and, if we fail to meet the requirements, we may be unable to obtain waivers from the lenders or amend the covenants. To the extent borrowings are outstanding under our credit agreement at the maturity thereof and upon the maturity of the Notes, we may be unable to refinance such borrowings or extend the maturity thereof. In such event, our cash flow may not be sufficient to make distributions to our stockholders and repay our maturing debt and may have a material adverse effect on our financial condition.

Risks Related to Our REIT Qualification and Investment Management Regulation

We cannot assure you that we will be able to successfully manage our business as a REIT.

In November 2019, the Company acquired (the “Business Combination”) all of the assets of PBRELF I, LLC, BRELF II, LLC, BRELF III, LLC, and BRELF IV, LLC (the “Predecessor Companies”). Each the Predecessor Companies had elected to be taxed as a REIT. The Predecessor Companies had limited experience operating as a REIT. The REIT provisions of the Internal Revenue Code of 1986, as amended (the “Code”), are complex, and any failure to comply with those provisions in a timely manner could prevent us from qualifying as a REIT or could force us to pay unexpected taxes and penalties. Failure to qualify as a REIT would subject us to income taxation (including interest and possibly penalties for prior periods in which we failed to qualify as a REIT) as a regular “C” corporation, which would reduce the amount of cash available for distribution to our stockholders.

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Qualifying as a REIT involves highly technical and complex provisions of the Code and therefore, in certain circumstances, may be subject to uncertainty.

In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets, the sources of our income and the diversity of our stock ownership. Also, we generally must make distributions to our stockholders aggregating annually at least 90% of our “REIT taxable income” (determined without regard to the dividends paid deduction and excluding net capital gain). Compliance with these requirements and all other requirements for qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Even a technical or inadvertent mistake could jeopardize our REIT status. In addition, the determination of various factual matters and circumstances relevant to REIT qualification is not entirely within our control and may affect our ability to qualify as a REIT.

If we fail to qualify as a REIT, we will be subject to tax as a regular “C” corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our stockholders.

We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Code since our initial taxable year ended December 31, 2019, and that our current and proposed method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the Code for subsequent taxable years. Our continued qualification as a REIT will depend on our ability to meet, on an ongoing basis, various complex requirements concerning, among other things, the ownership of our outstanding stock, the nature of our assets, the sources of our income, and the amount of our distributions to our stockholders. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the annual REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis.

If we fail to qualify for taxation as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income at regular corporate rates, and distributions to our stockholders would not be deductible by us in determining our taxable income. In such a case, we might need to borrow money or sell assets in order to pay our taxes. Our payment of income tax would decrease our cash available for distribution to our stockholders.

Furthermore, if we fail to maintain our qualification as a REIT, we no longer would be required to distribute substantially all of our taxable income to our stockholders. In addition, unless we were eligible for certain statutory relief provisions, we could not re-elect to qualify as a REIT until the fifth calendar year following the year in which we failed to qualify. We would also fail to qualify as a REIT in the event we were treated under applicable U.S. Treasury regulations as a successor to another REIT whose qualification as a REIT was previously terminated or revoked. If a Predecessor Company failed to qualify as a REIT prior to the Business Combination, it is possible that we would be treated as a successor REIT under the foregoing rules and thus be unable to qualify as a REIT.

Our ownership of and relationship with taxable REIT subsidiaries is limited, and a failure to comply with the limits would jeopardize our REIT qualification, and our transactions with our taxable REIT subsidiaries may result in the application of a 100% excise tax if such transactions are not conducted on arm’s-length terms.

A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries (“TRSs”). A TRS may earn income that would not be qualifying income if earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. Overall, no more than 20% of the value of a REIT’s assets may consist of stock and securities of one or more TRSs. A domestic TRS will pay U.S. federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the TRS rules impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

Our wholly owned subsidiary that provides certain investment management services with respect to our assets as well as to third parties has elected to be treated as a TRS. We may elect for certain other of our subsidiaries to be treated as TRSs. Our TRSs will pay U.S. federal, state and local income tax on their taxable income, and their after-tax income will be available for distribution to us but will not be required to be distributed to us. There can be no assurance, however, that we will be able to comply with the TRS limitations or to avoid application of the 100% excise tax discussed above.

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Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.

To qualify as a REIT, we must comply with requirements regarding the composition of our assets and our sources of income. If we are compelled to liquidate our investments for any reason, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory, other than foreclosure property.

Even if we qualify as a REIT, we may be subject to some taxes that will reduce our cash flow.

Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, taxes on income from some activities conducted or sales made as a result of a foreclosure, excise taxes, and state or local income, property and transfer taxes, such as mortgage recording taxes and other taxes. Moreover, in order to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory (other than foreclosure property), we may hold some of our assets through a TRS or other subsidiary corporation that will be subject to corporate level income tax at regular corporate rates. In addition, if a TRS borrows funds either from us or a third party, such TRS may be unable to deduct all or a portion of the interest paid, resulting in a higher corporate tax liability. Furthermore, the Code imposes a 100% excise tax on certain transactions between a TRS and a REIT that are not conducted on an arm’s length basis. We intend to structure any transaction with a TRS on terms that we believe are arm’s length to avoid incurring this 100% excise tax. There can be no assurances, however, that we will be able to avoid application of the 100% excise tax. The payment of any of these taxes would reduce our cash flow.

Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT.

If the fair market value or income potential of our qualifying assets for purposes of our qualification as a REIT declines as a result of increased interest rates, changes in prepayment rates, general market conditions, government actions or other factors, or the fair market value of or income from non-qualifying assets increases, we may need to increase our qualifying real estate assets and income or liquidate our non-qualifying assets to maintain our REIT qualification. If the change in real estate asset values or income occurs quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of any non-qualifying assets we may own. We may have to sell or acquire assets or make other decisions that we otherwise would not make absent our REIT election.

The REIT distribution requirements could adversely affect our ability to execute our business plan and may force us to incur debt or sell assets during unfavorable market conditions to make such distributions.

To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our “REIT taxable income” (determined without regard to the dividends paid deduction and excluding net capital gain) each year, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our “REIT taxable income” each year. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. We intend to make distributions to our stockholders to comply with the REIT distribution requirements.

Our taxable income may substantially differ from our net income based on U.S. GAAP, and differences in timing between the recognition of taxable income and the actual receipt of cash may occur. For example, we may recognize interest or other income on a mortgage loan for U.S. federal income tax purposes before we receive any payments of interest on such mortgage. We may also hold or acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under the applicable Treasury regulations, the modified debt may be considered to have been reissued to us at a gain in a debt-for-debt exchange with the borrower, with gain recognized by us to the extent that the principal amount of the modified debt exceeds our cost of purchasing it prior to modification. Moreover, under the Tax Cuts and Jobs Act, or the “TCJA,” we are generally required to take certain amounts (other than certain items, including original issue discount and market discount income, excluded under Treasury regulations) into income no later than the time such amounts are reflected on certain financial statements, which could increase our “phantom income.” In addition, the TCJA limits the deduction for business interest expense to 30% of “adjusted taxable income,” which could result in the deduction allowable in the computation of taxable income to be less than the amount of interest payments actually made during the tax year. Additionally, we may also be required under the terms of indebtedness that we incur to use cash received from interest payments to make principal payments on that indebtedness.

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As a result, we may generate less cash flow than taxable income in a particular year and find it difficult or impossible in certain circumstances to make distributions sufficient to satisfy the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax in a particular year. In such circumstances, we may be forced to incur debt on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that would otherwise have been invested in future loans, or make a taxable distribution of shares of our common stock, as part of a distribution in which stockholders may elect to receive shares (subject to a limit measured as a percentage of the total distribution).

We may be required to report taxable income from certain investments in excess of the economic income we ultimately realize from them.

We may acquire debt instruments in the secondary market for less than their face amount. The discount at which such debt instruments are acquired may reflect doubts about their ultimate collectability rather than current market interest rates. The amount of such discount will nevertheless generally be treated as “market discount” for U.S. federal income tax purposes. Accrued market discount is generally reported as income when, and to the extent that, any payment of principal of the debt instrument is made or the debt instrument is disposed of or retired. If we collect less on the debt instrument than our purchase price plus the market discount we had previously reported as income, we may not be able to benefit from any offsetting loss deductions. In addition, we may hold or acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under applicable Treasury regulations, the modified debt may be considered to have been reissued to us at a gain in a debt-for-debt exchange with the borrower. In that event, we may be required to recognize taxable gain to the extent the principal amount of the modified debt exceeds our adjusted tax basis in the unmodified debt, even if the value of the debt or the payment expectations have not changed. Moreover, debt instruments that we originate or acquire may be issued with original issue discount. We will be required to report such original issue discount based on a constant yield method and will be taxed based on the assumption that all future projected payments due on such debt instruments will be made. If any such debt instrument turns out not to be fully collectable, an offsetting loss deduction will become available only in the later year that uncollectability is provable.

Additionally, as described above, under the TCJA, we are generally required to take certain amounts into income no later than the time such amounts are reflected on certain financial statements, which could increase our “phantom income.”

Finally, in the event that any debt instruments held or acquired by us are delinquent as to mandatory principal and interest payments, or in the event payments with respect to a particular debt instrument are not made when due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income as it accrues, despite doubt as to its ultimate collectability. In each case, while we would in general ultimately have an offsetting loss deduction available to us when such interest was determined to be uncollectable, the utility of that deduction could depend on whether such loss is ordinary or capital and on us having taxable income, in that later year or thereafter.

Our investments in construction loans will require us to make estimates about the fair value of land improvements that may be challenged by the IRS.

We expect to invest in construction loans, the interest from which will be qualifying income for purposes of the REIT income tests, provided that the loan value of the real property securing the construction loan is equal to or greater than the highest outstanding principal amount of the construction loan during any taxable year. For purposes of construction loans, the loan value of the real property is the fair value of the land plus the reasonably estimated cost of the improvements or developments (other than personal property) that will secure the loan and that are to be constructed from the proceeds of the loan. There can be no assurance that the U.S. Internal Revenue Service (“IRS”) would not challenge our estimate of the loan value of the real property.

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If any subsidiary REIT failed to qualify as a REIT, we could be directly or indirectly subject to higher taxes and could fail to remain qualified as a REIT.

We may directly or indirectly (through disregarded subsidiaries, pass-through entities or a TRS) own shares of a subsidiary that has elected to be taxed as a REIT for U.S. federal income tax purposes. Any such subsidiary REIT would be subject to the various REIT qualification requirements and other limitations described herein that are applicable to us. If any such subsidiary REIT were to fail to qualify as a REIT, then (i) such subsidiary REIT would become subject to U.S. federal income tax and applicable state and local taxes on its taxable income at regular corporate rates and (ii) our ownership of shares in such subsidiary REIT would cease to be a qualifying asset for purposes of the asset tests applicable to REITs. If any such subsidiary REIT not held indirectly through BRMK Management, Corp. or another TRS were to fail to qualify as a REIT, it is possible that we would fail certain of the asset tests applicable to REITs, in which event we would fail to qualify as a REIT unless we could avail ourselves of certain relief provisions.

We could have potential deferred and contingent tax liabilities as a result of acquiring assets in the Business Combination that were previously owned by non-REIT “C” corporations.

Even if we qualify for taxation as a REIT, we will be subject to U.S. federal corporate income tax at the highest regular rate (currently 21%) on all or a portion of the gain recognized from the disposition of any asset acquired from BRELF III, LLC in the Business Combination occurring within the five-year period following BRELF III, LLC's REIT conversion on January 1, 2019. In other words, if during the five-year period beginning on January 1, 2019, we recognize gain on the disposition of any asset BRELF III, LLC owned on January 1, 2019, then, to the extent of the excess of (i) the fair market value of such asset as of January 1, 2019, over (ii) BRELF III, LLC's adjusted income tax basis in such asset as of January 1, 2019, we will be required to pay U.S. federal corporate income tax on this gain at the highest regular rate applicable to corporations. The same treatment would apply, for a period of as long as five years beginning on the date of the closing of the Business Combination, to any assets acquired in the Business Combination by us from a Predecessor Company that failed to qualify as a REIT in a taxable year ended on or prior to the Business Combination. These requirements could limit, delay or impede future sales of certain assets. We currently do not expect to sell any asset if the sale would result in the imposition of a material tax liability. We cannot, however, assure you that we will not change our plans in this regard.

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

To maintain our qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we would generally be required to distribute to our stockholders at least 90% of our REIT taxable income each year, which requirement we currently intend to satisfy through regular cash distributions to our stockholders out of legally available funds therefor. We have not, however, established a minimum distribution payment level and our ability to pay distributions may be adversely affected by a number of factors, including the risk factors described in our filings with the SEC. All distributions will be made at the discretion of our board and will depend on our earnings, our financial condition, maintenance of our REIT qualification, restrictions on making distributions under Maryland law and such other factors as our board may deem relevant from time to time. We may not be able to make distributions in the future and our board may change our distribution policy in the future. We believe that a change in any one of the following factors, among others, could adversely affect our results of operations and impair our ability to pay distributions to our stockholders: the profitability of the assets we hold or acquire; the allocation of assets between our REIT-qualified and non-REIT qualified subsidiaries; our ability to make profitable investments and to realize profits therefrom; and defaults in our asset portfolio or decreases in the value of our portfolio. As a result, we cannot assure you that we will achieve results that will allow us to make required cash distributions for any year.

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Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends, which could depress the market price of our stock if it is perceived as a less attractive investment.

The maximum tax rate applicable to income from “qualified dividends” payable by non-REIT “C” corporations to U.S. stockholders that are individuals, trusts and estates generally is 20% (which rate does not include the 3.8% net investment income tax). Dividends payable by a REIT, however, generally are not eligible for the current reduced rate, except to the extent that certain holding requirements have been met and the REIT’s dividends are attributable to dividends received by such REIT from taxable corporations (such as a TRS), to income that was subject to tax at the REIT/corporate level, or to dividends properly designated by the REIT as “capital gains dividends.” Effective for taxable years beginning before January 1, 2026, non-corporate U.S. stockholders generally may deduct 20% of their dividends from REITs (excluding “qualified dividend” income and “capital gains dividends”). To qualify for this deduction, the U.S. stockholder receiving such dividend must hold the dividend-paying REIT shares for at least 46 days (taking into account certain special holding period rules) of the 91-day period beginning 45 days before the shares become ex-dividend, and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property. For those U.S. stockholders in the top marginal tax bracket of 37%, the deduction for applicable REIT dividends yields an effective income tax rate of approximately 30% on such REIT dividends, which is higher than the 20% tax rate on “qualified dividend” income paid by non-REIT “C” corporations. Although the reduced rates applicable to dividend income from non-REIT “C” corporations do not adversely affect the taxation of REITs or dividends payable by REITs, it could cause investors who are non-corporate taxpayers to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT “C” corporations that pay qualified dividends, which could depress the market price of investments in REITs, including our stock.

Complying with the REIT requirements may cause us to liquidate or forgo otherwise attractive investment opportunities.

To qualify as a REIT, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code), including certain mortgage loans and securities (the “75% asset test”). The remainder of our investments (other than securities includable in the 75% asset test) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. Additionally, in general, no more than 5% of the value of our total assets (other than securities includable in the 75% asset test) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs, and debt instruments issued by publicly offered REITs, to the extent not secured by real property or interests in real property, cannot exceed 25% of the value of our total assets. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate or forgo otherwise attractive investment opportunities. These actions could have the effect of reducing our income and amounts available for distribution by us to our stockholders and the income and amounts available to service our indebtedness, if any.

In addition to the asset tests set forth above, to qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the amounts we distribute to our stockholders and the ownership of our stock. We may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution, and we may be unable to pursue investment opportunities that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for us to qualify as a REIT. In addition, in certain cases, the modification of a debt instrument could result in the conversion of the instrument from a qualifying real estate asset to a wholly or partially non-qualifying asset. Compliance with the source-of-income requirements may also limit our ability to acquire debt instruments at a discount from their face amount. Thus, compliance with the REIT requirements may hinder our ability to make, or in certain cases, maintain ownership of, certain attractive investments and, thus, reduce our income and amounts available for distribution or to service our indebtedness, if any.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our stock.

The present U.S. federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the U.S. federal income tax treatment of an investment in us. The rules dealing with U.S. federal, state and local taxation are constantly under review by persons involved in the legislative process and by the IRS, the U.S. Department of the Treasury and other taxing authorities. Changes to the tax laws, with or without retroactive application, could have a material adverse effect on us and our stockholders. We cannot predict how changes in the tax laws might affect us or our stockholders. New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to remain qualified as a REIT or the tax consequences of such qualification.

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Risks Related to Taxes and the Business Combination

If the IRS were to determine that the merger of any of the Predecessor Companies in connection with the Business Combination did not qualify as a tax-free reorganization for U.S. federal income tax purposes with respect to a Predecessor Company, we may be subject to significant tax liabilities.

If the IRS were to determine that the merger of any of the Predecessor Companies in connection with the Business Combination failed to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code with respect to a Predecessor Company, so long as such Predecessor Company qualified as a REIT at the time of the merger, such Predecessor Company generally would not have incurred a U.S. federal income tax liability so long as such Predecessor Company made distributions (which would have been deemed to include for this purpose the fair market value of the shares of our common stock issued pursuant to the applicable merger) to such Predecessor Company’s members in an amount at least equal to the net income or gain recognized on the deemed sale of such Predecessor Company’s assets to us. In the event that such distributions were not sufficient to eliminate all of such Predecessor Company’s tax liability as a result of the deemed sale of its assets to us, we would be liable for any remaining tax owed by such Predecessor Company as a result of such merger.

If the IRS were to determine that the merger of any of the Predecessor Companies in connection with the Business Combination failed to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code with respect to a Predecessor Company and such Predecessor Company did not qualify as a REIT at the time of such merger, such Predecessor Company would generally have recognized gain or loss on the deemed transfer of its assets to us, and we would be liable for any tax imposed on such Predecessor Company, which tax could be significant.

We may be subject to adverse tax consequences if the IRS were to determine that one or more Predecessor Companies failed to qualify as a REIT for U.S. federal income tax purposes.

If the IRS were to determine that any Predecessor Company failed to qualify as a REIT through the consummation of the Business Combination, we may have inherited significant tax liabilities and could fail to qualify as a REIT. Even if we retain our REIT qualification, if any Predecessor Company did not qualify as a REIT or lost its REIT qualification for a taxable year ended on or with the Business Combination, we will face serious tax consequences that could substantially reduce our cash available for distribution to our stockholders because:

•if any Predecessor Company did not qualify as a REIT at the time of the consummation of the Business Combination, the merger of such Predecessor Company could have failed to qualify as a “reorganization” under Section 368(a) of the Code with respect to such Predecessor Company;

•we, as the successor by merger to each Predecessor Company, would have generally inherited any corporate income, excise and other tax liabilities of the Predecessor Companies, including penalties and interest, which inherited tax liabilities could be particularly substantial if such merger of such Predecessor Company failed to qualify as a “reorganization” within the meaning of Section 368(a) of the Code with respect to such Predecessor Company;

•we may be subject to tax on certain built-in gain upon future disposition of each asset of each applicable Predecessor Company; and

•we could be required to pay a special distribution and/or employ applicable deficiency dividend procedures (including penalties and interest payments to the IRS) to eliminate any earnings and profits accumulated by each applicable Predecessor Company during taxable periods that it did not qualify as a REIT.

As a result of these factors, any failure by one or more Predecessor Companies to have qualified as a REIT for any taxable year ended on or before the consummation of the Business Combination could impair our ability to expand our business and raise capital and could materially adversely affect the value of our common stock.

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We have succeeded to certain of the Predecessor Companies’ tax liabilities.

We generally will take a carryover basis and holding period in the assets transferred in connection with the mergers of the Predecessor Companies in connection with the Business Combination. As the successor by merger, we generally are responsible for all of the Predecessor Companies’ liabilities including any unpaid taxes (and penalties and interest, if any), whether as a result of a failure by any Predecessor Company to have distributed all of its taxable income in any tax period, including the short taxable period ending on the date of the Business Combination, or taxes that might otherwise have been due and payable by such Predecessor Company. In addition to us inheriting such tax liabilities, if one or more Predecessor Companies failed to qualify as a REIT for any period ending on or prior to the Business Combination, the amount of the applicable Predecessor Companies’ tax liabilities inherited by us as a result of the Business Combination could be substantial.

Risks Related to Ownership of Our Securities

Our management team has broad discretion in the use of proceeds of securities offerings and, despite our efforts, we may invest or spend the proceeds of offerings in ways with which you may not agree or in ways which may not yield a significant return.

Our management team has broad discretion in the use of proceeds of securities offerings and, despite our efforts, we may invest or spend the proceeds of offerings in ways with which you may not agree or in ways which may not yield a significant return. We intend to use net proceeds from offerings for general corporate purposes, including to fund our lending activities. Our management will have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. As a result, the net proceeds from offerings may be used for lending activities or other general business purposes that do not increase our operating results or enhance the value of our common stock.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and is important in helping to prevent mistakes in and restatements of our financial statements and financial fraud. Although we have determined that our internal control over financial reporting was effective as of December 31, 2022, 2021 and 2020, the Predecessor Companies, and their corresponding management companies, each of which was acquired in the Business Combination (collectively, the “Predecessor Company Group”) reported certain material weaknesses in internal control over financial reporting identified in connection with the audit of the members of the Predecessor Company Groups' financial statements at December 31, 2018, which we reported remained as of December 31, 2019. A failure to maintain effective internal control over financial reporting may adversely affect the accuracy and timing of our financial reporting, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, we may be unable to prevent fraud, investors may lose confidence in our financial reporting, and the price of our securities may decline as a result. In addition, we may be subject to lawsuits or regulatory discipline if we fail to establish and maintain effective internal control over our financial reporting.

We may issue additional shares of common stock upon the exercise of Warrants or for other purposes, which would dilute your ownership interests and may depress the market price of our common stock.

We currently have warrants outstanding to purchase approximately 15.6 million shares of common stock in the aggregate at an aggregate purchase price of $11.50 per share. Further, there were approximately 3.3 million shares of common stock remaining available for issuance pursuant to equity awards under the Broadmark Realty 2019 Stock Incentive Plan at December 31, 2022. We may also issue additional shares of common stock or other equity securities in the future in connection with, among other things, future capital raising and transactions and future acquisitions, without stockholder approval in many circumstances.

Our issuance of additional shares of common stock or other equity securities would have the following effects:

•our existing stockholders’ proportionate ownership interest in us may decrease;

•the amount of cash available for payment of dividends may decrease;

•the relative voting strength of each previously outstanding share of common stock may be diminished; and

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•the market price of our common stock may decline.

Our stockholders have limited control over changes in our policies and operations, which increases the uncertainty and risks our stockholders will face.

Our board determines our major policies, including our policies regarding financing, growth and debt capitalization. Our board may amend or revise these and other policies without a vote of our stockholders. The broad discretion of our board in setting policies and the inability of our stockholders to exert control over those policies increases the uncertainty and risks such stockholders will face. In addition, our board may change its investment objectives without seeking stockholder approval. Although our board has duties to us under Maryland law and intends only to change its investment objectives when our board determines that a change is in our best interest, a change in our investment objectives could cause a decline in the value of the stockholders’ investment in us.

Our rights and the rights of our stockholders to recover claims against our directors and officers are limited, which could reduce your and our recovery against them if they negligently cause us to incur losses.

Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, Maryland law and our charter provide that no director or officer shall be liable to us or our stockholders for monetary damages unless the director or officer (i) actually received an improper benefit or profit in money, property or services or (ii) was actively and deliberately dishonest as established by a final judgment, which was material to the cause of action. Moreover, (i) our charter requires us to indemnify our directors and officers to the maximum extent permitted under Maryland law and (ii) we have entered into indemnification agreements with each of our directors and executive officers that provide for indemnification to the maximum extent permitted by Maryland law, except as expressly limited by the indemnification agreements. As a result, we may have more limited rights against our directors or officers than might otherwise exist under common law, which could reduce your and our recovery from these persons.

Certain provisions of Maryland law could inhibit changes of control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests.

Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:

•“Business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes certain fair price and/or supermajority stockholder voting requirements on these combinations; and

•“Control share” provisions that provide that holders of our “control shares” (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

By resolution of our board, we have opted out of the business combination provisions of the MGCL, which means that any business combination between us and any other person is exempt from the business combination provisions of the MGCL, provided that the business combination is first approved by a majority of our directors (including a majority of directors who are not affiliates or associates of such persons). In addition, pursuant to a provision in our bylaws, we have opted out of the control share provisions of the MGCL. However, our board may by resolution elect to opt into the business combination provisions of the MGCL and we may, by amendment to our bylaws, opt into the control share provisions of the MGCL in the future. Notwithstanding the foregoing, an alteration or repeal of the board resolutions exempting such business combinations will not have any effect on any business combinations that have been consummated or upon any agreements existing at the time of such modification or repeal.

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Our charter contains certain provisions restricting the ownership and transfer of our capital stock that may delay, defer or prevent a change of control transaction that might involve a premium price for holders of our common stock or that our stockholders otherwise believe to be in their best interests.

Our charter contains certain ownership limits with respect to our capital stock. Our charter, among other restrictions, prohibits the beneficial or constructive ownership by any person of more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of any class or series of our capital stock (including our common stock), excluding any shares that are not treated as outstanding for U.S. federal income tax purposes. Our board, in its sole and absolute discretion, may exempt a person, prospectively or retroactively, from this ownership limit if certain conditions are satisfied. This ownership limit as well as other restrictions on ownership and transfer in our charter may:

•Discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for holders of our common stock or that our stockholders otherwise believe to be in their best interests; and

•Result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of certain of the benefits of owning the additional shares.

We could increase or decrease the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval.

A majority of our entire board, without stockholder approval, has the power under our charter to amend the charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue, to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock into one or more classes or series of stock and to set the terms of such newly classified or reclassified shares. As a result, we may issue one or more classes or series of common stock or preferred stock with preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption that are senior to, or otherwise conflict with, the rights of our common stockholders. Although our board has no such intention at the present time, it could establish a class or series of common stock or preferred stock that could, depending on the terms of such class or series, delay, defer or prevent a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in the best interest of our stockholders.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit their ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division, will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in the MGCL, (b) any derivative action or proceeding brought on our behalf (other than actions arising under U.S. federal securities laws), (c) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders, (d) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our charter or bylaws or (e) any other action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. This provision does not cover claims made by stockholders pursuant to the securities laws of the United States, or any rules or regulations promulgated thereunder. We adopted this provision because we believe it makes it less likely that we will be forced to incur the expense of defending duplicative actions in multiple forums and less likely that plaintiffs’ attorneys will be able to employ such litigation to coerce us into otherwise unjustified settlements.

We are a holding company and our only material asset is our interest in our subsidiaries, and we are accordingly dependent upon distributions made by our subsidiaries to make payments, pay dividends and pay taxes.

We are a holding company with no material assets other than our ownership of our subsidiaries. As a result, we have no independent means of generating revenue or cash flow. Our ability to make payments, pay dividends and pay taxes will depend on the financial results and cash flows of our subsidiaries and the distributions we receive from our subsidiaries. Additionally, to the extent that we need funds and any of our subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of any financing arrangements, or any of our subsidiaries is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.

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The ability of our subsidiaries to make distributions to us may be subject to various limitations and restrictions including, but not limited to, restrictions on distributions that would either violate any contract or agreement to which such subsidiary is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering such subsidiary insolvent. If our cash resources are insufficient to fund our obligations, we may be required to incur indebtedness to provide the liquidity needed to make such payments, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders.

General Risk Factors

Public health crises and epidemics such as COVID-19 may adversely affect our business, financial condition and results of operations

We are subject to risks related to the effects of public health crises, epidemics and pandemics, including the continued effects of COVID-19. Such events could inhibit global, national and local economic activity and demand for construction loans, constrain our access to capital and other sources of funding, adversely affect our borrowers ability to pay or refinance their loans; and delays in our ability to exercise our rights or otherwise resolve loans in default. Such impacts could adversely impact our cash flows and ability to pay dividends or to service our debt; result in material non-cash impairment charges in future periods; and have other direct and indirect effects that are difficult to predict. Such risks depend upon the nature and severity of the public health concern, as well as the extent and duration of government-mandated orders and personal decisions to limit travel, economic activity and personal interaction, none of which can be predicted with confidence.

Litigation may adversely affect our business, financial condition and results of operations.

We are, from time to time, subject to legal proceedings and regulatory requirements applicable to our business and industry. Litigation can be lengthy, expensive and disruptive to our operations and results cannot be predicted with certainty. There may also be adverse publicity associated with litigation, regardless of whether the allegations are valid or whether we are ultimately found not liable. As a result, litigation could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders.

There can be no assurance that our corporate insurance policies will mitigate all insurable losses, costs or damages to our business.

Based on the history of the Predecessor Company Group and our type of business, we believe that we maintain adequate insurance coverage to cover probable and reasonably estimable liabilities should they arise. However, there can be no assurance that these estimates will prove to be sufficient, nor can there be any assurance that the ultimate outcome of any claim or event will not have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our equity holders.

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Broadmark Realty Capital Inc.

Cybersecurity threats and other security breaches and disruptions could compromise sensitive information belonging to us or our employees, borrowers and other counterparties and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of business, we may acquire and store sensitive data on our network, such as our proprietary business information and personally identifiable information of our prospective and current borrowers, loan guarantors and our employees. The secure processing and maintenance of this information is critical to our business strategy. Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. Our information and technology systems as well as those of other related parties, such as service providers, may be vulnerable to damage or interruption from cybersecurity breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, usage errors by their respective professionals or service providers, power, communications or other service outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes. Cyberattacks and other security threats could originate from a wide variety of sources, including cyber criminals, nation state hackers, hacktivists and other outside parties. There has been an increase in the frequency and sophistication of the cyber and security threats we face, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target us because we hold a significant amount of confidential and sensitive information about our investors, borrowers and potential investments. As a result, we may face a heightened risk of a security breach or disruption with respect to this information. If successful, these types of attacks on our network or other systems could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our equity holders, due to, among other things, the loss of investor or proprietary data, interruptions or delays in the operation of our business and damage to our reputation. There can be no assurance that measures that we take to ensure the integrity of our systems will provide protection, especially because cyberattack techniques change frequently or are not recognized until successful.

Our business and operations could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact our stock price.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Stockholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the price of our common stock or other reasons may in the future cause us to become the target of securities litigation or stockholder activism. Securities litigation and stockholder activism, including potential proxy contests, could result in substantial costs and divert management’s and our board’s attention and resources from our business. Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with employees and other service providers and make it more difficult to attract and retain qualified personnel. It could also negatively impact our ability to generate new loans. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist stockholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism.

Any projections, forecasts or estimates that we have issued or may issue in the future are subject to significant inherent uncertainties and may not be realized.

Any financial and other projections and forecasts or estimates that we have issued or may issue from time to time in the future are necessarily based on numerous assumptions, expectations and other inputs. As a result, they are inherently subject to significant business, economic, and competitive uncertainties and contingencies and other significant risks, many of which are beyond our control. Actual results can differ from our expectations, and those differences can be material. Any projections, forecasts or estimates should not be regarded as a representation by us as to the financial or other matters addressed by such projections, forecasts or estimates, as there can be no assurance that any of these projections, forecasts or estimates will be realized. In light of the foregoing, you should not place undue reliance on any projections, forecasts or estimates, which constitute forward-looking statements and are inherently subject to numerous significant risks and uncertainties.

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Broadmark Realty Capital Inc.

The market price and trading volume of our securities may be volatile and could decline significantly.

The public trading markets have from time-to-time experienced significant price and volume fluctuations. The market price of our securities may be volatile and could decline significantly. In addition, the trading volume in our securities may fluctuate and cause significant price variations to occur. If the market price of our securities declines significantly, you may be unable to resell your securities at or above the price you purchased it at, or otherwise at a favorable price. We cannot assure you that the market price of our common stock will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:

•the realization of any of the risk factors presented in our filings with the Securities and Exchange Commission;

•actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, results of operations, level of indebtedness, liquidity or financial condition;

•additions and departures of key personnel;

•failure to comply with the requirements of the markets on which our securities are listed;

•failure to comply with the Sarbanes-Oxley Act or other laws or regulations;

•future issuances, sales or resales, or anticipated issuances, sales or resales, of our securities;

•perceptions of the investment opportunity associated with our securities relative to other investment alternatives;

•the performance and market valuations of other similar companies;

•future announcements concerning our business or our competitors’ businesses;

•broad disruptions in the financial markets, including sudden disruptions in the credit markets;

•speculation in the press or investment community;

•actual, potential or perceived control, accounting or reporting problems;

•changes in accounting principles, policies and guidelines; and

•the impact of epidemics, other public health concerns, civil unrest and political uncertainty.

On January 5, 2023, we received a letter from NYSE regulation, that it had determined to suspend trading of our warrants, each exercisable for one fourth (1/4th) share of the Company’s common stock at an exercise price of $2.875 per one fourth (1/4th) share from the NYSE American Exchange, because the warrant’s trading price was no longer suitable for listing. The NYSE American Exchange subsequently delisted the warrants, and the warrants now trade on the Pink Sheets.

In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their securities. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.

If securities or industry analysts do not publish research, publish inaccurate or unfavorable research or cease publishing research about us, the trading price and trading volume of our securities could decline significantly.

The market for our securities may be influenced by the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts may not continue to publish research on us. If no securities or industry analysts maintain coverage of us, the market price and liquidity for our securities could be negatively impacted. If one or more of the analysts who cover us downgrade their opinions about our securities, publish inaccurate or unfavorable research about us, or cease publishing about us regularly, demand for securities could decrease, which might cause the trading price and trading volume to decline significantly.

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Broadmark Realty Capital Inc.

Future issuances of debt securities and equity securities may adversely affect us, including the market price of our securities and may be dilutive to existing stockholders.

We have recently begun to issue debt securities to finance our business, and there is no assurance that we may not issue additional debt securities or issue equity ranking senior to our stock. Those securities will generally have priority upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock. Because our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. As a result, future capital raising efforts may reduce the market price of our common stock and be dilutive to existing stockholders.

If our common stock becomes subject to the “penny stock” rules of the SEC, the trading market in our common stock may become significantly more limited, which would make transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.

Since the middle of November 2022, our common stock has traded at a price below $5.00, and as a result, may be considered a “penny stock”. Under Rule 15g-9 of the Exchange Act, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. Such broker-dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of shares of our common stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market.

There can be no guarantee that we will make distributions or generate yields comparable to our current or historic levels.

Past distributions and yields are no guarantee of our future performance. Our distributions of dividends are not guaranteed and will be paid only to the extent earned by us and authorized by our board. Multiple factors could adversely impact our ability to generate income and pay dividends, such as those set forth under “— Market Risks Related to Real Estate Loans,” and “— Risks Related to Our Loan Portfolio.” The timing and amount of dividends will be determined by our board. There is no guarantee that we will achieve results that will allow us to pay a specified level of cash dividends or to increase the level of such dividends in the future.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal office is located in leased space at 1420 Fifth Avenue, Suite 2000, Seattle, Washington 98101.

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Broadmark Realty Capital Inc.

ITEM 3. LEGAL PROCEEDINGS

We are involved in legal proceedings which arise in the ordinary course of business. We believe that the outcome of such matters, individually and in the aggregate, will not have a material adverse effect on our business, financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

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

Our common stock is listed for trading on the New York Stock Exchange under the symbol “BRMK.” As of February 22, 2023, we had 230 registered holders of our common stock.

Purchase of Equity Securities by the Issuer

The following table summarizes the Company's capital stock repurchases for the quarter ended December 31, 2022 (in millions, except share and per share amounts):

Period	Total Number of Shares Purchased(1)		Average Price Paid Per Share		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(1)
October 1 - October 31, 2022		—		—		—
November 1 - November 30, 2022		—		—		75.0
December 1 - December 31, 2022		1,295,273	$	3.86	$	70.0

(1)On November 7, 2022, the Company’s Board of Directors authorized a stock repurchase program (the “Stock Repurchase Program”) granting the Company the authority to repurchase up to $75.0 million of the Company’s common stock. The Stock Repurchase Program does not have an expiration date and the Company reserves the right to terminate or suspend at any time.

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Broadmark Realty Capital Inc.

Stockholder Return Performance

The following stock performance graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Standard & Poor's 500 (the “S&P 500 Index”) and the FTSE NAREIT Mortgage REITs index (“FTSE NAREIT Index”), a published industry index, from November 15, 2019 (the date on which our common stock became publicly traded) through December 31, 2022. The graph assumes that $100 was invested on November 15, 2019 in our common stock, the S&P 500 and the FTSE NAREIT Index and that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below.

 

	Period Ending
	November 15, 2019		December 31, 2019		December 31, 2020		December 31, 2021		March 31, 2022		June 30, 2022		September 30, 2022		December 31, 2022
BRMK		100.00		117.53		102.45		102.88		96.66		77.33		61.31		44.39
FTSE NAREIT Index		100.00		102.87		80.50		80.50		75.14		61.38		48.18		52.20
S&P 500		100.00		103.54		120.37		152.74		145.18		121.31		114.61		123.04

ITEM 6. [RESERVED]

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Broadmark Realty Capital Inc.

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

The following discussion and analysis of our financial condition and results of operations should be read together with the “Business” section, as well as the consolidated financial statements and related notes in Part II, Item 8 of this Annual Report on Form 10-K. In addition, the following discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-looking statements and involves numerous risks and uncertainties, including those described under the heading “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements. You should read this discussion and analysis together with the consolidated financial statements and related notes included elsewhere in this Report for the Company. In this “Management Discussion and Analysis of Financial Condition and Results of Operations” unless the context otherwise requires, references to “Broadmark Realty,” the “Company,” “we,” “us” and “our” refer to Broadmark Realty Capital Inc., a Maryland corporation, and its consolidated subsidiaries.

Broadmark Realty is an internally managed commercial real estate finance company that has elected to be taxed as a real estate investment trust for U.S. federal income tax purposes. Based in Seattle, Washington, we specialize in underwriting, funding, servicing and managing a portfolio generally consisting of short-term, first deed of trust loans to fund the construction and development of, or investment in, residential or commercial properties. We categorize our loans into the following distinct purposes:

•Vertical Construction. Loans which fund the building or installing of vertical improvements on real property.

•Horizontal Development. Loans which fund the building or installing of horizontal improvements on real property including initial site preparation, ground clearing, installing utilities, and road, sidewalk and gutter paving.

•Acquisition. Loans which fund the acquisition of a property where the intent is generally subsequent financing.

•Land Entitlement. Loans which fund the entitlement of land and to obtain zoning, permitting or legal use to further develop the property.

•Rehabilitation. Loans which fund the renovation or improvement of the physical existence of a real property.

•Bridge. Loans collateralized by completed properties used by borrowers to lease and stabilize an asset with sufficient cash flows to obtain permanent financing.

•Investment. Loans which do not fit into the other purposes described above, such as a cash out refinance or partnership buyout.

We generally operate in states that we believe to have favorable demographic trends and that provide more efficient and quicker access to collateral in the event of borrower default. Beginning in early 2021, we have increased the number of states in which we operate in order to expand our potential lending markets and we plan to be a nationwide lender in the future. As of December 31, 2022, our portfolio of 202 active loans had approximately $1.4 billion of total commitments and $931.0 million of principal outstanding across 162 borrowers in 20 states and the District of Columbia. We refer to loans that have outstanding commitments or principal balances that have not been repaid or retired, including by foreclosure, as “active loans.” Total commitments refer to the aggregate sum of outstanding principal balances, interest reserves and construction holdbacks which includes capital expenditures required to complete construction for defaulted loans that we are no longer required to pay. Historically, our loan portfolio was 100% equity funded, and we had no outstanding debt. On February 19, 2021, we closed on a $135.0 million revolving credit facility, which has enabled us to use a larger percentage of our cash balances for lending activities. We may opportunistically issue debt and raise capital in the public and private markets from time to time based on market conditions to fund the growth of our portfolio and produce attractive returns for our stockholders. On November 12, 2021, we closed the private placement of $100.0 million aggregate principal amount of 5.0% senior unsecured notes due 2026.

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Broadmark Realty Capital Inc.

Properties securing our loans are generally classified as residential properties, commercial properties or undeveloped land, and are typically not income producing. Each loan is generally secured by a first deed of trust lien on real estate. Our lending policy typically limits the committed amount and initial outstanding principal balance of each loan to a maximum loan-to-value (“LTV”) ratio of up to 65% of the “as-complete” appraised value of the underlying collateral as determined by an independent appraiser at the time of the loan origination. At the time of origination, the difference between the initial outstanding principal and the total commitment is the amount held back for future release, subject to property inspections, progress reports and other conditions in accordance with the loan documents. Unless otherwise indicated, LTV is measured by the total commitment amount of the loan at origination divided by the “as-complete” appraisal. LTVs do not reflect interim activity such as construction draws or interest payments capitalized to loans, or partial repayments of the loan. As of December 31, 2022, the weighted average LTV was 60.6% across our active loan portfolio based on the total commitment of the loan and “as-complete” appraisals as of origination or latest amendment. For our loans in contractual default status as of December 31, 2022, the weighted average LTV was approximately 124.8%, when measured by the sum of the principal outstanding, the estimated cost to complete and the accounts receivable for which collectability is reasonably assured, divided by the most recent “as-complete” appraisal. This resulted in significant additions to our allowance for credit losses, resulting in a weighted average LTV net of our allowance for credit losses of approximately 84.9% for our loans in contractual default. In addition, our loans are often personally guaranteed on a recourse basis by the principals of the borrower or others at our discretion to provide further credit support for the loan. The personal guarantee may also be secured by collateral through a pledge of the guarantor’s interest in other real estate or assets owned by the guarantor. As of December 31, 2022, a total of 40 loans were in contractual default, totaling $250.4 million in principal outstanding, or 26.9% of our aggregate principal outstanding. We are actively identifying resolutions for our non-performing loans but continue to face challenges in the current environment. We expect our non-performing loans to negatively affect our near-term financial performance.

As of December 31, 2022, the average total commitment of our active loans was $7.0 million, with a weighted average interest rate of 10.2%. The weighted average term outstanding of our active loans was 22 months, which we often elect to extend for several months based on our evaluation of the expected timeline for completion of construction. We usually receive loan origination fees, or “points,” which, as of December 31, 2022, had a weighted average fee of 2.7% of total commitment at origination, along with loan amendment and extension fees, each of which varies in amount based upon the term of the loan, the credit quality of the borrower and the loan otherwise satisfying our underwriting criteria. In addition, we charge late fees on past due receivables and receive reimbursements from borrowers for costs associated with services provided by us, such as closing costs, collection costs on defaulted loans and construction draw inspection fees.

We primarily compete on the basis of borrower relationships, loan structure, terms and service rather than on price. Additionally, starting in 2021, competitive pressures have led us in many cases to originate loans with terms that deviate from our historical practice. Increased competition and readily available sources of capital through 2021 and into mid 2022 led to lower interest rates on our originated loans in those vintages, lower loan origination fees, absence of minimum interest provisions in our mortgage notes, and a change in our general requirement that all of our loans be secured by personal guarantees on a recourse basis.

In the later part of third quarter of 2022 and continuing into the fourth quarter of 2022, market interest rates rose markedly and rapidly primarily as a result of the Federal Reserve's actions to curb rapidly rising inflation. This led to a significant slowdown in real estate transactions and less capital available in the marketplace to finance real estate projects. Rising interest rates and macroeconomic uncertainties in the capital markets have led to a decrease in the availability of capital from traditional lenders for longer-term financing of completed construction and development projects, which may negatively affect our borrowers' ability to sell or refinance their loan collateral and repay our loans.

We have begun tightening our lending standards and, in some instances, we are not originating loans that would have previously met our lending policy. We are focused on capital preservation and ensuring we are positioned to capture opportunities that emerge from this rapidly changing economic environment.

As a result of rising interest rates and associated pressures to service or refinance their debt capital, we have started to see many of our competitors slow or pause their loan origination activities. This may lead to decreased competition and pricing pressure on our business, although there are no assurances that this will take place.

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Broadmark Realty Capital Inc.

Key Indicators of Financial Condition and Operating Performance

In assessing the performance of our business, we consider a variety of financial and operating metrics, which include both GAAP and non-GAAP metrics, including the following:

Interest income earned on our loans. A primary source of our revenue is interest income earned on our loan portfolio. As of December 31, 2022, our loans bear a weighted average interest rate of 10.2%, paid monthly, primarily from interest reserves and, to a much lesser extent, cash payments. Our loans originated since the second quarter of 2021 typically do not provide for minimum interest provisions in our mortgage notes. A reduction in or absence of minimum interest provisions in our mortgage notes and an increase in the amount of our loans in non-accrual status as a result of being deemed collateral dependent or high risk reduce our effective interest-bearing principal and the interest income we earn on our loans. The effective interest-bearing principal represents the principal balance outstanding plus the excess of minimum interest provisions over the actual principal outstanding and minus the principal balance outstanding on non-accrual status. As of December 31, 2022 and 2021, the effective interest-bearing principal net of non-accrual principal was $716.3 and $840.1 million, respectively. This represents the principal balance outstanding of $931.0 and $924.7 million plus the excess of minimum interest provisions over the actual principal outstanding of $2.5 and $17.3 million less the non-accrual principal of $217.2 and $101.9 million as of December 31, 2022 and 2021, respectively. We expect the trend of lower effective interest-bearing principal than historic levels to continue in subsequent quarters as a result of the absence of minimum interest provisions in new originations and elevated level of loans in non-accrual status.

Fees and other revenue recognized from originating and servicing our loans. Fee income is comprised of loan origination, loan servicing and amendment fees, loan renewal and extension fees, late fees, inspection fees and exit fees. The majority of fee income is comprised of loan origination fees, or “points,” which as of December 31, 2022, had a weighted average fee of 2.7% of the total commitment at origination. In addition to origination fees, we earn loan extension fees when maturing loans are renewed or extended and amendment fees when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan for the transition from horizontal development to vertical construction. Loans are generally only renewed or extended if the loan is not in default and satisfies our underwriting criteria, including our typical maximum LTV ratio of up to 65% of the appraised value, as determined by an independent appraiser at the time of loan origination, or based on an updated appraisal, if required. Loan origination and renewal fees are deferred and recognized in income over the contractual maturity of the underlying loan.

Loan originations. Our operating performance is heavily dependent upon our ability to originate new loans to invest new capital and re-invest returning capital from the repayment of loans. The dollar amounts of loan originations reflect the total commitment at origination and loan repayments reflect the total commitment at payoff. Given the short-term nature of our loans, loan principal on our loans is generally repaid on a faster basis than other types of loans, making redeployment of capital through our originations process an important factor in our success.

The following tables contains the total amount of our loan originations and repayments for the periods indicated:

	Year Ended
(dollars in millions)	December 31, 2022		December 31, 2021
Loans originated(1)	$	488.3	$	873.0
Loans repaid(2)	$	511.7	$	483.3

(1)Based on original total loan commitment amounts and excluding amendments.

(2)Based on fully repaid loans during the period and excluding partial repayments.

Credit quality of our loan portfolio. All of our loans are secured by residential or commercial real estate and, in assessing current expected credit losses ("CECL"), we evaluate external and internal credit quality indicators. Our internal credit quality indicators include, but are not limited to, construction type, collateral type, LTV, market conditions of property location and borrower experience and financial strength.

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Broadmark Realty Capital Inc.

The following tables allocate the carrying value of our loan portfolio based on construction type, collateral type and LTV used in assessing estimated credit losses and vintage of origination at the dates indicated:

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
Construction Type
Vertical Construction	$	552,468			59.8	%	$	352,355	$	128,130	$	33,895	$	1,928	$	36,160
Horizontal Development		221,078			24.1			144,082		68,201		8,795		—		—
Investment		46,536			5.0			46,536		—		—		—		—
Rehabilitation		39,422			4.3			12,936		15,009		11,477		—		—
Land Entitlement		26,132			2.8			4,146		21,986		—		—		—
Bridge		22,611			2.4			19,450		937		—		2,224		—
Acquisition		15,195			1.6			13,454		1,741		—		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(2)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
Collateral Type
Apartments	$	191,708			20.8	%	$	134,816	$	49,944	$	5,020	$	1,928	$	—
Single Family Housing		133,702			14.5			124,218		9,245		239		—		—
Townhomes		106,888			11.6			81,393		24,701		794		—		—
Residential Lots		104,100			11.3			56,675		38,630		8,795		—		—
Entitled Land		76,251			8.3			54,265		21,986		—		—		—
Condos		71,975			7.8			29,738		2,515		3,562		—		36,160
Commercial		58,515			6.3			13,838		44,677		—		—		—
Mixed Use		50,127			5.4			6,209		30,217		11,477		2,224		—
Hotel		30,221			3.3			14,116		—		16,105		—		—
Offices		18,467			2.0			12,179		—		6,288		—		—
Unentitled Land		17,262			1.9			16,325		937		—		—		—
Senior Housing		16,595			1.8			16,595		—		—		—		—
Duplex		13,639			1.5			13,639		—		—		—		—
Commercial Other		11,411			1.2			—		11,411		—		—		—
Retail		9,071			1.0			5,443		1,741		1,887		—		—
Quadplex		8,932			1.0			8,932		—		—		—		—
Commercial Lots		4,018			0.4			4,018		—		—		—		—
Triplex		560			0.1			560		—		—		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(2)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

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Broadmark Realty Capital Inc.

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
LTV (2)
0 - 40%	$	26,053			2.8	%	$	22,544	$	3,509	$	—	$	—	$	—
41 - 45%		29,025			3.1			7,039		21,986		—		—		—
46 - 50%		42,267			4.6			22,524		13,455		6,288		—		—
51 - 55%		144,649			15.7			76,978		58,876		8,795		—		—
56 - 60%		107,098			11.6			98,691		8,407		—		—		—
61 - 65%		456,743			49.5			284,722		112,569		21,364		1,928		36,160
66 - 70%		93,104			10.1			71,638		16,561		2,681		2,224		—
71 - 75%		4,280			0.5			4,280		—		—		—		—
76- 80%		2,540			0.3			2,540		—		—		—		—
Above 80%		17,683			1.9			2,003		641		15,039		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(3)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

(3)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
Construction Type
Vertical Construction	$	478,475			52.5	%	$	234,861	$	191,896	$	1,177	$	2,491	$	47,789	$	261
Horizontal Development		196,543			21.5			169,041		27,502		—		—		—		—
Acquisition		96,937			10.6			96,937		—		—		—		—		—
Investment		65,703			7.2			42,509		2,101		—		3,608		17,485		—
Rehabilitation		27,023			3.0			11,320		15,703		—		—		—		—
Land Entitlement		24,529			2.7			24,529		—		—		—		—		—
Bridge		22,534			2.5			18,072		2,537		1,925		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(2)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
Collateral Type
Residential Lots	$	111,644			12.2	%	$	85,219	$	26,425	$	—	$	—	$	—	$	—
Apartments		107,765			11.8			38,232		68,356		1,177		—		—		—
Townhomes		93,300			10.2			51,240		28,979		—		1,017		11,803		261
Mixed Use		85,929			9.5			53,530		30,474		1,925		—		—		—
Single Family Housing		87,902			9.6			84,703		3,049		—		—		150		—
Condos		64,492			7.1			8,805		18,227		—		1,474		35,986		—
Commercial		61,592			6.8			61,592		—		—		—		—		—
Senior Housing		61,236			6.7			35,899		25,337		—		—		—		—
Storage		56,481			6.2			56,481		—		—		—		—		—
Unentitled Land		46,019			5.0			42,411		—		—		3,608		—		—
Entitled Land		45,098			4.9			27,763		—		—		—		17,335		—
Hotel		31,665			3.5			4,886		26,779		—		—		—		—
Offices		15,348			1.7			8,280		7,068		—		—		—		—
Commercial Lots		10,227			1.1			6,670		3,557		—		—		—		—
Quadplex		9,769			1.1			9,769		—		—		—		—		—
Commercial Other		9,080			1.0			9,080		—		—		—		—		—
Retail		7,873			0.9			6,385		1,488		—		—		—		—
Duplex		6,324			0.7			6,324		—		—		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(2)		(10,394	)
Carrying value, net	$	901,350

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(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
LTV (2)
0 - 40%	$	53,907			5.9	%	$	32,634	$	—	$	—	$	3,608	$	17,665	$	—
41 - 45%		48,431			5.3			44,380		4,051		—		—		—		—
46 - 50%		63,690			7.0			41,356		21,317		—		1,017		—		—
51 - 55%		92,238			10.1			74,978		17,260		—		—		—		—
56 - 60%		79,039			8.7			27,115		40,190		—		—		11,473		261
61 - 65%		559,997			61.4			372,645		146,640		3,102		1,474		36,136		—
66 - 70%		645			0.1			645		—		—		—		—		—
71 - 80%		—			0.0			—		—		—		—		—		—
Above 80%		13,797			1.5			3,516		10,281		—		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(3)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

(3)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

Dividends Declared. The following table summarizes the declared cash dividends per common share for the years ended December 31, 2022 and 2021:

	Year Ended
	December 31, 2022		December 31, 2021
Dividends declared per common share	$	0.77	$	0.84

Earnings per Common Share. The following table summarizes the earnings (GAAP) and distributable earnings (non-GAAP) per common share activity for the years ended December 31, 2022 and 2021:

	Year Ended
	December 31, 2022			December 31, 2021
Basic weighted-average shares of common stock outstanding		132,841,196			132,579,289
Diluted weighted-average shares of common stock outstanding		132,841,196			132,666,502
Earnings (loss) per common share, basic	$	(0.88	)	$	0.62
Earnings (loss) per common share, diluted		(0.88	)		0.62
Distributable earnings (loss) per diluted share of common stock		0.52			0.71
Distributable earnings (loss) per diluted share of common stock prior to realized loss on investments		0.55			0.73

Non-GAAP Financial Measures

Distributable Earnings

We have elected to present “distributable earnings” and “distributable earnings prior to realized loss on investments” as supplemental non-GAAP financial measures used by management to evaluate our operating performance. We define distributable earnings as net income attributable to common stockholders adjusted for: (i) impairment recorded on our loans, investments in real property and goodwill; (ii) unrealized gains or losses on our investments (including provision for credit losses) and warrant liabilities; (iii) new public company transition expenses; (iv) non-capitalized transaction-related and other one-time expenses; (v) non-cash stock-based compensation; (vi) depreciation and amortization including amortization of our intangible assets; and (vii) deferred taxes, which are subject to variability and generally not indicative of future economic performance or representative of current operations.

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Broadmark Realty Capital Inc.

During the years ended December 31, 2022 and 2021, provision for credit losses, net was $38.3 and $6.2 million, respectively, which has been excluded from distributable earnings consistent with other unrealized gains (losses) pursuant to our policy for reporting distributable earnings. We expect to recognize such potential credit losses in distributable earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally upon charge-off of principal at the time of loan repayment or upon sale of real property owned by us and the amount of proceeds is less than the principal outstanding at the time of foreclosure.

Management believes that the adjustments to compute “distributable earnings” specified above allow investors and analysts to readily identify and track the operating performance of our assets, assist in comparing the operating results between periods, and enable investors to evaluate our current performance using the same measure that management uses to operate the business. Distributable earnings excludes certain recurring items, such as unrealized gains and losses (including provision for credit losses) and non-capitalized transaction-related expenses, because they are not considered by management to be part of our primary operations for the reasons described herein. However, management has elected to also present distributable earnings prior to realized loss on investments because it believes the Company’s investors use such measure to evaluate and compare the performance of the Company and its peers. As such, distributable earnings and distributable earnings prior to realized loss on investments are not intended to reflect all of our activity and should be considered as only one of the factors used by management in assessing our performance, along with GAAP net income which is inclusive of all of our activities.

As a REIT, we are required to distribute annually to our stockholders at least 90% of our “REIT taxable income” (determined without regard to the dividends-paid deduction and excluding net capital gains) and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common stock, we generally intend to attempt to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Distributable earnings and distributable earnings prior to realized loss on investments are one of many factors considered by our board of directors in declaring dividends and, while not direct measures of taxable income, over time, the measures can be considered useful indicators of our dividends.

Distributable earnings and distributable earnings prior to realized loss on investments do not represent, and should not be considered as a substitute for, or superior to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with GAAP, and our calculation of these measures may not be comparable to similarly entitled measures reported by other companies.

The table below is a reconciliation of distributable earnings and distributable earnings prior to realized loss on investments to the most directly comparable GAAP financial measure:

	Year Ended
(dollars in thousands, except share and per share data)	December 31, 2022			December 31, 2021
Net (loss) income attributable to common stockholders	$	(116,391	)	$	82,488
Adjustments for non-distributable earnings:
Stock-based compensation expense		3,779			3,455
New public company expenses(1)		—			953
Non-capitalized transaction and other transition expenses(2)		3,229			987
Change in fair value of warrant liabilities		(1,813	)		1,838
Depreciation and amortization		1,314			741
Impairment on real property		7,596			—
Provision for credit losses, net		38,266			6,179
Goodwill impairment		136,965			—
Distributable earnings prior to realized loss on investments:	$	72,945		$	96,641
Realized credit losses(3)		(4,207	)		(2,672	)
Distributable earnings:	$	68,738		$	93,969
Distributable earnings per diluted share of common stock prior to realized loss on investments	$	0.55		$	0.73
Distributable earnings per diluted share of common stock	$	0.52		$	0.71
Weighted-average number of shares of common stock outstanding, basic and diluted
Basic		132,841,196			132,579,289
Diluted		132,841,196			132,666,502

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Broadmark Realty Capital Inc.

(1)Expenses directly related to professional fees in connection with our new public company reporting procedures, the design and implementation of internal controls under Section 404 of the Sarbanes-Oxley Act and the implementation of the CECL standard.

(2)Includes other expenses primarily related to the various costs associated with management succession, including executive search and severance costs, as well as certain unusual repair and legal expenses incurred on held-for-sale real properties no longer under construction.

(3)Represents credit losses recorded in the provision for credit losses and recognized in distributable earnings upon charge-off of principal at the time of loan repayment or upon sale of real property where proceeds received are less than the principal outstanding.

Segment Reporting

We operate the business as one reportable segment, which originates, underwrites and services mortgage loans.

Results from Operations

The period-to-period comparison of results is not necessarily indicative of results for future periods. The tables below set forth the results of our operations for the periods indicated, both in dollars and as a percentage of revenue (amounts in thousands, except percentage data):

	Year Ended
Statements of Operations Data:	December 31, 2022			December 31, 2021			December 31, 2020
Revenues:
Interest income	$	83,410		$	89,957		$	93,869
Fee income		22,668			30,587			28,489
Total interest and fee income		106,078			120,544			122,358
Real property revenue from operations		2,799			—			—
Total revenues		108,877			120,544			122,358
Expenses:
Compensation and employee benefits		16,935			15,093			15,646
General and administrative		13,300			11,518			15,083
Real property operating expenses and depreciation		6,365			108			168
Interest expense		8,638			3,320			—
Total expenses		45,238			30,039			30,897
Impairment:
Provision for credit losses, net		38,266			6,179			6,722
Goodwill impairment		136,965			—			—
Total impairment		175,231			6,179			6,722
Other (expense) income:
Change in fair value of warrant liabilities		1,813			(1,838	)		5,492
Gain on sale of real property		984			—			—
Impairment on real property		(7,596	)		—			—
Total other (expense) income		(4,799	)		(1,838	)		5,492
(Loss) income before provision for income taxes		(116,391	)		82,488			90,231
Income tax provision		—			—			—
Net (loss) income	$	(116,391	)	$	82,488		$	90,231

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Broadmark Realty Capital Inc.

	Year Ended
Percentage of Revenue:	December 31, 2022			December 31, 2021			December 31, 2020
Revenues:
Interest income		77	%		75	%		77	%
Fee income		20			25			23
Total interest and fee income		97			100			100
Real property revenue from operations		3			—			—
Total revenue		100			100			100
Expenses:
Compensation and employee benefits		16			13			13
General and administrative		12			10			12
Real property operating expenses and depreciation		6			—			—
Interest expense		8			3			—
Total expenses		42			26			25
Impairment:
Provision for credit losses, net		35			5			5
Goodwill impairment		126			—			—
Total impairment		161			5			5
Other (expense) income:
Change in fair value of warrant liabilities		2			(2	)		4
Gain on sale of real property		1			—			—
Impairment on real property		(7	)		—			—
Total other (expense) income		(4	)		(2	)		4
(Loss) income before provision for income taxes		(107	)		67			74
Income tax provision		—			—			—
Net (loss) income		(107	)%		67	%		74	%

Comparison of Results of Operations

Unless otherwise stated, for purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, the comparison of the results of operations is for the year ended December 31, 2022 and December 31, 2021.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenue

Total revenue for the years ended December 31, 2022 and 2021 was $108.9 and $120.5 million, respectively, a decrease of $11.6 million. The decrease resulted from a decrease in in fee income and interest income of $7.9 and $6.5 million, respectively, partially offset by an increase in real property revenue from operations of $2.8 million, which are discussed in more detail below.

Expenses

Total expenses for the years ended December 31, 2022 and 2021 were $45.2 and $30.0 million, respectively, an increase of $15.2 million. The increase resulted from increases in real property operating expenses and depreciation, interest expense, compensation and employee benefits and general and administrative expenses of $6.3, $5.3, $1.8 and $1.8 million, respectively, which are discussed in more detail below.

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Broadmark Realty Capital Inc.

Interest Income

Interest income decreased by $6.5 million, or 7.3%, for the year ended December 31, 2022 from the year ended December 31, 2021, due to a lower average effective interest-bearing principal outstanding during 2022 compared to 2021 resulting from (1) a 12.3% increase in loans on non-accrual over the course of 2022 compared to 2021 and (2) an increase in the number of loans originated during 2022 with lower fixed rate interest and no minimum interest provisions; partially offset by the effects of an increase of 8% in the average size of our loan portfolio.

Fee Income

Fee income decreased by $7.9 million, or 25.9%, for the year ended December 31, 2022 from the year ended December 31, 2021, primarily due to (1) a 44.9% decrease in the volume of loan originations during 2022 compared to 2021 along with a decrease in weighted average origination fees on loans recently originated due to increased competition in the marketplace and (2) a lower volume of amendment and extension fees during 2022 as fewer loans were extended beyond their maturity date due to construction delays.

Real Property Revenue from Operations

Real property revenue from operations increased by $2.8 million for the year ended December 31, 2022 from the year ended December 31, 2022, resulting from an increase in real properties held for use and in service during 2022 with an insignificant amount in 2021.

Compensation and Employee Benefits

Compensation and employee benefits expense increased by $1.8 million, or 12.2%, for the year ended December 31, 2022 from the year ended December 31, 2021. The increase is primarily due to (1) $1.3 million executive severance and relocation expenses associated with hiring a new chief executive officer during 2022 and (2) increases in cash compensation resulting from higher employee headcount and increased wages in 2022 compared to 2021.

General and Administrative

General and administrative expense increased by $1.8 million, or 15.5%, for the year ended December 31, 2022 from the year ended December 31, 2021. The increase was primarily due to increases of (1) $1.1 million in board member RSU expense and retainers during 2022 primarily resulting from additional directors being added to the board, (2) $0.5 million in advertising and marketing expenses associated with our rebranding during 2022 and (3) $0.3 million in computer and internet expenses primarily related to new system costs during 2022.

Real Property Operating Expenses and Depreciation

Real property operating expenses and depreciation increased by $6.3 million for the year ended December 31, 2022 from the year ended December 31, 2021. The increase is due to increases of (1) $3.3 million repair and maintenance expenses, (2) $1.7 million of property taxes, (3) $0.7 million of depreciation expenses and (4) $0.6 million of management and legal expenses. These increases relate to the increase in the number of real properties owned and completion of construction resulting in expenses no longer capitalized and the commencement of depreciation.

Interest Expense

Interest expense increased by $5.3 million for the year ended December 31, 2022 from the year ended December 31, 2021, primarily due to (1) and increase of $4.8 million in interest and amortization of deferred financing costs for our senior unsecured notes as the notes were issued during the fourth quarter of 2021 and (2) a $0.5 million increase in the sum of undrawn fees, interest on draws and amortization of deferred financing costs for our revolving credit facility during 2022, resulting from making draws on the facility during 2022 and the facility being in place for the full year in 2022 as compared to a partial year for 2021.

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Broadmark Realty Capital Inc.

Other Income (Expense)

Other expense increased by $3.0 million for the year ended December 31, 2022 from the year ended December 31, 2021. This increase primarily relates to $7.6 million of impairment on real property in the 2022 period with no corresponding impairment in 2021. This increase in other expense was partially offset by (1) a $1.8 million decline in the fair value of the private placement warrant liability recorded during 2022 versus a $1.8 million increase in the fair value during 2021 and (2) a $1.0 million gain on the 2022 sale of real property with no corresponding sale in 2021.

Provision for Credit Losses, Net

The provision for credit losses increased $32.1 million for the year ended December 31, 2022 from the year ended December 31, 2021. This increase primarily resulted from (1) 29 loans classified as collateral dependent during 2022 compared to 7 during 2021, resulting in increased loan specific allowances based on property value declines and (2) increase to our forecasted losses due to our experience of principal losses realized on paid off loans and loans transferred to real estate owned during 2022.

Goodwill Impairment

Goodwill impairment increased by $137.0 million for the year ended December 31, 2022 from the year ended December 31, 2021 resulting from the fair value of the reporting unit being less than the carrying value. In the later part of the third quarter of 2022 and continuing into the fourth quarter of 2022, market interest rates rose markedly and rapidly primarily as a result of the Federal Reserve's actions to curb rapidly rising inflation. This led to a significant slowdown in real estate transactions and less capital available in the marketplace to finance real estate projects. During the fourth quarter, rising interest rates and macroeconomic uncertainties in the capital markets have led to a significant decrease in real estate sales in the marketplace and in the availability of capital from traditional lenders for longer-term financing of completed construction and development projects, which negatively affected our borrowers' ability to sell or refinance our collateral and repay our loans. As a result, this led the Company to have a higher percentage of defaults go into non-accrual, additional properties foreclosed or start the foreclosure process and the Company prudently slowed origination pace to preserve liquidity. We expect that this situation will likely continue for at least a portion of 2023. These market conditions led us to perform a quantitative goodwill analysis during the fourth quarter of 2022. Our quantitative analysis resulted in recognizing $137.0 million of goodwill impairment.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

A discussion regarding the results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 can be found under Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022, which is available on the SEC’s website at www.sec.gov.

Liquidity and Capital Resources

Overview

Our primary liquidity needs include ongoing commitments to fund our lending activities and future funding obligations for our existing loan portfolio, paying dividends, repaying borrowings and funding other general business needs. Our material cash requirements from known contractual and other obligations are set forth in Note 12 - Commitment and Contingencies of our consolidated financial statements included in this Report. As of December 31, 2022 and 2021, our cash and cash equivalents totaled $55.0 and $132.9 million, respectively. As of December 31, 2022, our total liquidity includes not only cash and cash equivalents, but our entire undrawn revolving credit facility of $135.0 million.

We seek to meet our long-term liquidity requirements, such as real estate lending needs, including future construction draw commitments, primarily through our existing cash resources and return of capital from investments, including loan repayments. Additionally, we intend to use borrowings under our revolving credit facility from time to time as a cash management tool in between collecting loan repayments. We expect to opportunistically issue debt and raise capital in the public and private markets from time to time based on market conditions. As of December 31, 2022, we had $1.4 billion of total loan commitments outstanding, of which we funded $931.0 million. Of the unfunded commitments, $22.8 million relates to holdbacks that we are not required to fund as the related loans are in default.

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Broadmark Realty Capital Inc.

Debt-to-Equity Ratio

The following table presents our debt-to-equity ratio, based on the amounts presented in our consolidated balance sheets included in this Report, as of the dates presented:

	December 31, 2022		December 31, 2021
Debt–to–Equity Ratio		0.105		0.085

Revolving Credit Facility

On February 19, 2021, we entered into a credit agreement with a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent for the lenders, providing for a $135.0 million revolving credit facility with a three-year term and bearing interest at the prime rate plus 275 basis points. As a source of backup liquidity for future draws, the availability of the revolving credit facility has enabled us to use a larger percentage of our cash balances for lending activities. In October 2021, we made our first use of our revolving credit facility, with a draw of $50.0 million to support the funding of borrower draws and new loan originations while we awaited several large loan repayments. We then repaid the outstanding balance on our revolving credit facility in full by October 31, 2021 following the receipt of such loan repayments, minimizing the cost of such borrowing while earning fee income on the new borrower draws and loan originations. In July and August 2022, we made our second and third use of our revolving credit facility, with draws of $20.0 and $25.0 million, respectively, which we repaid in full by September 30, 2022.

Our obligations under the revolving credit facility are secured by substantially all of our assets. The revolving credit facility contains covenants customary for financings of this type, including limitations on the incurrence of indebtedness, liens, asset dispositions, acquisitions, mergers and consolidations, certain dividends, distributions, stock repurchases and other payments, advances and investments, payments to affiliates, optional prepayments and other modifications of certain other indebtedness, and amendments, terminations and waivers of certain material agreements, as well as a minimum tangible net worth, a total debt to equity ratio and a minimum debt service coverage ratio requirement. Among other things, the credit agreement provides that we may not pay cash dividends that would result in non-compliance with the financial covenants under the credit agreement or during an event of default under the credit agreement, except in the case of defaults other than payment defaults, for dividends in the amounts necessary to maintain our REIT status. The revolving credit facility contains events of default customary for financings of this type, including failure to pay principal, interest and other amounts, materially incorrect representations or warranties, failure to observe covenants and other terms of the revolving credit facility, cross-defaults to other indebtedness, bankruptcy, insolvency, material judgments, certain ERISA violations, changes in control and failure to maintain REIT status, in some cases subject to customary grace periods.

On November 4, 2022, the credit agreement governing the revolving credit facility was amended to allow for repurchases of shares of the Company’s common stock, subject to certain limitations.

Senior Unsecured Notes

On November 12, 2021, we completed a private offering of $100.0 million of senior unsecured notes. Interest on the notes accrues at the fixed rate of 5.00% per annum, payable semi-annually in arrears. The notes may be prepaid prior to their maturity date, subject to the payment of applicable premiums. The note purchase agreement contains financial covenants that require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as other affirmative and negative covenants that may limit, among other things, our ability to incur liens and enter into mergers or transfer all or substantially all of our assets. The note purchase agreement governing the notes also includes customary representations and warranties and customary events of default.

Equity Offering Program

On March 2, 2021, we entered into a distribution agreement with J.P. Morgan Securities LLC, Barclays Capital Inc., B. Riley Securities, Inc., JMP Securities LLC and Raymond James & Associates, Inc. as sales agents, to sell shares of our common stock having an aggregate gross sales price of up to $200,000,000, from time to time, through an “at-the-market” equity offering program (the “ATM Program”). We have no obligation to sell any shares under the ATM Program and sold no shares under the ATM Program during the years ended December 31, 2022 and 2021.

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Broadmark Realty Capital Inc.

Stock Repurchase Program

On November 7, 2022, the Board of Directors authorized the repurchase of up to $75.0 million of its common stock thereof (the “Stock Repurchase Program”). Repurchases may be made in open-market transactions or privately negotiated transactions, or in such other manner as deemed appropriate by the Company and may be made from time to time as determined by the Company depending on market conditions, share price, trading volume, cash needs and other business factors, in each case as permitted by securities laws and other legal requirements. We reserve the right to terminate or suspend the Stock Repurchase Program at any time, and it does not have an expiration date. During the year ended December 31, 2022, we repurchased 1,295,273 of common stock at an average price of $3.86 per share for an aggregate purchase price of $5.0 million. As of December 31, 2022, $70.0 million remained available for future repurchases pursuant to the Stock Repurchase Program, which repurchases decrease our liquidity and capital resources, when effected. For additional information on our Stock Repurchase Program, see Note 9 in our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

As a REIT, we are required to distribute annually to our stockholders at least 90% of our “REIT taxable income” (determined without regard to the dividends-paid deduction and excluding net capital gains), including taxable income where Broadmark Realty does not receive corresponding cash. We intend to distribute all or substantially all of our REIT taxable income in order to comply with the REIT distribution requirements of the Code and to avoid U.S. federal income tax and the non-deductible excise tax.

We believe our existing sources of liquidity are sufficient to fund our existing commitments. To the extent funds available for new loans are limited, we will manage our capital deployment based on the receipt of payoffs and may from time-to-time use borrowings under our revolving credit facility. We also may raise capital from time to time subject to market conditions, which may include additional debt financing. We intend to maintain a conservative balance sheet and debt to equity ratio. Under our credit agreement for our revolving credit facility, we must maintain a total debt to equity ratio that does not exceed 30%.

Sources and Uses of Cash

The following table sets forth changes in cash and cash equivalents for the periods indicated:

	Year Ended
(dollars in thousands)	December 31, 2022			December 31, 2021
Cash provided by (used in):
Operating activities	$	57,218		$	64,130
Investing activities		(22,703	)		(136,079	)
Financing activities		(112,440	)		(18,537	)
Net decrease in cash & cash equivalents	$	(77,925	)	$	(90,486	)

Comparison of Results of Cash Flows for the Year Ended December 31, 2022 and December 31, 2021

Net cash provided by operating activities for the years ended December 31, 2022 and 2021 were $57.2 and $64.1 million, respectively, a decline of $6.9 million or 10.8%. Net cash provided by operating activities is driven by our net (loss) income adjusted for non-cash items and changes in operating assets and liabilities. The $6.9 million decrease in cash provided by operating activities in 2022 compared to 2021 was primarily due to (1) an increase in net losses from real property operations during 2022 compared to 2021, (2) increased interest on the senior unsecured notes as these notes were outstanding for the full year in 2022 versus approximately six weeks in 2021 and (3) an increase in cash paid for compensation and employee benefits, along with the increase in general and administrative expenses, the reasons for which are discussed in more detail above in the “Comparison of Results of Operations.” The decreases in cash provided by operating activities are partially offset by increases in cash provided by operating activities resulting from the higher amount of accounts payable and accrued liabilities as of December 31, 2022 compared to December 31, 2021. The reconciliations between net (loss) income and cash provided by operating activities in the consolidated statement of cash flows include adjustments to net (loss) income for non-cash items that, while fluctuating between the 2022 and 2021 periods, have no effect on cash that was provided by operating activities.

Net cash used in investing activities was $22.7 and $136.1 million, respectively for the years ended December 31, 2022 and 2021. The decrease in cash used in investing activities of $113.4 million was primarily due to a $65.8 million decrease in fundings for mortgage notes receivable net of principal collections during 2022 and $43.5 million paid for repurchase of loan participations from the Private REIT during 2021 with no corresponding amount in 2022.

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Broadmark Realty Capital Inc.

Net cash used in financing activities was $112.4 and $18.5 million, respectively for the years ended December 31, 2022 and 2021. The increase in cash used in financing activities of $93.9 million was primarily due to $100.0 million in proceeds from the issuance of the senior unsecured notes during 2021 and $5.0 million used for the repurchase of our common stock in 2022. These increases were partially offset by (1) $5.1 million payment of costs to obtain our revolving credit facility in 2021, (2) $3.1 million decrease in dividends paid in 2022 compared to 2021 and (3) a $2.9 million payment of debt issuance costs in 2021.

Critical Accounting Policies and Estimates

The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our consolidated financial statements and to the understanding of our reported financial results include those made in connection with estimating credit losses for our mortgage notes receivable, valuation of investments in real property and valuation of our goodwill.

Estimated Credit Losses

We measure and record expected credit losses related to our loan portfolio in accordance with the Current Expected Credit Losses (“CECL”) standard. The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. The Company utilizes a probability of default/loss given default (“PD/LGD”) method for estimating current expected credit losses.

In accordance with the PD/LGD method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The PD/LGD method requires consideration of the timing of expected future funding of existing commitments and repayments over each asset’s remaining life. An annual loss factor, adjusted for macroeconomic estimates, is applied over each subsequent period and aggregated to arrive at the CECL allowance.

In determining the CECL allowance, we considered various factors including (1) historical loss experience in our portfolio, (2) historical loss experience in the commercial real estate lending market, (3) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, (4) timing of expected pay offs including prepayments and extensions where reasonably expected and (5) our current and future view of the macroeconomic environment. We utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus short-term extensions of one to three months that are reasonably expected for construction loans.

Our provision for credit losses increased $32.1 million during 2022 over the provision for 2021 primarily due to the $34.9 million increase in the CECL allowance as of December 31, 2022 for collateral dependent loans compared to the CECL allowance as of December 31, 2021 for collateral dependent loans based on the excess of amortized cost over the fair value of the underlying collateral. The fair value of collateral dependent loans is based upon the most recent independent third-party appraisal of value, discounted between 0% to 10% based upon our experience with actual liquidation values. For certain collateral dependent loans, where a recent appraisal is either unavailable or not most representative of fair value, the fair value is based on a broker opinion of value including a capitalized income analysis and replacement cost analysis considering historical operating results, market rents, vacancy rates, capitalization rates, land cost comparisons, market trends and economic conditions. The assessment of fair value of real property is subject to uncertainty and, in certain cases, sensitive to the selection of comparable properties.

Valuation of Investments in Real Property

To maximize recovery against a defaulted loan, we may assume legal title or physical possession of the underlying collateral through foreclosure or the execution of a deed in lieu of foreclosure. Foreclosed properties are recorded at fair market value at the time of acquisition, which generally approximates the carrying value of the loan secured by such property, net of the related allowance for estimated credit loss.

Foreclosed properties classified as held for sale are carried at the lower of cost or fair value and are evaluated for subsequent decreases in fair value on a quarterly basis. Any subsequent decreases in value are recorded as impairment in real property in our consolidated statements of operations.

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Broadmark Realty Capital Inc.

Foreclosed properties that are classified as held for use are carried at cost less accumulated depreciation. We evaluate our real property held for use for impairment at time of acquisition and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If an impairment indicator exists, we evaluate the undiscounted net cash flows that are expected to be generated by the property, including any estimated proceeds from the eventual disposition of the property. Based upon the analysis, if the carrying value of a property exceeds its undiscounted net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property.

The fair value of real property is based upon the most recent independent third-party appraisal of value, discounted between 0% to 10% based upon our experience with actual liquidation values. For certain real properties, where a recent appraisal is either unavailable or not most representative of fair value, the fair value is based on a broker opinion of value including a capitalized income analysis and replacement cost analysis considering historical operating results, market rents, vacancy rates, capitalization rates, land cost comparisons, market trends and economic conditions. The assessment of fair value of real property is subject to uncertainty and, in certain cases, sensitive to the selection of comparable properties.

Valuation of Goodwill

Goodwill is assessed for impairment annually in the fourth quarter or more frequently if events occur or circumstances change that indicate an impairment may exist. Our assessment begins with an evaluation of qualitative factors including macroeconomic conditions, industry and market considerations, current and projected financial performance, changes in strategy and market capitalization to determine whether it is more likely than not that the fair value of our single reporting unit exceeds the carrying value. A high degree of judgement is required in evaluating the qualitative factors. If we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative test is then performed. The quantitative test consists of comparing the estimated fair value of the reporting unit to its carrying amount, including goodwill, using income or market approaches. If the estimated fair value of the reporting unit is less than the carrying value including goodwill, an impairment write-down of goodwill would be required for the excess of carrying value over the estimated fair value. Under the income approach, the Company estimates the fair value of a reporting unit based on the present value of estimated future cash flows covering discrete forecast periods as well as terminal value determinations. The Company prepares cash flow projections based on management's estimates of long-term growth rates, pre-tax return on earnings, earning asset growth and return on tangible equity, taking into consideration industry and market conditions. The Company bases the discount rate on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, the Company estimates fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit. The Company weights the fair value derived from the market approach commensurate with the level of comparability of these publicly traded companies to the reporting unit, as well as observable market values of our reporting unit based on any third-party attributions of value to such unit in the context of potential transactions with the Company. When market comparables or observable market values are not meaningful or not available, the Company estimates the fair value of a reporting unit using only the income approach. Estimating the fair value of our reporting unit requires the use of inputs and assumptions for which there is inherent uncertainty.

Our 2022 annual goodwill impairment analysis resulted in impairment charges for goodwill related to the Broadmark lending business which is our only reporting unit. The decline in fair value of the reporting unit below its carrying value resulted in changes from expected future cash flows as compared to prior year projections which is more broadly a result of macroeconomic factors and other operational challenges as well as an increase in cost of capital. As a result, we recorded a goodwill impairment charge of $137.0 million in the fourth quarter of 2022.

The reporting unit has no remaining goodwill as of December 31, 2022 and an excess of fair value over carrying value of net assets of 0% as of the annual test date. The business is facing challenges reflected in the results for the year ended December 31, 2022. In the later part of the third quarter of 2022 and continuing into the fourth quarter of 2022, market interest rates rose markedly and rapidly primarily as a result of the Federal Reserve's actions to curb rapidly rising inflation. This led to a significant slowdown in real estate transactions and less capital available in the marketplace to finance real estate projects. During the fourth quarter, rising interest rates and macroeconomic uncertainties in the capital markets have led to a significant decrease in real estate sales in the marketplace and in the availability of capital from traditional lenders for longer-term financing of completed construction and development projects, which negatively affected our borrowers' ability to sell or refinance our collateral and repay our loans. As a result, this led the Company to have a higher percentage of defaults go into non-accrual, additional properties foreclose or start the foreclosure process and the Company prudently slowed origination pace to preserve liquidity.

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Broadmark Realty Capital Inc.

For a complete listing and description of our significant accounting policies and description of our adoption of new accounting pronouncements and the impact thereof on our business, see “Note 2 - Summary of Significant Accounting Policies” of our consolidated financial statements included in this Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At December 31, 2022, we did not have any outstanding “market risk sensitive instruments,” as such term is used within the meaning of Item 305 of SEC Regulation S-K. However, we are subject to other types of business risk described below and under “Market Risks Related to Real Estate Loans” in Item 1A. Risk Factors above.

Interest Rate Risk

While we recently began originating certain floating rate loans with interest rate floors, most of our loans bear a fixed rate of interest and we have very limited interest-rate sensitive obligations outstanding. However, the nature of our business exposes us to business risk arising from changes in interest rates. Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. An increase or decrease in interest rates would not impact the interest charged on our then existing loan portfolio, as most of our loans bear fixed rates of interest. However, a rapid significant increase in interest rates may reduce the demand for mortgage loans due to the higher cost of borrowing, potentially resulting in a reduced demand for real estate, declining real estate values and higher default rates. Alternatively, a significant rapid decline in interest rates may negatively affect the amount of interest that we may charge on new loans, including those that are made with capital received as outstanding loans mature. Additionally, declining interest rates may also result in prepayments of existing loans, which may also result in the redeployment of capital in new loans bearing lower interest rates. See Item 1A above, “Risk Factors,” for additional information regarding interest rate risk.

Credit Risk

Our loans are subject to credit risk. Credit risk is the exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply and demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy and other factors beyond our control. All loans are subject to a certain possibility of default. We seek to mitigate credit risk by originating loans which are generally secured by first deed of trust position liens on real estate with a maximum loan-to-value ratio of 65%. We also undertake extensive due diligence of the property that will be mortgaged to secure the loans, including review of third-party appraisals on the property.

Risks Related to Real Estate

Residential and commercial property values are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, events such as natural disasters, including hurricanes and earthquakes, acts of war and terrorism, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions (such as an oversupply of housing, retail, industrial, office or other commercial space); changes or continued weakness in specific industry segments; construction quality, construction cost, age and design; demographic factors; retroactive changes to building or similar codes; and increases in operating expenses (such as energy costs). In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the loans, which could also cause us to suffer losses. These factors could adversely affect our business, financial condition, results of operations and ability to pay dividends to stockholders.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

	Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 659)	59
Consolidated Balance Sheets as of December 31, 2022 and 2021	62
Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020	63
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022, 2021 and 2020	64
Consolidated Statements of Cash Flows	65
Notes to Consolidated Financial Statements	67

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Broadmark Realty Capital Inc.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Broadmark Realty Capital Inc.

Opinion on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Broadmark Realty Capital Inc. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Broadmark Realty Capital Inc.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Qualitative Adjustments to Current Expected Credit Loss (“CECL”) Allowance

As described in Notes 2 and 3 to the consolidated financial statements, in determining the CECL allowance, the Company considered various factors including (i) historical loss experience in their portfolio, (ii) historical loss experience in the commercial real estate lending market, (iii) timing of expected pay offs, including prepayments and extensions where reasonably expected, and (iv) their current and future view of the macroeconomic environment. The Company utilizes a reasonable and supportable forecast period equal to the contractual term of the loan plus short-term extensions of one to three months that are reasonably expected for construction loans.

The Company estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio

The Company makes qualitative adjustments to default and loss data used within the CECL allowance calculation. The qualitative adjustments are used to weigh the Company’s own loss experience and historical loss experience in the commercial real estate lending market, to reflect the risk of different lending arrangements, and to forecast certain expected macroeconomic changes over a reasonable and supportable period. We identified the qualitative adjustments to default and loss inputs used in the CECL allowance to be a critical audit matter because of the subjectivity used to determine the adjustments and the estimation uncertainty. This required a high degree of auditor judgment when performing audit procedures to evaluate the reasonableness of the qualitative adjustments.

The primary procedures we performed to address this critical audit matter included:

•Testing the design and operating effectiveness of controls implemented by the Company in relation to the determination of the CECL allowance. Specifically, in relation to the adjustments made to the CECL allowance, we focused our procedures on testing internal controls related to evaluation of the use of internally calculated default and loss information and externally sourced default and loss information, and evaluation of macroeconomic factors and other judgments involved in the determination of such adjustments.

•Evaluating management’s process for determining the qualitative adjustment used in the weighting of the internal and external data by assessing the consistency of the approach with prior periods and evaluating management’s rationale. Performed a sensitivity analysis on the weighting of the internal and external data used in the calculation and evaluated the impact to the allowance as a result of changing the mix of the internal and external data.

•Testing the reasonableness of the economic scenario used in the forecast by evaluating management’s rationale for selecting certain macroeconomic variables and comparing conclusions with independent external market data.

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Broadmark Realty Capital Inc.

Valuation of Collateral Dependent Loans

As described in Notes 2, 3 and 5 to the consolidated financial statements, for assets that are classified as collateral dependent where (1) the Company has begun foreclosure (2) bankruptcy is declared, (3) they have elected to pursue the appointment of a receiver, (4) loan to value (“LTV”) or combined LTV is greater than 100% or; (5) the Company intends to obtain ownership of the property, the Company records loan specific allowances based on the fair value of the collateral, less costs to sell, for expected credit losses under the CECL standard. Given the short-term nature of the loans, the Company evaluates the most recent external appraisal and, depending on the age of the appraisal, may order a new appraisal or, where available, will evaluate against existing comparable sales or other pertinent information to estimate the fair value of the collateral for such loans. The fair value estimate of certain collateral dependent loans required significant judgment, which may include assumptions regarding market capitalization rates, income projections, comparable sales, or other factors deemed relevant by the Company.

We identified the fair value estimate of certain collateral dependent loans as a critical audit matter because of the subjectivity, lack of observability, and judgment involved in the determination of the valuation method and certain significant assumptions. Auditing the fair value of certain collateral dependent loans required a high degree of auditor judgment and increased effort, including the need to involve internal valuation specialists.

Our audit procedures related to testing the valuation of certain collateral dependent loans included:

•Testing the design and operating effectiveness of controls implemented by the Company in relation to the estimation of the fair value of the collateral dependent loans.

•Utilizing our internal valuation specialists to test the valuation of certain collateral dependent loans, including the evaluation of the management’s methodologies and significant assumptions used in the Company’s fair value analysis.

•Testing the underlying data used to develop the fair value to determine that the information used in the analysis was accurate and complete.

•Utilizing market inputs or other data to either assess the reasonableness of management's estimation of value, or develop an independent expectation of value.

•Considering whether events or transactions that occurred after the balance sheet date but before the completion of the audit affect the conclusions reached on the fair value measures and disclosures.

/s/ Moss Adams LLP

Everett, Washington

March 1, 2023

We have served as the Company’s auditor since 2019.

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Broadmark Realty Capital Inc.

Consolidated Balance Sheets

(in thousands, except share data)

	December 31, 2022			December 31, 2021
Assets
Cash and cash equivalents	$	54,964		$	132,889
Mortgage notes receivable, net		881,950			901,350
Interest and fees receivable, net		14,775			17,526
Investment in real property held for sale, net		24,516			52,531
Investment in real property held for use, net		63,382			15,536
Right-of-use assets		5,609			6,016
Goodwill		—			136,965
Other assets		6,311			8,342
Total assets	$	1,051,507		$	1,271,155
Liabilities and stockholders' equity
Senior unsecured notes, net	$	97,789		$	97,223
Dividends payable		4,654			9,291
Accounts payable and accrued liabilities		13,489			8,180
Lease liabilities		7,522			7,993
Total liabilities		123,454			122,687
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding at December 31, 2022 and December 31, 2021		—			—
Common stock, $0.001 par value, 500,000,000 shares authorized, 131,645,145 and 132,716,338 issued and outstanding at December 31, 2022 and December 31, 2021, respectively		131			132
Additional paid in capital		1,215,229			1,216,957
Accumulated deficit		(287,307	)		(68,621	)
Total stockholders' equity		928,053			1,148,468
Total liabilities and stockholders' equity	$	1,051,507		$	1,271,155

See accompanying notes to the consolidated financial statements

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Broadmark Realty Capital Inc.

Consolidated Statements of Operations

(in thousands, except share and per share data)

	Year Ended
	December 31, 2022			December 31, 2021			December 31, 2020
Revenues:
Interest income	$	83,410		$	89,957		$	93,869
Fee income		22,668			30,587			28,489
Total interest and fee income		106,078			120,544			122,358
Real property revenue from operations		2,799			—			—
Total revenues		108,877			120,544			122,358
Expenses:
Compensation and employee benefits		16,935			15,093			15,646
General and administrative		13,300			11,518			15,083
Real property operating expenses and depreciation		6,365			108			168
Interest expense		8,638			3,320			—
Total expenses		45,238			30,039			30,897
Impairment:
Provision for credit losses, net		38,266			6,179			6,722
Goodwill impairment		136,965			—			—
Total impairment		175,231			6,179			6,722
Other (expense) income:
Change in fair value of warrant liabilities		1,813			(1,838	)		5,492
Gain on sale of real property		984			—			—
Impairment on real property		(7,596	)		—			—
Total other (expense) income		(4,799	)		(1,838	)		5,492
(Loss) income before provision for income taxes		(116,391	)		82,488			90,231
Income tax provision		—			—			—
Net (loss) income	$	(116,391	)	$	82,488		$	90,231
Earnings per common share:
Basic	$	(0.88	)	$	0.62		$	0.68
Diluted	$	(0.88	)	$	0.62		$	0.68
Weighted-average shares of common stock outstanding, basic and diluted:
Basic		132,841,196			132,579,289			132,209,495
Diluted		132,841,196			132,666,502			132,261,113

See accompanying notes to the consolidated financial statements

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Broadmark Realty Capital Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

	Preferred				Common Stock						Additional
	Shares		Amount		Shares			Amount			Paid-in Capital			Accumulated Deficit			Total
Balances as of December 31, 2019		—	$	—		132,015,635		$	132		$	1,209,120		$	(24,780	)	$	1,184,472
Net income		—		—		—			—			—			90,231			90,231
Dividends		—		—		—			—			—			(103,174	)		(103,174	)
Adoption of ASU 2016-13		—		—		—			—			—			(1,975	)		(1,975	)
Issuance of shares for vested restricted stock units		—		—		516,723			—			—			—			—
Issuance of shares for exercised warrants		—		—		25			—			—			—			—
Stock-based compensation expense for restricted stock units		—		—		—			—			4,867			—			4,867
Balances as of December 31, 2020		—	$	—		132,532,383		$	132		$	1,213,987		$	(39,698	)	$	1,174,421
Net income		—		—		—			—			—			82,488			82,488
Dividends		—		—		—			—			—			(111,411	)		(111,411	)
Issuance of shares for vested restricted stock units		—		—		231,053			—			—			—			—
Shares withheld for tax liability		—		—		(47,098	)		—			(485	)		—			(485	)
Stock-based compensation expense for restricted stock units		—		—		—			—			3,455			—			3,455
Balances as of December 31, 2021		—		—		132,716,338			132			1,216,957			(68,621	)		1,148,468
Net loss		—		—		—			—			—			(116,391	)		(116,391	)
Dividends		—		—		—			—			—			(102,295	)		(102,295	)
Issuance of shares for vested restricted stock units		—		—		285,853			—			—			—			—
Issuance of shares for exercised warrants		—		—		112			—			—			—			—
Repurchase of common stock		—		—		(1,295,273	)		(1	)		(4,999	)		—			(5,000	)
Shares withheld for tax liability		—		—		(61,885	)		—			(508	)		—			(508	)
Stock-based compensation expense for restricted stock units		—		—		—			—			3,779			—			3,779
Balances as of December 31, 2022		—	$	—		131,645,145		$	131		$	1,215,229		$	(287,307	)	$	928,053

See accompanying notes to the consolidated financial statements

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Consolidated Statements of Cash Flows

(in thousands)

	Year Ended
	December 31, 2022			December 31, 2021			December 31, 2020
Cash flows from operating activities
Net (loss) income	$	(116,391	)	$	82,488		$	90,231
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Accretion of deferred origination and amendment fees		(21,608	)		(27,741	)		(23,114	)
Depreciation and amortization		1,314			741			(558	)
Goodwill impairment		136,965			—			—
Amortization of right of use assets		407			382			446
Amortization of debt issuance costs		572			78			—
Amortization of credit facility costs		1,510			1,255			—
Stock-based compensation expense for restricted stock units		3,779			3,455			4,867
Provision for credit losses, net		38,266			6,179			6,722
Gain on sale of real property		(984	)		—			—
Impairment on real property		7,596			—			—
Change in fair value of warrant liabilities		(1,813	)		1,838			(5,492	)
Changes in operating assets and liabilities:
Interest and fees receivable, net		1,507			(3,169	)		(10,249	)
Other assets		16			385			(1,073	)
Accounts payable and accrued liabilities		6,553			(1,397	)		2,469
Lease liabilities		(471	)		(364	)		(446	)
Net cash provided by operating activities		57,218			64,130			63,803
Cash flows from investing activities:
Fundings of mortgage notes receivable		(540,579	)		(675,009	)		(445,794	)
Principal collections		500,486			569,104			458,309
Origination and amendment fees received on mortgage notes receivable		15,073			13,916			13,670
Purchases of property and equipment		(137	)		(476	)		—
Proceeds from sale of real property		8,365			4,319			6,356
Improvements in real property		(5,911	)		(4,435	)		(119	)
Repurchase of participations in mortgage notes receivable		—			(43,498	)		—
Net cash provided by (used in) investing activities		(22,703	)		(136,079	)		32,422

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Consolidated Statements of Cash Flows Continued

(in thousands)

Cash flows from financing activities:
Dividends paid		(106,932	)		(110,072	)		(111,064	)
Repurchase of common stock		(5,000	)		—			—
Proceeds from issuance of senior unsecured notes		—			100,000			—
Payment of debt issue costs		—			(2,855	)		—
Payment of costs to obtain financing		—			(5,125	)		—
Proceeds from borrowings on credit facilities		45,000			50,000			—
Repayment of borrowings on credit facilities		(45,000	)		(50,000	)		—
Payment of taxes on shares withheld for tax liability		(508	)		(485	)		—
Net cash used in financing activities		(112,440	)		(18,537	)		(111,064	)
Net decrease in cash and cash equivalents		(77,925	)		(90,486	)		(14,839	)
Cash and cash equivalents, beginning of period		132,889			223,375			238,214
Cash and cash equivalents, end of period	$	54,964		$	132,889		$	223,375
Supplemental disclosure of cash flow information:
Interest paid	$	5,193		$	—		$	—
Supplemental disclosure of non-cash investing and financing activities:
Dividends payable	$	4,654		$	9,291		$	7,952
Measurement period adjustment to goodwill and intangible assets		—			—			5,000
Mortgage notes receivable converted to investment in real property		54,230			54,349			8,873
Investments in real property converted to mortgage notes receivable		25,900			—			—
Interest and fee receivables converted to investments in real property		1,244			4,129			—
Operating lease right-of-use assets		—			6,360			—
Lease liabilities arising from obtaining right-of-use assets		—			8,319			—
Property and equipment purchased through tenant improvement allowance		—			1,959			—

See accompanying notes to the consolidated financial statements

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Notes to Consolidated Financial Statements

Note 1 - Organization and Business

Broadmark Realty Capital Inc. (“Broadmark Realty,” “the Company,” “we,” “us” and “our”) is an internally managed commercial real estate finance company that provides secured financing to real estate investors and developers. Broadmark Realty’s objective is to preserve and protect stockholder capital while producing attractive risk-adjusted returns primarily through dividends generated from current income from its loan portfolio. Broadmark Realty has historically operated in states that it believes to have favorable demographic trends and provide Broadmark Realty the ability to efficiently access the underlying collateral in the event of borrower default.

The consolidated subsidiaries of Broadmark Realty include BRMK Lending, LLC, BRMK Management, Corp., and Broadmark Private REIT Management, LLC. BRMK Lending, LLC originates short-term loans generally secured by first deed of trust liens on residential and commercial real estate. BRMK Management, Corp. (the “Manager”) manages the underwriting, closing, servicing and disposition of mortgage notes, and performs all general and administrative duties for Broadmark Realty. Broadmark Private REIT Management, LLC (the “Private REIT Manager”) previously managed Broadmark Private REIT, LLC (the “Private REIT”), which was an unconsolidated affiliate of the Company that primarily participated in loans originated, underwritten and serviced by a subsidiary of Broadmark Realty. The Private REIT was liquidated during the quarter ended September 30, 2021. Refer to Note 14 for details about the liquidation of the Private REIT.

Broadmark Realty has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. Broadmark Realty generally will not be subject to U.S. federal corporate income tax on that portion of its net income that is distributed to stockholders if it annually distributes dividends equal to at least 90% of its REIT taxable income to its stockholders (determined without regard to the dividends-paid deduction and excluding net capital gains) by prescribed dates and complies with various other requirements. Broadmark Realty also operates its business in a manner that permits it to maintain an exclusion from registration under the Investment Company Act of 1940. As a REIT, Broadmark Realty may own up to 100% of the stock of one or more taxable REIT subsidiaries (“TRSs”), which may earn income that would not be qualifying income if earned directly by a REIT. The Manager is a TRS and this election applies to the wholly-owned subsidiaries of the Manager, including the Private REIT Manager.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include Broadmark Realty Capital Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).

Principles of Consolidation

Broadmark Realty consolidates those entities in which it has control over significant operating, financial and investing decisions of the entity, as well as those entities deemed to be variable interest entities (“VIEs”), if any, in which Broadmark Realty is determined to be the primary beneficiary. Broadmark Realty is not the primary beneficiary of, and therefore does not consolidate, any VIEs in the accompanying consolidated financial statements.

The Private REIT was determined to be a voting interest entity for which we, through our wholly-owned subsidiary who previously acted as manager with no significant equity investment, did not hold a controlling interest in and, therefore, did not consolidate. Furthermore, the Private REIT's participation in loans originated by us met the characteristics of a participating interest and the criterion for sale accounting in accordance with GAAP and therefore, the loans were derecognized from our consolidated financial statements. The Private REIT was liquidated in August 2021 and all participations in mortgage notes receivable held by the Private REIT were purchased for cash by the Company at the settlement value which approximated fair value.

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Reclassifications

Certain amounts in our prior period consolidated financial statements have been reclassified to conform to the presentation of our current period consolidated financial statements. These reclassifications had no effect on our previously reported net income or stockholders’ equity.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The most significant estimates relate to the expected credit losses on our loans, the fair value of financial instruments, goodwill impairment, exit prices for collateral dependent loans and the fair value of investments in real property. Accordingly, actual results could differ from those estimates.

For certain real properties, where a recent appraisal is either unavailable or not most representative of fair value, the fair value of the “as complete” property is based on a broker opinion of value including a capitalized income analysis and replacement cost analysis considering market rents, vacancy rates, capitalization rates, land cost comparisons, market trends and economic conditions. Depending on the stage of the underlying property, we also consider estimated costs to complete remaining construction and to lease up the finished property. The assessment of fair value of real property is subject to uncertainty and, in certain cases, sensitive to the selection of comparable properties.

Certain Significant Risks and Uncertainties

In the normal course of business, we encounter two primary types of economic risk in the form of credit and market risks. Credit risk is the risk of default on our investment in mortgage notes receivable resulting from a borrower's inability or unwillingness to make contractually required payments. Market risk is the risk of declining real estate values for the collateral underlying our loans which may make it more difficult for existing borrowers to remain current on their payment obligations, reduce the speed or ability for our loans to be repaid through the sale or refinance of the collateral and increase the likelihood that we will incur losses on our loans in the event of default as the value of collateral may be insufficient to cover our investment in the loan. We believe that the carrying values of our loans reasonably consider these risks.

In addition, we are subject to significant tax risks. If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal corporate income tax, which could be material.

We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: the economy in the areas we operate; the stability of the real estate market and the impact of interest rate changes; competition in our market; changes in government regulation affecting our business; public health crises, like the COVID-19 pandemic; natural disasters, catastrophic events and the physical effects of climate change; and our ability to attract and retain qualified employees and key personnel, among other things.

Reportable Segments

We operate the business as one reportable segment. Our principal business activities are related to the origination underwriting and serving of loans secured by real estate as well the investment in real property held for sale and use.

BALANCE SHEET MEASUREMENT

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. We have a cash management sweep account repurchase agreement, whereby our bank nightly sweeps cash in excess of $750,000, sells us specific U.S. government agency securities and then repurchases these securities the next day.

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We maintain our cash and cash equivalents with financial institutions, which are insured up to a maximum of $250,000 per account as of December 31, 2022 and 2021. The balances in these accounts may exceed the insured limits. There were no restrictions on cash as of December 31, 2022 or 2021.

Mortgage Notes Receivable

Mortgage notes receivable (referred to herein as “mortgage notes receivable”, “construction loans”, “loans”, or “notes”) are classified as held for investment, as we have the intent and ability to hold until maturity or payoff and are carried in the consolidated balance sheets at amortized cost, net of construction holdbacks, interest reserves, allowance for credit losses and deferred origination and amendment fees as described in Note 3.

Current Expected Credit Losses Allowance

We adopted the current expected credit loss (“CECL”) standard during the year ended December 31, 2020. The initial CECL allowance adjustment of $2.0 million was recorded effective January 1, 2020 as a cumulative-effect of change in accounting principle through a direct charge to accumulated deficit on our consolidated statements of stockholders’ equity; however, subsequent changes to the CECL allowance are recognized in our consolidated statements of operations.

We record an allowance for credit losses in accordance with the CECL standard on our loan portfolio, including unfunded construction holdbacks, on a collective basis by assets with similar risk characteristics. In addition, for assets that are classified as collateral dependent where (1) we have begun a foreclosure, (2) bankruptcy is declared, (3) we have elected to pursue the appointment of a receiver, (4) Loan-to-value (“LTV”) or current LTV is greater than 100% or (5) we intend to obtain ownership of the property, we continue to record loan specific allowances based on the fair value of the collateral for expected credit losses under the CECL standard. Given the short-term nature of our loans, we evaluate the most recent external appraisal and, depending on the age of the appraisal, may order a new appraisal or, where available, will evaluate against existing comparable sales or other pertinent information to estimate the fair value of the collateral for such loans.

The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. The Company utilizes a probability of default/loss given default (“PD/LGD”) method for estimating current expected credit losses.

In accordance with the PD/LGD method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The PD/LGD method requires consideration of the timing of expected future funding of existing commitments and repayments over each asset’s remaining life. An annual loss factor, adjusted for macroeconomic estimates, is applied over each subsequent period and aggregated to arrive at the CECL allowance.

In determining the CECL allowance, we considered various factors including (1) historical loss experience in our portfolio, (2) historical loss experience in the commercial real estate lending market, (3) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral (4) timing of expected pay offs including prepayments and extensions where reasonably expected and (5) our current and future view of the macroeconomic environment. We utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus short-term extensions of one to three months that are reasonably expected for construction loans.

Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio. The CECL allowance related to the principal outstanding is presented within mortgage notes receivable, net and for unfunded commitments is within accounts payable and accrued liabilities in our consolidated balance sheets.

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We have made an accounting policy election to exclude accrued interest receivable, included in interest and fees receivable, net on our consolidated balance sheets, from the amortized cost basis of the related mortgage notes receivable in determining the CECL allowance, as any uncollectable accrued interest receivable is written off either when the collateral underlying the loan is sold or upon transfer to real estate owned. No interest income is recognized on mortgage notes receivable that are in contractual default unless the collectability of all principal is not in doubt and collection of accrued amounts is reasonably assured or paid in cash. In addition, if a loan is deemed collateral dependent or high risk, it is placed on non-accrual status with interest income recognized on a cash-basis where principal collection is not in doubt.

Deferred Income

Deferred income represents the amount of our origination, loan servicing and amendment fees that have been deferred and will be recognized in income over the contractual maturity of the underlying loan. Origination and loan servicing fees are included in the total commitment to the borrower and financed at the time of loan origination. Amendment fees are either included in the total commitment to the borrower and financed at the time of the loan amendment or are billed to the borrower when the loan is amended and not capitalized into the principal outstanding. Deferred origination, loan servicing and amendment fees capitalized into the principal outstanding are included within mortgage notes receivable, net on the consolidated balance sheets. Deferred amendment fees that are not included in the principal outstanding are presented within interest and fees receivable, net in the consolidated balance sheets.

Interest and Fees Receivable

Interest on performing loans is accrued and recognized as interest income at the contractual rate of interest, or at the contractual rate of monthly minimum interest, if applicable. Extension fees are charged when we agree to extend the maturity dates of loans. In addition, late fees are charged when borrower payments are contractually past due. We monitor each note’s outstanding interest and fee receivables and, based on historical performance, generally reserve against the balance after a receivable is greater than 60 days past due unless collectability of all amounts due is reasonably assured.

Real Property

To maximize recovery against a defaulted loan, we may assume legal title or physical possession of the underlying collateral through foreclosure or the execution of a deed in lieu of foreclosure. The properties are initially measured at fair value. If the fair value of the property is lower than the carrying value of the loan, the difference is recognized as current expected credit loss reserves. In the case that there is a loss in excess of the cumulative reserve on the loan, the additional loss is recognized as a realized principal loss which is included as part of our provision for credit losses, net on our consolidated statements of operations. If the collateral value exceeds the carrying value of the loan, we then record some or all the unpaid, accrued interest and fees to the carrying value of the property.

Real Property Held for Sale

Real property is classified as held for sale in the period when we (1) commit to a plan and have the authority to sell the asset in its current condition, (2) have initiated an active marketing plan to sell the asset at a price that is reflective of its current fair value and (3) the sale of the asset is both probable and expected to qualify for full sales recognition within a period of 12 months. Real property classified as held for sale is held at the lower of cost or fair value at the time of acquisition and is evaluated for subsequent decreases in fair value on a quarterly basis. Any subsequent decreases in value are recorded as impairment in real property in our consolidated statements of operations. Depreciation is not recorded on assets classified as held for sale and operating and holding expenditures are charged to expense when incurred.

Based on a change in circumstances, we may have a change to a plan of sale and decide not to sell real property previously classified as held for sale, in which case we would reclassify as held for use. Upon reclassification to held for use, the real property is measured at the lower of (1) its carrying amount before the asset was classified as held for sale, adjusted for any depreciation or amortization expense that would have been recognized had the assets continued to be classified as held for use, or (2) the fair value at the date of the subsequent decision not to sell.

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Real Property Held for Use

Properties that are classified as held for use are carried at cost less accumulated depreciation. We evaluate our real property held for use for impairment at the time of acquisition and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If an impairment indicator exists, we evaluate the undiscounted net cash flows that are expected to be generated by the property, including any estimated proceeds from the eventual disposition of the property. Based upon the analysis, if the carrying value of a property exceeds its undiscounted net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property. In evaluating and/or measuring impairment, we consider, among other things, current and estimated future cash flows associated with each property, market information for each sub-market, including, where applicable, competition levels, foreclosure levels, leasing trends, occupancy trends, lease or room rates, and the market prices of similar properties recently sold or currently being offered for sale and other quantitative and qualitative factors. Another key consideration in this assessment is our assumption about the highest and best use of the real estate investments and our intent and ability to hold them for a reasonable period that would allow for the recovery of their carrying values.

Costs related to acquisition, development, construction and improvements are capitalized to the extent the investment in the real property held for use does not exceed the fair value less estimated costs to sell. Expenditures for repairs and maintenance are charged to expense when incurred.

Once construction is complete and the property is held available for occupancy, real property held for use is depreciated using the straight-line method over the estimated useful life of the property. Depreciation expense is no longer recorded once the real property is classified as held for sale.

Leases

Our office space in Seattle, Washington is subject to an operating lease. The right of use assets and lease liabilities in our consolidated balance sheets relate to this lease. The lease agreement includes both lease components (e.g., fixed rent) and non-lease components (e.g., common-area maintenance). We account for the lease and non-lease components as a single component.

Right of use assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of the total lease payments not yet paid, including lease incentives not yet received, with the right of use assets further adjusted for any prepaid or accrued lease payments, lease incentives received and/or initial direct costs incurred. Our lease arrangement also includes variable payments for costs such as common-area maintenance, utilities, taxes or other operating costs, which are based on a percentage of actual expenses incurred. These variable lease payments are excluded from the measurement of the right of use assets and lease liabilities.

When our lease includes an option to extend the lease term, we consider several factors in determining if a renewal option is reasonably certain of being exercised at lease commencement, including, but not limited to, contract-based, asset-based and entity-based factors. We reassess the term of the existing lease if there is a significant event or change in circumstances within our control that affects whether we are reasonably certain to exercise the option to extend the lease. Examples of such events or changes include construction of significant leasehold improvements or other modifications or customizations to the underlying asset, relevant business decisions or subleases.

As our lease did not provide an implicit rate, we used our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

We recognize lease expense for our operating lease on a straight-line basis over the lease term. Variable lease payments are generally recognized when incurred. These expenses are included in general and administrative expenses in the consolidated statements of operations.

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Goodwill

Goodwill represents the excess of the cost of an acquired business over the fair value of the assets acquired at the date of acquisition and is not amortized. Goodwill is assessed for impairment annually in the fourth quarter or more frequently if events occur or circumstances change that indicate an impairment may exist. Our assessment begins with an evaluation of qualitative factors, including macroeconomic conditions, industry and market considerations, current and projected financial performance, changes in strategy and market capitalization to determine whether it is more likely than not that the fair value of our single reporting unit exceeds the carrying value. A high degree of judgment is required in evaluating the qualitative factors. If we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative test is then performed. The quantitative test consists of comparing the estimated fair value of the reporting unit to its carrying amount, including goodwill, using income or market approaches. If the estimated fair value of the reporting unit is less than the carrying value including goodwill, an impairment write-down of goodwill would be required for the excess of carrying value over the estimated fair value. When market comparables or observable market values are not meaningful or not available, we estimate the fair value of a reporting unit using only the income approach. Estimating the fair value of our reporting unit requires the use of inputs and assumptions for which there is inherent uncertainty.

Other Assets

Other assets primarily consist of deferred financing costs related to our revolving credit facility, fixed assets, prepaid insurance and other operating receivables.

Fixed Assets

Fixed assets, which are included in other assets in the accompanying consolidated balance sheets are stated at cost, less accumulated depreciation. Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/or useful life are capitalized. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized. Depreciation and amortization are recorded on the straight-line basis over the estimated useful life of the assets. For computer equipment, office equipment, furniture and fixtures the useful lives range from three to seven years. For leasehold improvements, we amortize over the shorter of expected useful life or lease term.

Deferred Financing Costs

Deferred financing costs that are included in other assets represent direct costs associated with the execution of the revolving credit facility. Such costs are included in other assets because the revolving credit facility has no principal outstanding as of December 31, 2022 and there is no recognized debt liability. These costs are amortized on the straight-line basis over the initial term of our revolving credit facility.

Intangible Assets

We record intangible assets at fair value at the acquisition date and amortize their value into expense over the expected useful life. All of our intangible assets relate to the value of customer relationships. As of December 31, 2022, our intangible assets have been fully amortized.

Senior Unsecured Notes

Senior unsecured notes are recorded at the face amount of the notes net of unamortized issuance costs.

Debt Issuance Costs

Debt issuance costs represent direct costs associated with the issuance of a debt instrument that are deferred and amortized over the initial term of our debt instruments. Debt issuance costs are reported in the consolidated balance sheets as a direct deduction from the face amount of the debt issued. Costs that do not qualify as debt issuance costs are expensed as incurred.

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INCOME RECOGNITION

Interest Income

Interest income on mortgage notes receivable is accrued based on contractual rates applied to the principal balance, unless there is a minimum interest provision in the mortgage note. Certain construction loans provide for minimum interest provisions, to which the contractual rate applies, which are typically between 50% and 70% of the face amount of the note until the actual outstanding principal exceeds the minimum threshold. Our loans originated since the second quarter of 2021 typically do not provide for minimum interest provisions.

Mortgage notes receivable can be placed in contractual default status for any of the following reasons: (1) interest receivable is 60 days past due, (2) the loan was not repaid at the maturity date (3) there is a breach of terms in the loan documents or (4) the value of the collateral is less than the loan amount.

The accrual of interest income is suspended when a loan is in contractual default unless the interest is paid in cash or collectability of all amounts due is reasonably assured. In addition, we may place a loan on non-accrual status when the loan is either deemed collateral dependent or high risk. The following criteria are used to determine if a loan is deemed high risk: (1) total outstanding interest and fee receivables are greater than 15% of the total commitment and outstanding face rate interest receivable if 60 days past due, (2) there is a significant decline in the value of the collateral due to entitlement, engineering or project changes, (3) introduction of significant uncertainty due to the project or collateral type, (4) significant decline in value of collateral due to market conditions, (5) significant damage or loss to the collateral, (6) adverse claim against the property or borrower and (7) unfunded construction cost overruns. Interest previously accrued may be reversed at that time, and such reversal is offset against interest income. The accrual of interest income resumes only when the loans are no longer deemed collateral dependent or high risk, with collectability being reasonably assured.

Fee Income

We charge loan origination and loan servicing fees in conjunction with origination. Amendment fees are charged when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan for the transition from horizontal development to vertical construction. We defer and amortize loan origination, loan servicing and amendment fees over the contractual terms of the loans. Extension fees are charged when we agree to extend the maturity dates of loans and we charge fees on past due receivables. Extension and late fees are recognized when billed to the borrower.

We charge inspection fees, which we use to hire independent inspectors to report on the status of construction projects. These fees are earned and recognized upon each construction draw request.

EXPENSE RECOGNITION

Interest Expense

Interest expense on debt obligations is accrued based on the note rate applied to the face amount of the debt outstanding. Amortization of debt issuance costs and deferred financing costs over the initial term of the debt instruments is reported as interest expense in the consolidated statements of operations.

Stock‑Based Compensation

We measure compensation expense for all share-based awards at fair value on the date of grant and recognize compensation expense over the service period on a straight-line basis for awards expected to vest, which is generally three years for employees and one year for directors.

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Awards made to our employees and directors, typically consist of restricted stock units (“RSUs”). Employee stock-based compensation expense is included in compensation and employee benefits and director stock-based compensation expense is included in general and administrative in the consolidated statement of operations. For awards with only a service vesting condition, the fair value of the award is based on the grant date closing price of our common stock less the present value of expected dividends over the requisite service period, as the awards are not entitled to dividends. For these awards, we recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award, subject to periodic adjustments to ensure that the cumulative amount of expense recognized through the end of any reporting period is at least equal to the portion of the grant date fair value of the award that has vested through that date, and we account for forfeitures prospectively as they occur. For awards that contain both service vesting and market conditions, referred to as performance restricted stock units (“pRSUs”), we use a Monte Carlo simulation model to calculate the grant date fair value. For these market-condition awards, regardless of the outcome of the market condition, we recognize stock-based compensation expense on a straight-line basis over the longest of explicit and derived service periods, and we account for forfeitures prospectively as they occur. If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate or increase any remaining unrecognized or previously recorded stock-based compensation expense.

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes (the “Code”). As a REIT, we generally are not subject to U.S. federal income taxes on net income we distribute to our stockholders. We intend to make timely distributions sufficient to satisfy the annual distribution requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular corporate tax rates. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and U.S. federal income and excise taxes on our undistributed income. Our TRSs are subject to U.S. federal income taxes.

Earnings per Share (“EPS”)

Basic EPS is calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing the net (loss) income attributable to common stockholders by the weighted average number of shares of common stock outstanding determined for the basic EPS computation plus the effect of any dilutive securities. We include unvested shares of restricted stock in the computation of diluted EPS by using the treasury stock method. We include unvested performance units as contingently issuable shares in the computation of diluted EPS once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted EPS calculation.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for troubled debt restructurings (“TDR”) for creditors that have adopted the CECL standard and requires enhanced disclosures for loan modifications made to borrowers experiencing financial difficulty in the form of interest rate reductions, principal forgiveness, other-than-insignificant payment delays, or term extensions. In addition, the new guidance requires presentation in the vintage disclosures of current-period gross write-offs by year of origination. The guidance is effective for the Company in the first quarter of 2023. Entities are able to early adopt the guidance and have the ability to early adopt the TDR enhancements separately from the vintage disclosures. We have not yet adopted this ASU. While the guidance will result in expanded disclosures, we do not believe the adoption of this guidance will have a material impact on our financial position, results of operation or cash flows.

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Note 3 - Mortgage Notes Receivable

The stated principal amount of mortgage notes receivable in our portfolio represents our interest in loans generally secured by first deeds of trust, security agreements or legal title to real estate located in the United States. Our lending standards typically require that all mortgage notes receivable be secured by a first deed of trust lien on real estate and that the maximum LTV be no greater than 65%. The LTV is calculated on an “as-complete” appraised value of the underlying collateral as determined by an independent appraiser at the time of the loan origination. The lending standards also typically limit the initial outstanding principal balance of the loan to a maximum LTV of up to 65% of the “as-is” appraised value of the underlying collateral, as determined by an independent appraiser at the time of the loan origination. Unless otherwise indicated, LTV is measured by the total commitment amount of the loan at origination divided by the “as-complete” appraisal. LTVs do not reflect interim loan activity such as construction draws or interest payments capitalized to loans, or partial repayments of the loan. The maximum amount of a single loan may not exceed 10% of our total assets and the maximum amount to a single borrower may not exceed 15% of our total assets. We consider the maximum LTV as an indicator for the credit quality of a mortgage note receivable.

Mortgage notes receivable are considered to be short-term financings. As of December 31, 2022, the weighted average term outstanding of our active loans was 22 months, which we often elect to extend for several months, based on our evaluation of the expected timeline for completion of construction. All loans require monthly interest only payments, with our weighted average interest rate on our portfolio being 10.2% as of December 31, 2022. Most loans are structured with an interest reserve holdback that covers the interest payments for the initial term of the loan. Once the interest reserve is depleted, borrowers are expected to pay their monthly interest payment within 10 days of month-end.

Mortgage notes receivable are presented net of construction holdbacks, interest reserves, allowance for credit losses and deferred origination and amendment fee income in the consolidated balance sheets. The construction holdback represents amounts withheld from the funding of construction loans until we deem construction to be sufficiently completed. The interest reserve represents amounts withheld from the funding of certain mortgage notes receivable for the purpose of satisfying monthly interest payments over all or part of the term of the related note. Accrued interest is paid out of the interest reserve and recognized as interest income at the end of each month. The deferred origination, loan servicing and amendment fee income represents amounts that will be recognized over the contractual life of the underlying mortgage notes receivable.

The following table reconciles outstanding mortgage loan commitments to the outstanding balance of mortgage notes receivable as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Total loan commitments	$	1,417,325	$	1,489,055
Less:
Construction holdbacks(1)		452,690		524,462
Interest reserves		33,633		39,880
Total principal outstanding for our mortgage notes receivable		931,002		924,713
Less:
Allowance for credit losses(2)		41,492		10,394
Deferred origination and amendment fees		7,560		12,969
Mortgage notes receivable, net	$	881,950	$	901,350

(1)As of December 31, 2022 and 2021 this amount includes $22.8 and $17.3 million, respectively, of construction holdbacks for defaulted loans that we are no longer required to pay. These amounts are included in the loan commitment totals.

(2)As of December 31, 2022 and 2021, $1.5 and $0.9 million, respectively, of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

When a loan is deemed collateral dependent or high risk, it is placed on non-accrual status with interest income recognized on a cash-basis where principal collection is not in doubt. As of December 31, 2022 and 2021, the principal outstanding on loans in contractual default status placed on non-accrual status was $217.2 and $101.9 million, respectively.

As of December 31, 2022 and 2021, the principal outstanding on loans in contractual default was $250.4 and $174.0 million, respectively.

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The following tables show the carrying value of loans in contractual default status by collateral type and the LTV of the loans in contractual default at the dates indicated:

	December 31, 2022
(dollars in thousands)	Number of Loans		Carrying Value		% of Portfolio
Collateral Type
Residential lots		8	$	71,306		28.5	%
Condos		3		42,237		16.9
Hotel		2		28,919		11.5
Entitled Land		2		22,447		9.0
Townhomes		5		21,175		8.5
Single Family Housing		11		20,335		8.1
Mixed Use		4		14,795		5.9
Unentitled Land		1		10,496		4.2
Apartments		2		6,947		2.8
Offices		1		6,288		2.5
Retail		1		5,443		2.2
Total		40	$	250,388		100.0	%

	December 31, 2022
(dollars in thousands)	Carrying Value		% of Portfolio
LTV(1)
0 - 40%	$	3,969		1.6	%
41 - 60%		91,201		36.4
61 - 80%		139,537		55.7
Above 80%		15,681		6.3
Total	$	250,388		100.0	%

(1)Represents current LTV as of origination or latest amendment. At December 31, 2022, the weighted average LTV for loans in contractual default using the latest appraisal was 124.8%. The weighted average LTV of our loans in contractual default net of our allowance for credit losses was approximately 84.9%.

	December 31, 2021
(dollars in thousands)	Number of Loans		Carrying Value		% of Portfolio
Collateral Type
Condos		4	$	47,741		27.4	%
Senior Housing		1		25,337		14.6
Residential lots		3		19,541		11.2
Townhomes		6		18,870		10.8
Entitled Land		1		17,335		10.0
Mixed Use		4		15,858		9.1
Hotel		1		14,583		8.4
Unentitled Land		2		5,403		3.1
Apartments		2		5,341		3.1
Single Family Housing		7		3,973		2.3
Total		31	$	173,984		100.0	%

	December 31, 2021
(dollars in thousands)	Carrying Value		% of Portfolio
LTV (1)
0 - 40%	$	22,737		13.1	%
41 - 60%		26,902		15.5
61 - 80%		110,548		63.5
Above 80%		13,797		7.9
Total	$	173,984		100.0	%

(1)Represents LTV as of origination or latest amendment.

Current Expected Credit Losses

In assessing the CECL allowance, we consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. We derived an annual historical loss rate based on the Company’s historical loss experience in its portfolio and the historical loss experience in the commercial real estate industry provided by a third party adjusted to incorporate the risks of construction lending and to reflect our expectations of the macroeconomic environment based on forecast data per the Federal Reserve.

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The following tables summarize the activity in the CECL allowance during the years ended December 31, 2022 and 2021:

	CECL Allowance
(dollars in thousands)	Funded			Unfunded(2)		Total
CECL allowance as of December 31, 2020	$	10,590		$	—	$	10,590
Provision for credit losses, net		5,275			904		6,179
Charge-offs(1)		(5,471	)		—		(5,471	)
CECL allowance as of December 31, 2021		10,394			904		11,298
Provision for credit losses, net		37,696			570		38,266
Charge-offs(1)		(6,598	)		—		(6,598	)
CECL allowance as of December 31, 2022	$	41,492		$	1,474	$	42,966

(1)Charge-offs result from either loan repayments where the proceeds are less than the principal outstanding or transfers to investment in real property at the time that we take ownership of the property where the fair values of the underlying collateral are less than the principal outstanding.

(2)CECL allowance related to unfunded commitments is presented as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

As of December 31, 2022, the funded and unfunded CECL allowance aggregated $43.0 million, which represents an increase of $38.3 million for the year ended December 31, 2022. This increased allowance reflects increased loan specific allowances for certain high risk and collateral dependent loans where the fair value of the underlying collateral was less than the amortized cost of the loan, as well as increased uncertainty in the macroeconomic outlook, including weakening credit indicators, inflationary pressures, rising interest rates and market volatility.

In determining our CECL allowance, we segment loans with similar characteristics. All of our loans are secured by residential or commercial real estate and, in assessing estimated credit losses, we evaluate various metrics, including, but not limited to, construction type, collateral type, LTV, market conditions of property location and borrower experience and financial strength.

The following tables allocate the carrying value of our loan portfolio based on our internal credit quality indicators in assessing estimated credit losses and vintage of origination at the dates indicated:

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
Construction Type
Vertical Construction	$	552,468			59.8	%	$	352,355	$	128,130	$	33,895	$	1,928	$	36,160
Horizontal Development		221,078			24.1			144,082		68,201		8,795		—		—
Investment		46,536			5.0			46,536		—		—		—		—
Rehabilitation		39,422			4.3			12,936		15,009		11,477		—		—
Land Entitlement		26,132			2.8			4,146		21,986		—		—		—
Bridge		22,611			2.4			19,450		937		—		2,224		—
Acquisition		15,195			1.6			13,454		1,741		—		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(2)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

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	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
Collateral Type
Apartments	$	191,708			20.8	%	$	134,816	$	49,944	$	5,020	$	1,928	$	—
Single Family Housing		133,702			14.5			124,218		9,245		239		—		—
Townhomes		106,888			11.6			81,393		24,701		794		—		—
Residential Lots		104,100			11.3			56,675		38,630		8,795		—		—
Entitled Land		76,251			8.3			54,265		21,986		—		—		—
Condos		71,975			7.8			29,738		2,515		3,562		—		36,160
Commercial		58,515			6.3			13,838		44,677		—		—		—
Mixed Use		50,127			5.4			6,209		30,217		11,477		2,224		—
Hotel		30,221			3.3			14,116		—		16,105		—		—
Offices		18,467			2.0			12,179		—		6,288		—		—
Unentitled Land		17,262			1.9			16,325		937		—		—		—
Senior Housing		16,595			1.8			16,595		—		—		—		—
Duplex		13,639			1.5			13,639		—		—		—		—
Commercial Other		11,411			1.2			—		11,411		—		—		—
Retail		9,071			1.0			5,443		1,741		1,887		—		—
Quadplex		8,932			1.0			8,932		—		—		—		—
Commercial Lots		4,018			0.4			4,018		—		—		—		—
Triplex		560			0.1			560		—		—		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(2)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
LTV (2)
0 - 40%	$	26,053			2.8	%	$	22,544	$	3,509	$	—	$	—	$	—
41 - 45%		29,025			3.1			7,039		21,986		—		—		—
46 - 50%		42,267			4.6			22,524		13,455		6,288		—		—
51 - 55%		144,649			15.7			76,978		58,876		8,795		—		—
56 - 60%		107,098			11.6			98,691		8,407		—		—		—
61 - 65%		456,743			49.5			284,722		112,569		21,364		1,928		36,160
66 - 70%		93,104			10.1			71,638		16,561		2,681		2,224		—
71 - 75%		4,280			0.5			4,280		—		—		—		—
76- 80%		2,540			0.3			2,540		—		—		—		—
Above 80%		17,683			1.9			2,003		641		15,039		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(3)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

(3)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

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	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
Construction Type
Vertical Construction	$	478,475			52.5	%	$	234,861	$	191,896	$	1,177	$	2,491	$	47,789	$	261
Horizontal Development		196,543			21.5			169,041		27,502		—		—		—		—
Acquisition		96,937			10.6			96,937		—		—		—		—		—
Investment		65,703			7.2			42,509		2,101		—		3,608		17,485		—
Rehabilitation		27,023			3.0			11,320		15,703		—		—		—		—
Land Entitlement		24,529			2.7			24,529		—		—		—		—		—
Bridge		22,534			2.5			18,072		2,537		1,925		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(2)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
Collateral Type
Residential Lots	$	111,644			12.2	%	$	85,219	$	26,425	$	—	$	—	$	—	$	—
Apartments		107,765			11.8			38,232		68,356		1,177		—		—		—
Townhomes		93,300			10.2			51,240		28,979		—		1,017		11,803		261
Mixed Use		85,929			9.5			53,530		30,474		1,925		—		—		—
Single Family Housing		87,902			9.6			84,703		3,049		—		—		150		—
Condos		64,492			7.1			8,805		18,227		—		1,474		35,986		—
Commercial		61,592			6.8			61,592		—		—		—		—		—
Senior Housing		61,236			6.7			35,899		25,337		—		—		—		—
Storage		56,481			6.2			56,481		—		—		—		—		—
Unentitled Land		46,019			5.0			42,411		—		—		3,608		—		—
Entitled Land		45,098			4.9			27,763		—		—		—		17,335		—
Hotel		31,665			3.5			4,886		26,779		—		—		—		—
Offices		15,348			1.7			8,280		7,068		—		—		—		—
Commercial Lots		10,227			1.1			6,670		3,557		—		—		—		—
Quadplex		9,769			1.1			9,769		—		—		—		—		—
Commercial Other		9,080			1.0			9,080		—		—		—		—		—
Retail		7,873			0.9			6,385		1,488		—		—		—		—
Duplex		6,324			0.7			6,324		—		—		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(2)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

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	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
LTV (2)
0 - 40%	$	53,907			5.9	%	$	32,634	$	—	$	—	$	3,608	$	17,665	$	—
41 - 45%		48,431			5.3			44,380		4,051		—		—		—		—
46 - 50%		63,690			7.0			41,356		21,317		—		1,017		—		—
51 - 55%		92,238			10.1			74,978		17,260		—		—		—		—
56 - 60%		79,039			8.7			27,115		40,190		—		—		11,473		261
61 - 65%		559,997			61.4			372,645		146,640		3,102		1,474		36,136		—
66 - 70%		645			0.1			645		—		—		—		—		—
71 - 80%		—			0.0			—		—		—		—		—		—
Above 80%		13,797			1.5			3,516		10,281		—		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(3)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

(3)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

The following tables allocate the carrying value of collateral dependent loans in our loan portfolio to the collateral type at the dates indicated:

	December 31, 2022
(dollars in thousands)	Carrying Value		CECL Allowance(1)			Carrying Value, net
Collateral Type
Residential Lots	$	70,664	$	(11,519	)	$	59,145
Condos		42,237		(5,892	)		36,345
Land		21,986		(108	)		21,878
Townhomes		18,296		(1,706	)		16,590
Single Family Housing		16,993		(950	)		16,043
Hotel		16,106		(9,151	)		6,955
Apartments		6,947		(978	)		5,969
Offices		6,288		(5,042	)		1,246
Mixed Use		3,318		(1,320	)		1,998
Total	$	202,835	$	(36,666	)	$	166,169

	December 31, 2021
(dollars in thousands)	Carrying Value		CECL Allowance(1)			Carrying Value, net
Collateral Type
Senior Housing	$	25,337	$	(1,103	)	$	24,234
Entitled Land		17,335		(42	)		17,293
Single Family Housing		1,730		(15	)		1,715
Condos		1,109		(673	)		436
Townhomes		261		(1	)		260
Total	$	45,772	$	(1,834	)	$	43,938

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Note 4 – Investment in Real Property

As of December 31, 2022 and 2021, we owned 11 and nine properties or projects, with aggregate carrying value of $87.9 and $68.1 million, respectively.

The following tables provide information about the carrying value of our owned real property at the dates indicated:

(dollars in thousands)	December 31, 2022		December 31, 2021
Collateral Type
Senior Housing	$	49,917	$	—
Offices		15,414		19,388
Single Family Housing		8,538		4,134
Townhomes		6,712		9,281
Apartments		5,024		—
Residential Lots		2,293		3,012
Condos		—		28,441
Retail		—		3,811
Total	$	87,898	$	68,067

	December 31, 2022				December 31, 2021
(dollars in thousands)	Number of Properties		Carrying Value		Number of Properties		Carrying Value
Collateral Type
Held for sale		7	$	24,516		5	$	52,531
Held for use		4		63,382		4		15,536
Total		11	$	87,898		9	$	68,067

For the years ended December 31, 2022, 2021 and 2020, we recorded the operating revenue, expenses, fixed asset depreciation and impairment in our consolidated statement of operations as shown below for investment in real property, held for sale and held for use, respectively:

	Held for Sale
(dollars in thousands)	December 31, 2022			December 31, 2021			December 31, 2020
Revenue from operations	$	276		$	—		$	—
Gain on sale		984
Less:
Operating expenses		1,990			101			168
Depreciation(1)		125			—			—
Impairment		6,111			—			—
Net loss from investment in real property, held for sale	$	(6,966	)	$	(101	)	$	(168	)

(1)Depreciation incurred for a real property before it was reclassified to held for sale.

	Held for Use
(dollars in thousands)	December 31, 2022			December 31, 2021			December 31, 2020
Revenue from operations	$	2,523		$	—		$	—
Less:
Operating expenses		3,697			7			—
Depreciation		553			—			—
Impairment		1,485			—			—
Net loss from investment in real property, held for use	$	(3,212	)	$	(7	)	$	—

In April 2022, the Company executed an agreement with an unrelated party to sell a real property with a carrying value of $28.4 million for a sales price of $29.0 million. As part of the sale, the Company received a promissory note from the purchaser in the principal amount of $25.9 million. The note was amended to extend the financing term, resulting in an extension of the maturity date to December 31, 2022 after receiving partial payments on July 1, 2022 and August 31, 2022. In December 2022, the Company amended the loan to extend the maturity date to April 1, 2023, whereby we agreed to an additional advance of $0.4 million. This seller-financed sale of real property was evaluated for derecognition of the transferred assets and income recognition based on whether a sales contract existed and effective control was transferred to the purchaser and it was determined that the transaction met all of the criterion to be recognized as a sale.

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Note 5 – Fair Value Measurements

The accounting guidance on fair value measurements and disclosures requires the categorization of fair value measurement into three broad levels of the fair value hierarchy as follows:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Our development of fair value estimates, particularly Level 3 fair value assets and liabilities with significant unobservable inputs, involves judgment and a high degree of subjectivity. While we anticipate that our valuation methods are appropriate and consistent with valuation methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Likewise, due to the general illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.

The following tables present estimated fair values of our financial instruments, as of the date indicated, whether or not recognized or recorded in the consolidated balance sheets at the periods indicated:

	December 31, 2022				Fair Value Measurements Using
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	54,964	$	54,964	$	54,964	$	—	$	—
Mortgage notes receivable, net		881,950		865,304		—		—		865,304
Interest and fees receivable, net		14,775		14,775		—		14,775		—
Financial Liabilities
Senior unsecured notes, net		97,789		99,990		99,990		—		—
Private placement warrant liability		25		25		—		25		—

	December 31, 2021				Fair Value Measurements Using
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	132,889	$	132,889	$	132,889	$	—	$	—
Mortgage notes receivable, net		901,350		901,350		—		—		901,350
Interest and fees receivable, net		17,526		17,526		—		17,526		—
Financial Liabilities
Senior unsecured notes, net		97,223		100,000		100,000		—		—
Private placement warrant liability		1,838		1,838		—		1,838		—

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The following table sets forth assets measured and reported at fair value on a nonrecurring basis as of December 31, 2022 and 2021. All of these values are categorized as Level 3. The table also contains information about valuation methodologies and inputs for:

	Carrying Value				Fair Value
(dollars in thousands)	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021		Valuation Technique	Unobservable Inputs	Range of Inputs
Investment in real property held for sale(1)	$	14,628	$	—	$	15,075	$	—	Collateral valuations	Discount to appraised value based on comparable market prices, broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Investment in real property held for use (1)	$	25,167	$	—	$	33,379	$	—	Collateral valuations	Discount to appraised value based on comparable market prices, broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Collateral dependent loans, net of allowance for credit losses(1)		81,470		436		87,622		835	Collateral valuations	Discount to appraised value based on comparable market prices or broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Total	$	121,265	$	436	$	136,076	$	835

(1)Previously reported amounts included all real properties and collateral dependent loans regardless of whether an adjustment was required to mark to fair value in the reporting period. The current disclosure represents only those loans and properties for which an adjustment was required to report at fair value on a nonrecurring basis during the reporting periods.

Fair Value on a Recurring Basis

The private placement warrants are carried at fair value. Initially, the fair value of the private placement warrants was classified as Level 3 within the fair value hierarchy as it was valued using a lattice model, which primarily incorporates observable inputs such as our common stock price, exercise price, term of the warrant, dividend yield and the risk-free rate; however, it also incorporates an assumption for equity volatility. For the unobservable volatility input, we solved for the volatility of the public warrants using the lattice model that captures the redemption right and analyzed the calculated equity volatility based on the volatility of the common stock of comparable public companies. This valuation methodology resulted in the same value per share for both the public warrants and private placement warrants, indicating the redemption right, a feature excluded from private placement warrants, did not change the valuation; and therefore, the quoted price per share of the public warrants was used to value the private placement warrants on a recurring basis beginning September 30, 2021. As we utilized observable inputs in the valuation, specifically a quoted price for a similar item in an active market, we re-classified the private placement warrant liability from a Level 3 to a Level 2 within the fair value hierarchy as of September 30, 2021. The fair value of the 5.2 million private placement warrants, estimated using the quoted share price of the public warrants, was approximately $0.001 and $0.09 per warrant or $0.005 and $0.35 per share to arrive at $0.02 and $1.8 million, respectively, as of December 31, 2022 and 2021. Refer to Note 9 for additional details on the private placement warrants.

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Fair Value on a Nonrecurring Basis

For our investments in real property held for sale, we compare the cost basis to the fair value of real properties at each reporting period, based upon the most recent independent third-party appraisals of value discounted based upon our experience with actual liquidation values. These discounts to the appraisals generally range from 0% to 10% and are considered unobservable inputs in Level 3 within the fair value hierarchy. Any decline in the fair value of real property held for sale will be recorded in a valuation account to offset the cost basis and carry at fair value on a non-recurring basis. Similarly, whenever changes in circumstances indicate that the carrying amounts may not be recoverable for our investments in real property held for use, we evaluate the undiscounted net cash flows that are expected to be generated from the property, including any estimated proceeds from the eventual disposition of the property. If the carrying value of a property held for use exceeds its undiscounted net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property and will be recorded in a valuation account on a non-recurring basis.

The fair value of collateral dependent loans is based upon the most recent independent third-party appraisal of value, discounted between 0% to 10% based upon our experience with actual liquidation values. For certain collateral dependent loans, where a recent appraisal is either unavailable or not most representative of fair value, the fair value is based on a broker opinion of value including a capitalized income analysis and replacement cost analysis considering historical operating results, market rents, vacancy rates, capitalization rates, land cost comparisons, market trends and economic conditions. The assessment of fair value of real property is subject to uncertainty and, in certain cases, sensitive to the selection of comparable properties. As the result of using unobservable inputs in the valuation, we classify collateral dependent as Level 3 within the fair value hierarchy.

Impairment indicators may subject goodwill to nonrecurring fair value measurements when certain triggering events occur. In the fourth quarter of 2022, the Company recorded impairment charges for goodwill. The implied fair value of our goodwill was estimated using both the discounted cash flow and market multiple approaches, which are Level 3 valuation techniques. Refer to Note 6 for additional details on significant inputs used in our analysis.

Fair Value Disclosure Only

For our financial instruments, including cash equivalents, which are classified under Level 1 within the fair value hierarchy as well as interest and fees receivable, accounts payable and accrued liabilities which are classified under Level 2 within the fair value hierarchy, the carrying amounts approximate fair value due to their short-term maturities.

Our mortgage notes receivable are evaluated for expected credit losses and are presented net of an allowance for credit losses. We determined the fair value of our mortgage notes receivable based on a discounted cash flow methodology, taking into consideration various factors including discount rates, interest rate spreads and third-party appraisals for estimating as-complete appraised values. The interest rate spreads range from 0.01% to 0.14%, with a weighted average spread of 0.04%. As we utilize unobservable inputs, we classify mortgage notes receivable as Level 3 within the fair value hierarchy.

Our senior unsecured notes were purchased at par by investors in a private placement, but trade in the secondary market. Fair value is estimated using current market quotes received from active markets and we classify as Level 1 within the fair value hierarchy.

Note 6 – Goodwill and Intangible Assets

All of our goodwill and intangibles relate to the business combination (“Business Combination”), via a special purpose acquisition company that closed on November 14, 2019. In the first quarter of 2020, based on additional information obtained about facts and circumstances that existed as of November 14, 2019, we recorded a measurement period adjustment to reduce the fair value of intangible assets in the form of customer relationships from $6.0 to $1.0 million. This adjustment increased the preliminary amount of goodwill previously recorded by $5.0 million resulting in $137.0 million of goodwill as of September 30, 2020. As a result of this adjustment to preliminary values, $0.9 million of amortization of intangible assets recorded in 2019 was reversed in the first quarter of 2020.

Goodwill

We test our reporting unit for goodwill impairment annually in the fourth quarter, or upon a triggering event. Our qualitative analysis performed in the fourth quarter of 2022 considered continued interest rate hikes by the Federal Reserve to curb rising inflation and resulting market volatility, a significant slowdown in real estate transactions and less capital available in the marketplace to

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finance real estate projects and further decreases in our stock price. We concluded that it was more likely than not that the fair value of our reporting unit was less than its carrying amount as of December 31, 2022 and, therefore, a quantitative analysis was necessary. The quantitative analysis was based on income and market multiples approaches. Under the income approach, the fair value of a reporting unit was estimated based on the present value of estimated future cash flows covering discrete forecast periods as well as terminal value determinations. We prepared cash flow projections based on management's estimates of long-term growth rates, pre-tax return on earnings, earning asset growth and return on tangible equity, taking into consideration industry and market conditions. The discount rate was based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, fair value was estimated based on market multiples of revenue and earnings derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit, as well as observable market values of our reporting unit based on any third-party attributions of value to such unit in the context of potential transactions with us. We weighted the fair value derived from the market approach commensurate with the level of comparability of these publicly traded companies to the reporting unit.

Our 2022 annual goodwill impairment analysis resulted in impairment charges for goodwill related to the Broadmark lending business which is our only reporting unit. The decline in fair value of the reporting unit below its carrying value resulted in changes from expected future cash flows as compared to prior year projections which is more broadly a result of macroeconomic factors and other operational challenges as well as an increase in cost of capital. As a result, we recorded a goodwill impairment charge of $137.0 million in the fourth quarter of 2022.

The reporting unit has no remaining goodwill as of December 31, 2022 and an excess of fair value over carrying value of net assets of 0% as of the annual test date. The business is facing challenges reflected in the results for the year ended December 31, 2022. In the later part of the third quarter of 2022 and continuing into the fourth quarter of 2022, market interest rates rose markedly and rapidly primarily as a result of the Federal Reserve's actions to curb rapidly rising inflation. This led to a significant slowdown in real estate transactions and less capital available in the marketplace to finance real estate projects. During the fourth quarter, rising interest rates and macroeconomic uncertainties in the capital markets lead to a significant decrease in real estate sales in the marketplace and in the availability of capital from traditional lenders for longer-term financing of completed construction and development projects, which negatively affected our borrowers' ability to sell or refinance our collateral and repay our loans. As a result, this led us to have a higher percentage of defaults go into non-accrual, additional properties foreclose or start the foreclosure process and the decision to slow origination pace to preserve liquidity.

The following table sets forth the changes in the carrying amount of goodwill:

(dollars in thousands)	Goodwill
Goodwill as of December 31, 2020	$	136,965
Goodwill as of December 31, 2021		136,965
Less:
Impairment		136,965
Goodwill as of December 31, 2022	$	—

Intangible Assets

The following table summarizes the balances of intangible assets as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Asset Type
Customer relationships	$	1,000	$	1,000
Less: Accumulated amortization		1,000		718
Intangible assets, net	$	—	$	282

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Note 7 - Accounts Payable and Accrued Liabilities

The following table presents a summary of accounts payable and accrued liabilities as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Accounts payable and accrued liabilities
Borrower deposits	$	5,519	$	925
Accounts payable and other liabilities		4,223	$	4,315
Accrued salaries, bonus and commissions.		2,272	$	2,034
Allowance for credit losses on unfunded commitments		1,475		906
Total	$	13,489	$	8,180

Note 8 - Debt

On February 19, 2021, we entered into a credit agreement with a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent for the lenders, providing for a $135.0 million revolving credit facility maturing on February 19, 2024. Advances under the revolving credit facility bear interest at prime rate plus 2.75% and the facility has a commitment fee of 1.0% of unfunded commitment per annum. We incurred fees of approximately $4.5 million in relation to the revolving credit facility, which were capitalized as deferred financing costs on the consolidated balance sheets and are being amortized over the three-year term. As of December 31, 2022, the revolving credit facility has no principal outstanding.

Our obligations under the revolving credit facility are secured by substantially all of the Company’s assets. The revolving credit facility contains covenants customary for financings of this type, including limitations on the incurrence of indebtedness, liens, asset dispositions, acquisitions, mergers and consolidations, certain dividends, distributions, stock repurchases and other payments, advances and investments, payments to affiliates, optional prepayments and other modifications of certain other indebtedness, and amendments, terminations and waivers of certain material agreements, as well as compliance with leverage and coverage ratios and maintenance of minimum tangible net worth. Among other things, the credit agreement provides that we may not pay cash dividends that would result in non-compliance with the financial covenants under the credit agreement or during an event of default under the credit agreement, except in the case of defaults other than payment defaults, for dividends in amounts necessary to maintain our REIT status. The revolving credit facility contains events of default customary for financings of this type, including failure to pay principal, interest and other amounts, materially incorrect representations or warranties, failure to observe covenants and other terms of the revolving credit facility, cross-defaults to other indebtedness, bankruptcy, insolvency, material judgments, certain ERISA violations, changes in control and failure to maintain REIT status, in some cases subject to customary grace periods.

On November 4, 2022, the credit agreement governing the revolving credit facility was amended to allow for repurchases of shares of the Company’s common stock, subject to certain limitations.

On November 12, 2021, we completed a private offering of $100.0 million of senior unsecured notes. Interest on the notes accrues at the fixed rate of 5.0% per annum, which is payable semi-annually on May 15 and November 15. The notes may be prepaid prior to their maturity date, subject to the payment of applicable premiums. The note purchase agreement governing the notes contains financial covenants that require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as other affirmative and negative covenants that may limit, among other things, our ability to incur liens and enter into mergers or transfer all or substantially all of our assets. The note purchase agreement also includes customary representations and warranties and customary events of default. The amounts outstanding under the notes will be due on November 15, 2026. We incurred fees of approximately $2.9 million in relation to the issuance of the notes, which are amortized to interest expense over the remaining life of the respective loan term.

The following table presents the carrying values of our senior unsecured notes as of the periods indicated:

(dollars in thousands)	December 31, 2022			December 31, 2021
Principal	$	100,000		$	100,000
Debt issuance costs		(2,861	)		(2,855	)
Amortization of debt issuance costs		650			78
Total notes, net	$	97,789		$	97,223

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The following table summarizes the components of interest expense related to our senior unsecured notes and revolving credit facility for the periods indicated:

	Year Ended
	December 31, 2022						December 31, 2021
(dollars in thousands)	Amortization of Deferred Debt Issuance Costs		Interest on Borrowings		Undrawn Fees		Amortization of Deferred Debt Issuance Costs		Interest on Borrowings		Undrawn Fees
5.0% senior unsecured notes	$	572	$	4,986	$	—	$	78	$	694	$	—
Revolving credit facility		1,510		151		1,419		1,255		107		1,186
Total	$	2,082	$	5,137	$	1,419	$	1,333	$	801	$	1,186

Note 9 - Stockholders’ Equity and Earnings per Common Share

Stockholders' Equity

Stockholders’ Voting Rights

Holders of our common stock are entitled to one vote for each share.

Equity Offering Program

On March 2, 2021, we entered into a distribution agreement with J.P. Morgan Securities LLC, Barclays Capital Inc., B. Riley Securities, Inc., JMP Securities LLC and Raymond James & Associates, Inc. as sales agents, to sell shares of our common stock having an aggregate gross sales price of up to $200,000,000, from time to time, through an “at-the-market” equity offering program (the “ATM Program”). We have no obligation to sell any shares under the ATM Program and sold no shares under the ATM Program during the year ended December 31, 2022 and 2021.

Stock Repurchase Authorizations

On November 7, 2022, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $75.0 million of its common stock, par value $0.001 per share. Repurchases under the stock repurchase program may be made at management’s discretion from time to time on the open market, in privately negotiated transactions or otherwise, in each case subject to compliance with all Securities and Exchange Commission rules and other legal requirements, and may be made in part under one or more Rule 10b5-1 plans, which permit stock repurchases at times when the Company might otherwise be precluded from doing so. The timing and amount of any repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors. There is no guarantee as to the exact number of shares that will be repurchased under the stock repurchase program, or that any repurchases will occur. In addition, the stock repurchase program may be suspended, extended or terminated by the Company at any time without prior notice. As of December 31, 2022, $70.0 million remained available for future repurchases.

Public and Private Warrants

As of December 31, 2022 and 2021 there were 41.7 million public warrants outstanding to purchase one-fourth of a share and 5.2 million private placement warrants outstanding to purchase one share of common stock. In the aggregate, we have outstanding warrants to purchase approximately 15.6 million shares of common stock at a price of $11.50 per whole share. Settlement of outstanding warrants will be in shares of our common stock, unless we elect (solely in our discretion) to settle warrants we have called for redemption in cash, and subject to customary adjustment in the event of business combinations and certain tender offers. Unless earlier redeemed, the public warrants will expire on November 19, 2024.

The liability for the private placement warrants was $0.02 million as of December 31, 2022 and is included in accounts payable and accrued liabilities in the consolidated balance sheet.

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Earnings per Common Share

The table below presents the computation of basic and diluted net earnings per share of common stock for the periods presented:

	Year Ended
(dollars in thousands, except share and per share data):	December 31, 2022			December 31, 2021
Net (loss) income	$	(116,391	)	$	82,488
Basic weighted-average shares of common stock outstanding		132,841,196			132,579,289
Dilutive effect of share-based compensation – unvested restricted stock units (1)		—			87,213
Diluted weighted-average shares of common stock outstanding		132,841,196			132,666,502
Basic earnings per common share	$	(0.88	)	$	0.62
Diluted earnings per common share	$	(0.88	)	$	0.62

(1)Amounts exclude all potential common and common equivalent shares for periods when there is a net loss from continuing operations.

For the periods presented, the following common stock equivalents were excluded from the calculations of diluted earnings per share because their effect would have been anti-dilutive:

	Year Ended
	December 31, 2022		December 31, 2021
Weighted-average restricted stock units outstanding		27,091		199,709
Unexercised public warrants and private placement warrants		15,604,192		15,604,304
Total stock equivalents excluded		15,631,283		15,804,013

Note 10 - Income Taxes

The Manager has elected to be treated as a TRS and this election applies to the wholly-owned subsidiaries of the Manager, including the Private REIT Manager. Having TRSs permit us to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Internal Revenue Code of 1986, as amended (the “Code”) and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, we will continue to maintain the qualification as a REIT.

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

Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Code, which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of assets and the sources of income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state, and local income tax on our taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of December 31, 2022 and 2021, we were in compliance with all REIT requirements.

Based on our evaluation, we concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements of a contingent tax liability for uncertain tax positions. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in the accompanying consolidated financial statements.

The state and local tax jurisdictions for which we are subject to tax-filing obligations recognize our status as a REIT, and therefore, we generally do not pay income tax in such jurisdictions. We may, however, be subject to certain minimum state and local tax filing fees as well as certain excise or business taxes. Our TRSs are subject to U.S. federal, state and local income taxes.

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Note 11 - Equity Incentive Plan

Stock Incentive Plan

The Broadmark Realty 2019 Stock Incentive Plan (the “Plan”) allows for the issuance of up to 5,000,000 stock options, stock appreciation rights, restricted stock awards, restricted stock units or other equity-based awards or any combination thereof to the directors, employees, consultants or any other party providing services to us. The Plan is administered by the compensation committee of our board of directors. As of December 31, 2022, there were 3,291,351 shares available to be awarded under the Plan.

Awards made to our employees and directors typically consist of restricted stock units (“RSUs”) with only a service vesting condition. Awards to certain of our employees contain both service vesting and market conditions and are referred to as performance restricted stock units (“pRSUs”).

The RSUs granted under the Plan generally vest from one to three years depending on the terms of the specific award. All RSUs awarded will be settled upon vesting in shares of our common stock.

For the Company's pRSUs, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of market-based performance conditions. The market-based performance conditions are based on the Company's achievement of a relative total shareholder return (“TSR”) performance requirement, on a percentile basis, compared to a defined group of peer companies over a three year performance period, or contingent upon achieving specific stock price milestones over a five year performance period.

The Company uses a Monte Carlo simulation model to determine the grant-date fair value of awards with market-based performance conditions. The weighted average fair value and assumptions used to value the pRSU awards granted with market-based performance conditions are as follows:

	Year Ended
	December 31, 2022			December 31, 2021
Performance share fair value	$	6.74		$	8.20
Risk-free interest rate		1.74	%		0.27	%
Expected volatility		30.48	%		25.71	%
Expected life (in years)		2.85			2.77
Expected dividend yield		9.82	%		8.13	%

Dividend equivalents are not accrued or paid on unvested equity awards that were granted to employees, executive officers and directors and accordingly those unvested equity awards are not considered participating securities.

If an award granted under the Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid will again become available for the issuance of additional awards.

The following tables summarize the activity related to RSUs and pRSUs during 2022:

	Shares			Weighted Average Grant Date Fair Market Value
Unvested RSUs outstanding as of December 31, 2020		434,143
Granted		295,063		$	10.08
Vested		(231,053	)	$	10.61
Forfeited		(13,837	)	$	10.58
Unvested RSUs outstanding as of December 31, 2021		484,316
Granted		750,038		$	6.02
Vested		(285,853	)	$	10.01
Forfeited		(200,589	)	$	7.31
Unvested RSUs outstanding as of December 31, 2022		747,912

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	Shares			Weighted Average Grant Date Fair Market Value
Unvested pRSUs outstanding as of December 31, 2020		—
Granted		113,958		$	8.20
Unvested pRSUs outstanding as of December 31, 2021		113,958
Granted		276,679		$	6.74
Forfeited		(182,976	)	$	7.07
Unvested pRSUs outstanding as of December 31, 2022		207,661

As of December 31, 2022, there was $4.1 million of net unrecognized compensation cost related to unvested stock-based compensation arrangements. This compensation will be recognized on a straight-line basis over a weighted-average recognition period of 1.5 years.

Note 12 - Commitments and Contingencies

The following table illustrates our contractual obligations and commercial commitments by due date as of December 31, 2022:

(dollars in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Construction holdbacks(1)	$	429,920	$	261,243	$	168,677	$	—	$	—
Operating lease obligations(2)		9,930		887		2,018		2,140		4,885
Total	$	439,850	$	262,130	$	170,695	$	2,140	$	4,885

(1)The funding timing and amounts of construction holdbacks are uncertain as these commitments relate to loans for construction costs and depend on the progress and performance of the underlying projects. In addition, $22.8 million of holdbacks are excluded from this table as they represent capital expenditures required to complete construction for defaulted loans that we are no longer required to pay.

(2)The total operating lease obligation includes $2.4 million of imputed interest.

Construction Loans

Our commitments and contingencies include usual obligations incurred by real estate lending companies in the normal course of business, including construction holdbacks as disclosed in Note 3.

Lease Commitments

On March 18, 2020, we entered into a non-cancelable operating lease agreement for our office space in Seattle with an original lease period expiring in January 2032, which includes an option to extend the lease term for an additional five years. We have concluded that the renewal option is not reasonably certain of being exercised, therefore, the renewal is not included in the right of use asset and lease liability. The lease commencement date was in the first quarter of 2021. The total future cash payments included in the measurement of our operating lease liabilities, net of lease incentives, was $11.7 million at inception of the lease. The right-of-use assets obtained in exchange for the new operating lease obligation and the tenant improvements were $6.4 and $2.0 million, respectively. The discount rate for the operating lease was 6%, resulting in an initial imputed interest amount of $3.3 million.

Legal Proceedings

From time to time, we are named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, we do not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect our results of operations, financial condition or cash flows.

Concentration Risk

Our loan portfolio as of December 31, 2022 is generally secured by first deed of trust liens on residential and commercial real estate located in 20 states and the District of Columbia. Our loan portfolio is also concentrated within ten counties, the largest being King County in Washington. As of December 31, 2022 and 2021, the top ten counties make up 46.7% of the total committed amount of loans in our total portfolio.

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Note 13 - Employee Benefit Plan

In 2022, we adopted a defined contribution 401(k) retirement plan covering Broadmark employees who have met certain eligibility requirements (the “Broadmark 401(k) Plan”). Eligible employees may contribute pre-tax compensation up to a maximum amount allowable under Internal Revenue Service limitations. Employee contributions and earnings thereon vest immediately. We currently match 3.5% on employee contributions of up to 6% of their annual compensation. The total expense related to the Broadmark 401(k) Plan was $0.3 million for the year ended December 31, 2022.

Note 14 - Related Party Transactions

In August 2021, in connection with the liquidation of the Private REIT, all participations in mortgage notes receivable held by the Private REIT were offered to and purchased for cash by the Company at the settlement value which approximated fair value of $43.5 million. As of September 30, 2021, the Private REIT had distributed the net assets in excess of cash required to discharge liabilities (including accrued liabilities for liquidation costs) to its investors based on their relative percentage interests. The Private REIT Manager, acting as liquidator, was responsible for discharging the Private REIT’s remaining liabilities and winding up its affairs, which was completed in the fourth quarter of 2021.

Note 15 - Subsequent Events

Dividend Declaration

On January 15, 2023, our board of directors declared a monthly cash dividend of $0.035 per common share payable on February 15, 2023 to stockholders of record as of January 31, 2023, and on February 15, 2023, our board of directors declared a cash dividend of $0.035 per common share payable on March 15, 2023 to stockholders of record as of February 28, 2023.

Investment in Real Property

On January 24, 2023, the Company acquired via a deed-in-lieu of foreclosure an 84,378 square foot luxury apartment property in Colorado. The property previously served as collateral for a loan held for investment with a carrying value of $33.4 million, net of a CECL reserve of $2.8 million at December 31, 2022.

On February 9, 2023 the Company acquired via a deed-in-lieu of foreclosure a 5.4 acre property in Illinois. The property previously served as collateral for a loan held for investment with a carrying value of $15.0 million, net of a CECL reserve of $0.3 million at December 31, 2022.

On February 10, 2023, the Company acquired via foreclosure a 70.6 acre property in Utah. The property previously served as collateral for a loan held for investment with a carrying value of $8.5 million, net of a CECL reserve of $0.3 million at December 31, 2022.

On February 15, 2023, the Company acquired via foreclosure a 123.4 acre property in Colorado. The property previously served as collateral for a loan held for investment with a carrying value of $9.5 million, net of a CECL reserve of $0.4 million at December 31, 2022.

Agreement and Plan of Merger

On February 26, 2023, the Company, Ready Capital Corporation (“Ready Capital”) and Ready Capital Merger Sub, LLC (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Agreement”), pursuant to which the Company will merge with and into Merger Sub and each share of the Company’s common stock will be converted into 0.47233 shares of Ready Capital common stock. The transaction is expected to close during the second quarter of 2023, subject to the respective approvals by the stockholders of Ready Capital and the Company and other customary closing conditions. Ready Capital is a multi-strategy real estate finance company that originates, acquires finances, and services small-to-medium balance commercial loans and is headquartered in New York, New York.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Report. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2022.

Management's Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and include those policies and procedures that:

•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2022 .

Moss Adams LLP, the independent registered public accounting firm that audited our Consolidated Financial Statements included in this Annual Report, has audited the effectiveness of internal control over financial reporting as of December 31, 2022. Their audit report is included with our financial statements, and expressed an unqualified opinion on the effectiveness of internal control over financial reporting at December 31, 2022.

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Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2022, there were no changes in the Company’s internal control over financial reporting (as such terms are defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is incorporated by reference to the definitive Broadmark Realty Capital Inc. Proxy Statement to be filed with the SEC not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10‑K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated by reference to the definitive Broadmark Realty Capital Inc. Proxy Statement to be filed with the SEC not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10‑K.

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

The information required by Item 12 is incorporated by reference to the definitive Broadmark Realty Capital Inc. Proxy Statement to be filed with the SEC not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10‑K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by Item 13 is incorporated by reference to the definitive Broadmark Realty Capital Inc. Proxy Statement to be filed with the SEC not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10‑K.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by Item 14 is incorporated by reference to the definitive Broadmark Realty Capital Inc. Proxy Statement to be filed with the SEC not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10‑K.

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PART IV.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) and (2) Financial Statements and Schedules.

See “Index to Financial Statements and Schedules” on page F‑1.

(3) Exhibits

Exhibit	Description
2.1	Agreement and Plan of Merger, dated August 9, 2019, by and among Trinity Merger Corp., Broadmark Realty Capital Inc., Trinity Merger Sub I, Inc., Trinity Merger Sub II, LLC, PBRELF I, LLC, BRELF II, LLC, BRELF III, LLC, BRELF IV, LLC, Pyatt Broadmark Management, LLC, Broadmark Real Estate Management II, LLC, Broadmark Real Estate Management III, LLC, and Broadmark Real Estate Management IV, LLC (incorporated by reference to Annex A to the joint proxy statement/prospectus contained in Broadmark Realty’s Amendment No. 2 to the registration statement on Form S‑4 (File No. 333‑233214), filed with the SEC on October 15, 2019).
3.1	Articles of Amendment and Restatement of Broadmark Realty Capital Inc. (incorporated by reference to Exhibit 3.1 to Broadmark Realty’s Form 8‑K (File No. 001‑39134), filed with the SEC on November 20, 2019).
3.2	Amended and Restated Bylaws of Broadmark Realty Capital Inc. (incorporated by reference to Exhibit 3.1 to Broadmark Realty’s Form 8‑K (File No. 001‑39134), filed with the SEC on March 17, 2022).
4.1	Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to Broadmark Realty’s Form 8‑A12B (File No. 001‑39134), filed with the SEC on November 14, 2019).
4.2	Specimen Warrant Certificate (incorporated by reference to Exhibit 4.2 to Broadmark Realty’s Form 8‑A12B (File No. 001‑39134), filed with the SEC on November 14, 2019).
4.3	Warrant Agreement, dated as of May 14, 2018, between Trinity Merger Corp. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.3 to Broadmark Realty’s Form 8‑A12B (File No. 001‑39134), filed with the SEC on November 14, 2019).
4.4	Amendment to Warrant Agreement, dated November 14, 2019, by and between Broadmark Realty Capital Inc. and Continental Stock Transfer & Trust Co. (incorporated by reference to Exhibit 4.4 to Broadmark Realty’s Form 8‑K (File No. 001‑39134), filed with the SEC on November 20, 2019).
4.5	Second Amendment to Warrant Agreement, dated November 14, 2019, by and among Broadmark Realty Capital Inc., Continental Stock Transfer & Trust Co., and American Stock Transfer & Trust Company, LLC. (incorporated by reference to Exhibit 4.5 to Broadmark Realty’s Form 8‑K (File No. 001‑39134), filed with the SEC on November 20, 2019).
4.6	Description of Securities registered under Section 12 of the Securities Exchange Act of 1934.*
10.1	Letter Agreement, dated February 2, 2022, by and between Broadmark Realty Capital Inc. and Jeffrey Pyatt (incorporated by reference to Exhibit 10.2 to Broadmark Realty’s Form 8-K (File No. 001-39134), filed with the SEC on February 7, 2022).+
10.2	Letter Agreement, dated November 7, 2022, by and between Broadmark Realty Capital Inc. and Jeffrey B. Pyatt.+*
10.3	Letter Agreement, dated November 7, 2022, by and between Broadmark Realty Capital Inc. and Kevin M. Luebbers.+*
10.4	Employment Agreement, dated November 7, 2022, by and between Broadmark Realty Capital Inc. and Jonathan R. Hermes.+*

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10.5	Employment Agreement, dated September 5, 2020, by and between Broadmark Realty Capital Inc. and Nevin Boparai (incorporated by reference to Exhibit 10.1 to Broadmark Realty’s Form 10-Q (File No. 001-39134), filed with the SEC on November 9, 2020).+
10.6	Employment Agreement, dated February 2, 2022, by and between Broadmark Realty Capital Inc. and Brian Ward (incorporated by reference to Exhibit 10.1 to Broadmark Realty’s Form 8-K (File No. 001-39134), filed with the SEC on February 7, 2022).+
10.7	Separation and Release Agreement, dated November 2, 2022, by and between Broadmark Realty Capital Inc. and Brian P. Ward.+*
10.8	Broadmark Realty Capital Inc. 2019 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to Broadmark Realty’s Form 8‑K (File No. 001‑39134), filed with the SEC on November 20, 2019).+
10.9	Form of Indemnification Agreement (incorporated by reference to Exhibit 10.8 to Broadmark Realty’s Form 8‑K (File No. 001‑39134), filed with the SEC on November 20, 2019).
10.10	Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to Broadmark Realty’s Form 8‑K (File No. 001‑39134), filed with the SEC on February 7, 2020).+
10.11	Form of Restricted Stock Unit Award Agreement (Executive Officers) (incorporated by reference to Exhibit 10.1 to Broadmark Realty's Form 10-Q (File No. 001-39134), filed with the SEC on May 10, 2021). +
10.12	Form of Performance Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 to Broadmark Realty's Form 10-Q (File No. 001-39134), filed with the SEC on May 10, 2021).+
10.13	Executive Officer Annual Cash Bonus Plan (incorporated by reference to Exhibit 10.1 to Broadmark Realty’s Form 8-K (File No. 001-39134), filed with the SEC on January 27, 2021).+
10.14	Credit Agreement, dated February 19, 2021, by and among Broadmark Realty Capital Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Broadmark Realty’s Form 8-K (File No. 001-39134), filed with the SEC on February 25, 2021).
10.15	Amendment No. 1 to Credit Agreement, dated November 12, 2021, by and between Broadmark Realty Capital Inc. and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.18 to Broadmark Realty's Form 10-K (File No. 001-39134), filed with the SEC on February 28, 2022).
10.16	Amendment No. 2 to Credit Agreement, dated November 4, 2022, by and between Broadmark Realty Capital Inc. and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Broadmark Realty's Form 8-K (File No. 001-39134), filed with the SEC on November 7, 2022).
10.17	Form of Note Purchase Agreement, dated November 12, 2021, by and between Broadmark Realty Capital Inc. and each of the Purchasers listed therein (incorporated by reference to Exhibit 10.1 to Broadmark Realty’s Form 8-K (File No. 001-39134), filed with the SEC on November 17, 2021).
21.1	List of Subsidiaries.*
22.1	List of Guarantor Subsidiaries of Broadmark Realty Capital Inc. (incorporated by reference to Exhibit 22.1 to Broadmark Realty’s Form 10-K (File No. 001 39134), filed with the SEC on March 1, 2021).
23.1	Consent of Moss Adams LLP.*
31.1	Rule13a‑14(a)/15d‑14(a) Certification of Chief Executive Officer of Broadmark Realty Capital Inc.*
31.2	Rule13a‑14(a)/15d‑14(a) Certification of Chief Financial Officer of Broadmark Realty Capital Inc.*

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32.1	Section 1350 Certification of the Chief Executive Officer of Broadmark Realty Capital Inc.*
32.2	Section 1350 Certification of the Chief Financial Officer of Broadmark Realty Capital Inc.*
101:
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*Exhibits that are filed or furnished herewith.

+ Management contract or compensatory plan, contract or arrangement.

ITEM 16. FORM 10‑K SUMMARY

None.

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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.

	BROADMARK REALTY CAPITAL INC.
Date: March 1, 2023	By:	/s/ Jeffrey B. Pyatt
	Name:	Jeffrey B. Pyatt
	Title:	Interim Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Position	Date
/s/ Jeffrey B. Pyatt	Interim Chief Executive Officer and Chairman of the Board	March 1, 2023
Jeffrey B. Pyatt	(Principal Executive Officer)
/s/ Jonathan R. Hermes	Chief Financial Officer (Principal Financial	March 1, 2023
Jonathan R. Hermes	Officer and Principal Accounting Officer)
/s/ Stephen G. Haggerty	Director	March 1, 2023
Stephen G. Haggerty
/s/ Daniel J. Hirsch	Director	March 1, 2023
Daniel J. Hirsch
/s/ David A. Karp	Director	March 1, 2023
David A. Karp
/s/ Norma J. Lawrence	Director	March 1, 2023
Norma J. Lawrence
/s/ Kevin M. Luebbers	Director	March 1, 2023
Kevin M. Luebbers
/s/ Pinkie D. Mayfield	Director	March 1, 2023
Pinkie D. Mayfield

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EX-4

Exhibit 4.6

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

Broadmark Realty Capital Inc. (“Company,” “we,” “us” and “our”) has two classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): (1) our common stock, par value $0.001 per share (“Common Stock”), and (2) warrants scheduled to expire on November 14, 2024 (“Warrants”).

Common Stock

The following description of the material terms of our Common Stock is qualified by reference to the provisions of our charter (the “Charter”) and Amended and Restated Bylaws (the “Bylaws”), each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit is a part.

General

We have authorized for issuance a total of 600,000,000 shares of stock, consisting of 500,000,000 shares of Common Stock, and 100,000,000 shares of preferred stock, par value $0.001 per share. Our Charter authorizes our Board of Directors (the “Board”), with the approval of a majority of the entire Board and without any action by our stockholders, to amend our Charter to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series. Under Maryland law, stockholders generally are not liable for a corporation’s debts or obligations.

Common Stock

Subject to the preferential rights, if any, of holders of any other class or series of stock (including preferred stock) and to the provisions of our Charter regarding restrictions on ownership and transfer of our stock, holders of our Common Stock have the right to receive ratably any distributions from funds legally available therefor, when, as and if authorized by our Board and declared by us, and are entitled to share ratably in our assets legally available for distribution to the holders of Common Stock in the event of our liquidation, dissolution or winding up of affairs.

There generally are no redemption, sinking fund, conversion, preemptive or appraisal rights with respect to the Common Stock.

Subject to the provisions of our Charter regarding restrictions on ownership and transfer of our stock and except as may otherwise be specified in the terms of any class or series of stock, each outstanding share of Common Stock entitles the holder to one vote on all matters submitted to a vote of our stockholders, including the election of directors and, except as may be provided with respect to any other class or series of stock, the holders of such shares will possess the exclusive voting power.

Power to Reclassify and Issue Stock

Our Board may classify any unissued shares of preferred stock, and reclassify any unissued shares of Common Stock or any previously classified but unissued shares of any preferred stock into other classes or series of stock, including one or more classes or series of stock that have priority over Common Stock with respect to voting rights or distributions or upon liquidation, and authorize us to issue the newly classified shares. Prior to the issuance of shares of each class or series, our Board is required by the Maryland General Corporation Law (the “MGCL”) and our Charter to set, subject to the provisions of our Charter regarding the restrictions on ownership and transfer of our stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each such class or series. These actions can be taken without stockholder approval, unless stockholder approval is required by applicable law, the terms of any other class or series of our stock, or the rules of any stock exchange or automated quotation system on which our stock may be then listed or quoted.

Power to Increase or Decrease Authorized Stock and Issue Additional Shares of Common Stock and Preferred Stock

The power of our Board to increase or decrease the number of authorized shares of stock and to classify or reclassify unissued shares of Common Stock or our preferred stock and thereafter to cause us to issue such shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional classes or series, as well as the additional shares of stock, will be available for future issuance without further action by our stockholders, unless such action is required by applicable law, the terms of any other class or series of stock or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Our Board could authorize us to issue a class or series of stock that could, depending upon the terms of the particular class or series, delay, defer or prevent a transaction or a change in control of us that might involve a premium price for shares of Common Stock owned by our stockholders or otherwise be in their best interests.

Restrictions on Ownership and Transfer

In order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), our shares of Common Stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made). Our Charter contains restrictions on the ownership and transfer of our stock that are intended to assist us in complying with these requirements and qualifying as a REIT, among other reasons. The relevant sections of our Charter provide that, subject to the exceptions described below, no person or entity may actually or beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or in number of shares, whichever is more restrictive) of the outstanding shares of any class or series of our capital stock, excluding any shares of stock that are not treated as outstanding for federal income tax purposes. This restriction is referred to herein as the “ownership limit.” A person or entity that would have acquired actual, beneficial or constructive ownership of our stock but for the application of the ownership limit or any of the other restrictions on ownership and transfer of our stock discussed below is referred to as a “prohibited owner.”

The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% of any class or series of our capital stock (or the acquisition of an interest in an entity that owns, actually or constructively, any class or series of our capital stock) by an individual or entity could, nevertheless, cause that individual or entity, or another individual or entity, to own constructively in excess of 9.8% (in value or in number of shares, whichever is more restrictive) of the outstanding shares of such class or series of our capital stock and thereby violate the ownership limit.

Our Charter provides that our Board, subject to certain limits, upon receipt of a request that complies with the requirements of our Charter and any policy adopted by our Board, may retroactively or prospectively exempt a person from the ownership limit and establish a different limit on ownership for such person.

As a condition of the exception, our Board may require (i) such representations and/or undertakings as it may deem necessary or prudent; and (ii) an opinion of counsel or IRS ruling, in either case in form and substance satisfactory to it, in order to protect, determine or ensure our status as a REIT. Notwithstanding the receipt of any ruling or opinion, our Board may impose such conditions or restrictions as it deems appropriate in connection with such an exception.

Our Board may increase or decrease the ownership limit of any class or series of our capital stock for one or more persons, except that a decreased ownership limit will not be effective for any person whose actual, beneficial or constructive ownership of our stock exceeds the decreased ownership limit at the time of the decrease until the person’s actual, beneficial or constructive ownership of the applicable class or series of our capital stock equals or falls below the decreased ownership limit, although any further acquisition of such class or series of our capital stock (other than by a previously exempted person) will violate the decreased ownership limit. Our Board may not increase or decrease the ownership limit if the new ownership limit would allow five or fewer persons to actually or beneficially own in the aggregate more than 49.9% in value of our outstanding stock or could cause us to be “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause us to fail to qualify as a REIT.

The Charter further prohibits any person from:

● beneficially or constructively owning shares of our capital stock to the extent that such beneficial or constructive ownership would result in us being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of the taxable year);

● transferring shares of our capital stock to the extent that such transfer would result in shares of our capital stock being beneficially owned by fewer than 100 persons (determined under the principles of Section 856(a)(5) of the Code); or

● beneficially or constructively owning or transferring shares of our capital stock if such beneficial or constructive ownership or transfer would otherwise cause us to fail to qualify as a REIT under the Code.

Any attempted transfer of shares of our capital stock or other event which, if effective, would violate any of the restrictions described above will result in the number of shares of our capital stock causing the violation (rounded up to the nearest whole share) to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries, except that any transfer that results in the violation of the restriction relating to shares of our capital stock being beneficially owned by fewer than 100 persons will be void ab initio. In either case, the prohibited owner will not acquire any rights in those shares. The automatic transfer will be deemed to be effective as of the close of business on the business day prior to the date of the purported transfer or other event that results in the transfer to the trust. Shares held in the trust will be issued and outstanding shares. The prohibited owner will not benefit economically from ownership of any shares held in the trust, will have no rights to dividends or other distributions and will have no rights to vote or other rights attributable to the shares held in the trust. The trustee of the trust will have all voting rights and rights to dividends or other distributions with respect to shares held in the trust. These rights will be exercised for the exclusive benefit of the charitable beneficiary. Any dividend or other distribution paid prior to our discovery that shares have been transferred to the trust will be paid by the recipient to the trustee upon demand. Any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or other distribution paid to the trustee will be held in trust for the charitable beneficiary. Subject to Maryland law, effective as of the date the shares are transferred to the trust, the trustee will have the authority (at the trustee’s sole and absolute discretion) (i) to rescind as void any vote cast by the prohibited owner prior to our discovery that the shares have been transferred to the trust and (ii) to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary. However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast the vote.

Within 20 days of receiving notice from us that shares of our stock have been transferred to the trust, the trustee will sell the shares to a person, designated by the trustee, whose ownership of the shares will not violate the above ownership limitations. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited owner and to the charitable beneficiary as follows. The prohibited owner will receive the lesser of (i) the price paid by the prohibited owner for the shares or, if the prohibited owner did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction), the market price (as defined in the Charter) of the shares on the day of the event causing the shares to be held in the trust and (ii) the price per share received by the trustee (net of any commission and other expenses of sale) from the sale or other disposition of the shares. The trustee may reduce the amount payable to the prohibited owner by the amount of dividends or other distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. Any net sale proceeds in excess of the amount payable to the prohibited owner will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares of our stock have been transferred to the trustee, the shares are sold by the prohibited owner, then (i) the shares shall be deemed to have been sold on behalf of the trust and (ii) to the extent that the prohibited owner received an amount for the shares that exceeds the amount he, she or it was entitled to receive, the excess shall be paid to the trustee upon demand.

In addition, shares of our stock held in the trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and (ii) the market price on the date we, or our designee, accepts the offer, which we may reduce by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. We may pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us or our designee, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited owner.

If a transfer to a charitable trust, as described above, would be ineffective for any reason to prevent a violation of the ownership and transfer restrictions, the transfer that would have resulted in a violation will be void ab initio, and the prohibited owner shall acquire no rights in those shares.

Any certificate representing shares of our capital stock, and any notices delivered in lieu of certificates with respect to the issuance or transfer of uncertificated shares, will (i) bear a legend referring to the restrictions described above or (ii) state that we will furnish a full statement about the above restrictions on ownership and transfer to a stockholder on request and without charge.

Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our capital stock that will or may violate any of the foregoing restrictions on transferability and ownership, or any person who would have owned shares of our capital stock that resulted in a transfer of shares to a charitable trust, is required to give written notice immediately to us or, in the case of a proposed or attempted transaction, to give at least 15 days’ prior written notice, and provide us with such other information as we may request in order to determine the effect, if any, of the transfer on our status as a REIT. The foregoing restrictions on transferability and ownership will not apply if our Board determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.

Every beneficial owner of 5% or more (or any lower percentage as required by the Code or the regulations promulgated thereunder) of the outstanding shares of our capital stock, within 30 days after the end of each taxable year, is required to give us written notice stating his, her or its name and address, the number of shares of each class and series of shares of our capital stock that he, she or it beneficially owns and a description of the manner in which the shares are held. Each of these owners must provide us with additional information that we may request in order to determine the effect, if any, of his, her or its beneficial ownership on our status as a REIT and to ensure compliance with the ownership limit. In addition, each stockholder (including the stockholder of record) will, upon demand, be required to provide us with information we may request in order to determine our status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine our compliance.

These ownership limitations could delay, defer or prevent a transaction or a change in control of us that might involve a premium price for shares of Common Stock owned by our stockholders or otherwise be in the best interests of our stockholders.

Transfer Agent

The transfer agent for the Common Stock is American Stock Transfer & Trust Company, LLC.

Warrants

The Warrants registered under Section 12 are each exercisable for one fourth (1/4th) share of the Company’s common stock at an exercise price of $2.875 per one fourth (1/4th) share, with the exercise of a Warrant for less than a full share not permissible, subject to adjustment as discussed below.

The Warrants will expire November 14, 2024, which is the date five years after the completion of our initial business combination (the “Business Combination”), at 5:00 pm., New York City time, or earlier upon redemption or liquidation.

We may call the Warrants for redemption:

● in whole and not in part;

● at a price of $0.01 per Warrant;

● upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each Warrant holder; and

● if, and only if, the reported last sale price of the Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before we send the notice of redemption to the Warrant holders.

If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.

If we issue a notice of redemption of the Warrants, each Warrant holder will be entitled to exercise its Warrant prior to the scheduled redemption date.

If we call the Warrants for redemption as described above, we will have the option to require any holder that wishes to exercise its Warrant to do so on a “cashless basis.” If we take advantage of this option, all holders of Warrants would pay the exercise price by surrendering their Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Common Stock to be received upon exercise of the Warrants, including the “fair market value” in such case. If we require cashless exercise in this manner, we will not receive cash proceeds in connection with the Warrant exercises; however, the number of shares to be issued upon exercise of the Warrants would be reduced and thereby lessen the dilutive effect of a Warrant redemption.

A holder of a Warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such Warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the Warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the shares of Common Stock outstanding immediately after giving effect to such exercise.

If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant will be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering to holders of Common Stock entitling holders to purchase shares of Common Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Common Stock) and (ii) one (1) minus the quotient of (x) the price per share of Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable for Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

In addition, if we, at any time while the Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of Common Stock on account of such shares of Common Stock (or other shares of our capital stock into which the Warrants are convertible), other than (a) as described in the preceding paragraph, (b) regular monthly, quarterly or other periodic cash dividends or cash distributions, or (c) any other cash dividend or distribution required to be paid in order for us to qualify or maintain our status as a REIT within the meaning of the Code, or otherwise avoid the imposition of U.S. federal and state income and excise taxes, so long as we qualify or are seeking to maintain our status as a REIT at the time of such cash dividend or distribution, then the Warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Common Stock in respect of such event.

If the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant will be decreased in proportion to such decrease in outstanding shares of Common Stock.

Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as described above, the Warrant exercise price will be adjusted by multiplying the Warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Common Stock so purchasable immediately thereafter.

In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than those described above or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of ours as an entirety or substantially as an entirety in connection with which we dissolved, the holders of the Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would have received if such holder had exercised their Warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Common Stock in such a transaction is payable in the form of Common Stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the Warrant properly exercises the Warrant within thirty days following public disclosure of such transaction, the Warrant exercise price will be

reduced as specified in the warrant agreement based on the Black-Scholes value (as defined in the warrant agreement) of the Warrant. The purpose of such exercise price reduction is to provide additional value to holders of the Warrants when an extraordinary transaction occurs during the exercise period of the Warrants pursuant to which the holders of the Warrants otherwise do not receive the full potential value of the Warrants.

The Warrants are issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company and us, which was amended in connection with the completion of the Business Combination by the First Amendment and the Second Amendment to the warrant agreement among Continental Stock Transfer & Trust Company, American Stock Transfer & Trust Company, LLC, as successor Warrant agent, and us. You should review a copy of the warrant agreement, the First Amendment and the Second Amendment, which are incorporated by reference as exhibits to the Annual Report on Form 10-K of which this exhibit is a part, for a complete description of the terms and conditions applicable to the Warrants.

Except as the context may otherwise require, references to the warrant agreement herein refer to the warrant agreement, as amended. The warrant agreement provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding Warrants to make any change that adversely affects the interests of the registered holders of Warrants.

The Warrants may be exercised upon surrender of the Warrant certificate on or prior to the expiration date at the offices of the Warrant agent, with the exercise form on the reverse side of the Warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of Warrants being exercised. The Warrant holders do not have the rights or privileges of holders of Common Stock and any voting rights until they exercise their Warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the Warrants, each holder will be entitled to one (1) vote for each share of Common Stock held of record on all matters to be voted on by stockholders.

No fractional shares will be issued upon exercise of the Warrants. If, upon exercise of the Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of Common Stock to be issued to the Warrant holder.

Certain Provisions of the Maryland General Corporation Law and Our Charter and Bylaws

Although the following summary describes certain provisions of Maryland law and the material provisions of our Charter and our Bylaws, it is not a complete description of our Charter and Bylaws. You should review copies of these documents, which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this exhibit is a part.

Our Board of Directors

Our Charter and Bylaws provide that our number of directors may be established, increased or decreased only by our Board, but may not be less than the minimum number required under the MGCL, which is one, or, unless the bylaws are amended, more than fifteen. We have elected by a provision in our Charter to be subject to a provision of Maryland law requiring that, subject to the rights of holders of one or more classes or series of preferred stock, any vacancy may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the full term of the directorship in which such vacancy occurred and until his or her successor is duly elected and qualifies.

Each member of our Board is elected by our stockholders to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Holders of shares of Common Stock will have no right to cumulative voting in the election of directors, and directors will be elected by a majority of the votes cast for each nominee for director (except in contested elections, in which case a plurality of the votes cast will be required for election). Consequently, at each annual meeting of stockholders, the holders of a majority of the shares of Common Stock will be able to elect all of the directors.

Removal of Directors

Our Charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, a director may be removed from office at any time, but only for cause (as defined in the Charter), and then only by the affirmative vote of holders of shares entitled to cast at least two-thirds of all of the votes entitled to be cast generally in the election of directors. This provision, when coupled with the exclusive power of our Board to fill vacant directorships, may preclude stockholders from removing incumbent directors except for cause and by a substantial affirmative vote and from filling the vacancies created by such removal with their own nominees.

Resignation Policy for Directors

Each nominee for director shall be elected by a majority of the votes cast. A majority of the votes cast means the affirmative vote of a majority of the total votes cast “for” and “against” such nominee. Notwithstanding the foregoing, a nominee for director shall be elected by a plurality of the votes cast if the number of nominees exceeds the number of directors to be elected. Our Board has adopted a policy regarding the election of directors in uncontested elections. Pursuant to such policy, in an uncontested election of directors, any nominee who receives a greater number of votes against his or her election than votes for his or her election will, within two weeks following certification of the stockholder vote by us, submit a written resignation offer to our Board. Our Board will consider the resignation offer and, within 60 days following certification by us of the stockholder vote with respect to such election, will make a recommendation to our Board concerning the acceptance or rejection of the resignation offer. Our Board will take formal action on the recommendation no later than 90 days following certification of the stockholder vote by us. We will publicly disclose, in a Current Report on Form 8-K to be filed with the SEC, the decision of our Board. Our Board will also provide an explanation of the process by which its decision has been made and, if applicable, its reason or reasons for rejecting the tendered resignation.

Business Combinations

Under the MGCL, certain “business combinations” (including a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an interested stockholder (i.e., any person (other than the corporation or any subsidiary) who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock after the date on which the corporation had 100 or more beneficial owners of its stock, or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation after the date on which the corporation had 100 or more beneficial owners of its stock) or an affiliate of an interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (2) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, unless, among other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. The board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions it determines.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that the interested stockholder became an interested stockholder. As permitted by the MGCL, our Board has adopted a resolution exempting any business combination between us and any other person from the provisions of this statute, provided that the business combination is first approved by a majority of our directors (including a majority of directors who are not affiliates or associates of such persons). However, our Board may repeal or modify this resolution at any time in the future, in which case the applicable provisions of this statute will become applicable to business combinations between us and interested stockholders.

Control Share Acquisitions

The MGCL provides that holders of “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights with respect to those shares except to the extent approved by the affirmative vote of at least two-thirds of the votes entitled to be cast by stockholders entitled to vote generally in the election of directors, excluding votes cast by (1) the person who makes or proposes to make a control share acquisition, (2) an officer of the corporation or (3) an employee of the corporation who is also a director of the corporation. “Control shares” are voting shares of stock which, if aggregated with all other such shares of stock previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: (1) one-tenth or more but less than one-third, (2) one-third or more but less than a majority or (3) a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses), may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights of control shares are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or, if a meeting of stockholders is held at which the voting rights of such shares is considered and not approved, as of the date of such meeting. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

The control share acquisition statute does not apply to, among other things, (1) shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (2) acquisitions approved or exempted by the charter or the bylaws of the corporation.

Our Bylaws contain a provision exempting from the control share acquisition statute any acquisition by any person of shares of our capital stock. There can be no assurance that such provision will not be amended or eliminated at any time in the future by our Board.

Subtitle 8

Subtitle 8 of Title 3 of the MGCL (“Subtitle 8”) permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect to be subject, by provision in such corporation’s charter or bylaws or a resolution of its board of directors, without stockholder approval, and notwithstanding any contrary provision in such corporation’s charter or bylaws, to any or all of five provisions of the MGCL which provide, respectively, that:

● the corporation’s board of directors will be divided into three classes;

● the affirmative vote of two-thirds of the votes entitled to be cast in the election of directors generally is required to remove a director;

● the number of directors may be fixed only by vote of the directors;

● a vacancy on the board of directors may be filled only by the remaining directors and that directors elected to fill a vacancy will serve for the remainder of the full term of the class of directors in which the vacancy occurred; and

● the request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting is required for the calling of a special meeting of stockholders.

We have elected in our Charter to be subject to the provision of Subtitle 8 providing that vacancies on our Board may be filled only by the remaining directors, even if such remaining directors do not constitute a quorum. We have not elected to be subject to any of the other provisions of Subtitle 8, including the provisions that would permit us to classify our Board without stockholder approval. Moreover, our Charter provides that we may not elect to classify our Board through the provisions of Subtitle 8 without the affirmative vote of a majority of the votes cast on the matter by our stockholders entitled to vote generally in the election of directors. In addition, without having elected to be subject to Subtitle 8, our Charter and Bylaws already (1) require the affirmative vote of holders of shares entitled to cast at least two-thirds of all the votes entitled to be cast generally in the election of directors to remove a director from our Board, (2) vest in our Board the exclusive power to fix the number of directors and (3) require, unless called by the Chairman of our Board, the President, the Chief Executive Officer or our Board, the request of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting to call a special meeting of stockholders. Our Board is not currently classified.

Meetings of Stockholders

Pursuant to our Bylaws, an annual meeting of our stockholders for the purpose of the election of directors and the transaction of any business as may properly be brought before the meeting will be held on a date and at the time and place set by our Board. Each of the directors is elected by our stockholders to serve until the next annual meeting and until his or her successor is duly elected and qualifies under Maryland law. In addition, the Chairman of our Board, the President, the Chief Executive Officer or our Board may call a special meeting of our stockholders. Subject to the provisions of the Bylaws, a special meeting of our stockholders to act on any matter that may properly be considered by them will also be called by our Secretary upon the written request of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting on such matter, accompanied by the information required by our Bylaws. Our Secretary will inform the requesting stockholders of the reasonably estimated cost of preparing and mailing the notice of meeting (including any proxy materials), and the requesting stockholder(s) must pay such estimated cost before our Secretary may prepare and mail the notice of the special meeting.

Amendments to the Charter and the Bylaws

Under the MGCL, a Maryland corporation generally cannot amend its charter unless approved by the affirmative vote of stockholders entitled to cast at least two-thirds of all of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. Except for certain provisions related to the removal of directors and the vote required to amend those provisions (which must be declared advisable by our Board and approved by the affirmative vote of stockholders entitled to cast not less than two-thirds of all of the votes entitled to be cast on the matter), our Charter generally may be amended only if the amendment is declared advisable by our Board and approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. Our Board, with the approval of a majority of our entire Board, and without any action by the stockholders, may also amend our Charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series we are authorized to issue. Our Board may also amend the Charter to change our name or make certain other ministerial changes without stockholder approval.

Our Board has the power to adopt, amend or repeal any provision of our Bylaws and to make new bylaws. Our stockholders may also adopt, amend or repeal any provision of our Bylaws and to make new bylaws by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that any provision of the Bylaws requiring a vote of greater than a majority may be amended, repealed or modified only by a vote satisfying such higher voting requirements.

Extraordinary Transactions

Under the MGCL, a Maryland corporation generally cannot dissolve, merge, convert, transfer all or substantially all of its assets, engage in a statutory share exchange or engage in similar transactions outside the ordinary course of business unless declared advisable by the board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. As permitted by the MGCL, our Charter provides that any of these actions may be approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter.

No Appraisal Rights

Our Charter provides that our stockholders generally will not be entitled to exercise statutory appraisal rights.

Advance Notice of Director Nominations and New Business

Our Bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to our Board and the proposal of other business to be considered by the stockholders at an annual meeting of stockholders may be made only (1) pursuant to a notice of the meeting, (2) by or at the direction of our Board or (3) by a stockholder who was a stockholder of record at the record date for the meeting, at the time of giving of notice and at the time of the meeting (or any postponement or adjournment thereof), who is entitled to vote at the meeting on the election of each individual so nominated or such other business and who has complied with the advance notice procedures set forth in our Bylaws, including a requirement to provide certain information about the stockholder and its affiliates and the nominee or business proposal, as applicable. To be timely, such notice shall be delivered to our Secretary at our principal executive office not earlier than the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting.

With respect to special meetings of stockholders, only the business specified in the notice of the meeting may be brought before the meeting. Nominations of individuals for election to our Board may be made at a special meeting of stockholders at which directors are to be elected only (1) by or at the direction of our Board or (2) provided that the special meeting has been properly called by our Board or a duly authorized officer in accordance with the Bylaws for the purpose of electing directors, by a stockholder who was a stockholder of record at the record date for the meeting, at the time of giving of notice and at the time of the meeting (or any postponement or adjournment thereof), who is entitled to vote at the meeting on the election of each individual so nominated and who has complied with the advance notice provisions set forth in our Bylaws, including a requirement to provide certain information about the stockholder and its affiliates and the nominee.

Anti-Takeover Effect of Certain Provisions of Maryland Law and Our Charter and Bylaws

Our Charter and Bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control of us or other transaction that might involve a premium price for holders of shares of Common Stock owned by our stockholders or otherwise be in the best interests of our stockholders, including:

● supermajority vote and cause requirements for removal of directors;

● the requirement that stockholders holding at least a majority of the outstanding shares of Common Stock must act together to make a written request before our stockholders can require us to call a special meeting of stockholders;

● provisions that vacancies on our Board may be filled only by the remaining directors for the full term of the directorship in which the vacancy occurred;

● the power of our Board, without stockholder approval, to increase or decrease the aggregate number of authorized shares of stock or the number of shares of any class or series of stock;

● the exclusive power of our Board to amend our Bylaws;

● the power of our Board to cause us to issue additional shares of stock of any class or series and to fix the terms of one or more classes or series of stock without stockholder approval;

● the restrictions on ownership and transfer of our capital stock; and

● advance notice requirements for director nominations and stockholder proposals.

Likewise, if the resolution opting out of the business combination provisions of the MGCL is repealed, or the business combination is not approved by our Board, or the provision in our Bylaws opting out of the control share acquisition provisions of the MGCL were rescinded, these provisions of the MGCL could have similar anti-takeover effects.

Exclusive Forum

Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division, will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in the MGCL, (b) any derivative action or proceeding brought on our behalf (other than actions arising under federal securities laws), (c) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders, (d) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our Charter or our Bylaws or (e) any other action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. This provision does not cover claims made by stockholders pursuant to the securities laws of the United States, or any rules or regulations promulgated thereunder.

Limitation of Liability and Indemnification of Directors and Officers

Maryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers to the corporation and its stockholders for money damages, except for liability resulting from (1) actual receipt of an improper benefit or profit in money, property or services or (2) active and deliberate dishonesty that is established by a final judgment and is material to the cause of action. Our Charter contains a provision that eliminates such liability to the maximum extent permitted by Maryland law.

The MGCL requires a corporation (unless its charter provides otherwise, which our Charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service in that capacity. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to or in which they may be made, or threatened to be made, a party or witness by reason of their service in those or other capacities unless it is established that:

● the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty;

● the director or officer actually received an improper personal benefit in money, property or services; or

● in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

However, under the MGCL, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received. Nevertheless, a court may order indemnification in either case if it determines that the director or officer is fairly and reasonably entitled to indemnification, but only for expenses. In addition, the MGCL permits a Maryland corporation to advance reasonable expenses to a director or officer upon its receipt of:

● a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and

● a written undertaking by the director or officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director or officer did not meet the standard of conduct.

Our Charter obligates us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of such a proceeding to:

● any of our present or former director or officer who is made, or threatened to be made, a party to, or witness in, the proceeding by reason of his or her service in that capacity; or

● any individual who, while our director or officer and at our request, serves or has served as a director, officer, trustee, member, manager or partner of another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made, or threatened to be made, a party to, or witness in, the proceeding by reason of his or her service in that capacity.

Our Charter also permits us, with the approval of our Board, to indemnify and advance expenses to any individual who served as our predecessor in any of the capacities described above and to any employee or agent of ours or any of our predecessors.

We have entered into indemnification agreements with each of our directors and executive officers that provide for indemnification to the maximum extent permitted by Maryland law.

REIT Qualification

Our Charter provides that our Board may revoke or otherwise terminate our REIT election, without approval of our stockholders, if it determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.

EX-10

Exhibit 10.2

 

November 7, 2022

Jeffrey B. Pyatt

Dear Jeff:

We are pleased that you have agreed to serve as the Interim Chief Executive Officer of Broadmark Realty Capital Inc. (the “Company”), in addition to your continuing service as the Chairman of the Board of Directors (the “Board”) of the Company. This letter sets forth the key terms and conditions for service as Interim Chief Executive Officer of the Company (“Interim CEO”) and amends the provisions of the February 2, 2022 Letter Agreement between you and the Company (the “Letter Agreement”).

1. Employment. Effective as of the close of business on November 7, 2022 (the “Effective Date”) you shall serve as Interim CEO, and have the duties, responsibilities and authority of the Chief Executive Officer under the Company’s Bylaws, until either you or the Board provides written notice of your termination from such position (the “Employment Period”). You shall report to the Board and shall work on a full-time basis for the Company and shall devote substantially all of your business time, attention, skills and energies to the business and affairs of the Company. During the Employment Period, you shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts with your duties hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. You agree that you shall promptly report any potential conflict in writing to the Board, affirmatively disclosing any outside business opportunity that presents even the appearance of a conflict. The primary place of your employment will be in the Company’s home offices in the Seattle, Washington area, subject to the Company’s policies regarding working from a remote location and subject to reasonable business travel requirements.

2. Base Salary and Benefits. During the Employment Period, your base salary shall be $325,000 per annum (“Base Salary”), which shall be payable in regular installments in accordance with the Company’s general payroll practices. Annual compensation review and increases, if any, will be subject to approval by the Board. During the Employment Period, you will be entitled to paid vacation in accordance with Company policy and you will be eligible to participate in such health care, insurance, retirement, and other employee benefit plans as are generally made available by the Company to its employees, subject to the terms of said plan or plans. The terms of such plans are subject to change or termination at any time, with or without notice, at the discretion of the Company.

3. Amendment of Letter Agreement. During the Employment Period, the Base Salary shall satisfy the cash retainer payable under Section 2 of the Letter Agreement, and you will not be eligible for any additional cash retainers payable to outside directors of the Company. Following the Employment Period, the cash retainer payments under Section 2 of the Letter Agreement shall resume.

4. Equity Awards. Promptly following the Effective Date, the Company shall grant you restricted stock units (“RSUs”) with respect to Company common stock with a value of $325,000 as of the grant date (determined by dividing $325,000 by the closing price per share of Company common stock on the date of grant). The RSUs shall vest fully upon one year of service, subject to your continued employment or continued service on the Board through the vesting date. The RSUs shall be subject to the terms of the Company’s 2019 Stock Incentive Plan (the “Plan”) and the standard form of RSU agreement thereunder. The foregoing grant shall be in lieu of any equity awards granted to outside directors during the Employment Period pursuant to the Company’s outside director compensation program, as may be amended and/or restated from time to time. In addition, any RSUs or performance-based RSUs that you currently hold will continue to vest in accordance with their terms, subject to your continued service on the Board.

5. Expenses. The Company shall reimburse you for all reasonable expenses incurred by you in the course of performing your duties under this letter which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses.

6. Entire Agreement; Governing Law. This letter supersedes and replaces any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company, including Sections 1-4 ofthat certain Employment Agreement (the “Employment Agreement”), dated as of August 9, 2019, by and between you and the Company (f/k/a Trinity Sub, Inc.), and constitutes the complete agreement between you and the Company regarding your appointment to the position of Interim CEO. For the avoidance of doubt, Sections 5-12 of the Employment Agreement continue to be in full force and effect in accordance with the terms of the Employment Agreement. This letter may not be amended or modified, except by an express written agreement of the parties. This letter shall be construed, interpreted and governed by the law of the State of Maryland, without giving effect to principles regarding conflict of laws.

7. Counterparts. This letter may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

8. Headings. Headings in this letter are for reference only and shall not be deemed to have any substantive effect.

[Signature page follows]

Thank you for your continued service to the Company. Please confirm your agreement to the terms specified in this letter by signing below.

Sincerely,

/s/ Stephen G. Haggerty

Name: Stephen G. Haggerty

For the Board of Directors

AGREED AND ACKNOWLEDGED:

/s/ Jeffrey B. Pyatt

Jeffrey B. Pyatt

EX-10

Exhibit 10.3

 

November 7, 2022

Kevin Luebbers

Dear Kevin:

We are pleased that you have agreed to serve as the Interim President of Broadmark Realty Capital Inc. (the “Company”), in addition to your continuing service on the Board of Directors (the “Board”) of the Company. This letter sets forth the key terms and conditions for service as Interim President (“Interim President”).

1. Employment. Effective as of the close of business on November 7, 2022 (the “Effective Date”) you shall serve as Interim President, and have the duties, responsibilities and authority of the President under the Company’s Bylaws, until either you or the Board provides written notice of your termination from such position (the “Employment Period”). You shall report to the Board and shall work on a full-time basis for the Company and shall devote substantially all of your business time, attention, skills and energies to the business and affairs of the Company. During the Employment Period, you shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts with your duties hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. You agree that you shall promptly report any potential conflict in writing to the Board, affirmatively disclosing any outside business opportunity that presents even the appearance of a conflict. The primary place of your employment will be in the Company’s home offices in the Seattle, Washington area, subject to the Company’s policies regarding working from a remote location and subject to reasonable business travel requirements.

2. Base Salary and Benefits. During the Employment Period, your base salary shall be $325,000 per annum (“Base Salary”), which shall be payable in regular installments in accordance with the Company’s general payroll practices. Annual compensation review and increases, if any, will be subject to approval by the Board. During the Employment Period, any cash retainer payable to outside directors of the Company shall be suspended. During the Employment Period, you will be entitled to paid vacation in accordance with Company policy and you will be eligible to participate in such health care, insurance, retirement, and other employee benefit plans as are generally made available by the Company to its employees, subject to the terms of said plan or plans. The terms of such plans are subject to change or termination at any time, with or without notice, at the discretion of the Company.

3. Equity Awards. Promptly following the Effective Date, the Company shall grant you restricted stock units (“RSUs”) with respect to Company common stock with a value of $325,000 as of the grant date (determined by dividing $325,000 by the closing price per share of Company common stock on the date of grant). The RSUs shall vest fully upon one year of service, subject to your continued employment or continued service on the Board through the vesting date. The RSUs shall be subject to the terms of the Company’s 2019 Stock Incentive Plan (the “Plan”) and the standard form of RSU agreement thereunder. The foregoing grant shall be in lieu of any equity awards granted to outside directors during the Employment Period pursuant to the Company’s outside director compensation program, as may be amended and/or restated from time to time. In addition, any RSUs or performance-based RSUs that you currently hold will continue to vest in accordance with their terms, subject to your continued service on the Board.

4. Expenses. The Company shall reimburse you for all reasonable expenses incurred by you in the course of performing your duties under this letter which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses.

5. Entire Agreement; Governing Law. This letter supersedes and replaces any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitutes the complete agreement between you and the Company regarding your appointment to the position of Interim President. This letter may not be amended or modified, except by an express written agreement of the parties. This letter shall be construed, interpreted and governed by the law of the State of Maryland, without giving effect to principles regarding conflict of laws.

6. Counterparts. This letter may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

7. Headings. Headings in this letter are for reference only and shall not be deemed to have any substantive effect.

[Signature page follows]

Thank you for your continued service to the Company. Please confirm your agreement to the terms specified in this letter by signing below.

Sincerely,

/s/ Stephen G. Haggerty

Name: Stephen G. Haggerty

For the Board of Directors

AGREED AND ACKNOWLEDGED:

/s/ Kevin Luebbers

Kevin Luebbers

EX-10

Exhibit 10.4

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”), dated as of November 7, 2022, is entered into by and between Broadmark Realty Capital Inc., a Maryland corporation (the “Company”), and Jonathan Hermes, an individual (“Employee”).

RECITALS

A. The Company desires to employ Employee, and Employee desires to be employed by the Company, as of December 1, 2022 (the “Effective Date”) on the terms and subject to the conditions set forth in this Agreement;

B. Employee shall have access to valuable confidential and proprietary information used in the business of the Company, including financial data, customer data, operational data, trade secrets and other intellectual property that if disclosed to or used by competitors or potential competitors would cause irreparable harm to the Company, and as a result, Employee and the Company desire to provide the Company with adequate protection from the unauthorized disclosure or use of the Company’s confidential and proprietary information; and

C. Effective as of the Effective Date, Employee wishes to accept employment with the Company upon the terms and conditions set forth in this Agreement.

AGREEMENT

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.Employment. The Company shall employ Employee, and Employee accepts employment with the Company, upon the terms and conditions set forth in this Agreement. Employee’s term of employment hereunder shall commence on the Effective Date and continue until December 31, 2025 (the “Expiration Date”); provided, however, that the Company or Employee may terminate this Agreement, the term of Employee’s employment under this Agreement and Employee’s employment at any time as provided in Section 4 hereof. The term of Employee’s employment hereunder is referred to as the “Employment Period.” If the Employment Period ends because the term of this Agreement expires at the Expiration Date, such expiration shall not automatically result in Employee’s termination of employment and Employee shall thereupon remain employed by the Company without an employment agreement unless his employment is otherwise terminated. The primary place of Employee’s employment will be in the Company’s home offices in the Seattle, Washington area, subject to the Company’s policies regarding working from a remote location and subject to reasonable business travel requirements.

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2.Position and Duties.

(a)During the Employment Period, Employee shall serve as the Chief Financial Officer of the Company, and shall have the duties, responsibilities and authority of the Chief Financial Officer under the Company’s Bylaws. Employee acknowledges and agrees he shall perform his duties and responsibilities faithfully and to the best of his abilities in a businesslike manner.

(b)Employee shall report to the Chief Executive Officer and the Board of Directors of the Company (the “Board”), shall work on a full-time basis for the Company and shall devote substantially all of his business time, attention, skills and energies to the business and affairs of the Company. During the Employment Period, Employee shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts with the duties of Employee hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. Employee agrees that he shall promptly report any potential conflict in writing to the Board, affirmatively disclosing any outside business opportunity that presents even the appearance of a conflict.

3.Base Salary and Benefits.

(a)Base Salary. During the Employment Period, Employee’s base salary shall be $375,000 per annum (the “Base Salary”), which shall be payable in regular installments in accordance with the Company’s general payroll practices. Annual compensation review and increases, if any, will be subject to approval by the Board. However, the Base Salary may not be decreased during the Employment Period other than as part of an across-the-board salary reduction for executive officers of the Company.

(b)Annual Bonus. At the conclusion of each fiscal year (commencing with the 2023 fiscal year) during the Employment Period, in addition to the Base Salary, Employee may be eligible to receive an annual cash bonus (the “Annual Bonus”) in an amount to be established by the Board or the Compensation Committee. The amount of the Annual Bonus will be based on achievement of certain annual performance targets and other objectives established by the Board or the Compensation Committee, and the target Annual Bonus, assuming that all performance goals are satisfied at the target level of performance, shall be equal to annual Base Salary for the performance year (which target amount shall be subject to the annual compensation review and increase (but not decrease) by the Board or the Compensation Committee). Any Annual Bonus will be paid promptly following the completion of the annual audit for the calendar year to which it relates, and in all events no later than March 15th of the calendar year following the calendar year to which it relates.

(c)Vacation. During the Employment Period, Employee shall be entitled to paid vacation in accordance with Company policy.

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(d)Expenses. The Company shall reimburse Employee for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses (“Business Expenses”), subject to the Company’s requirements with respect to reporting and documentation of such expenses.

(e)Benefits. Employee will be eligible to participate in such health care, insurance, retirement, and other employee benefit plans as are generally made available by the Company to its employees, subject to the terms of said plan or plans. The terms of such plans are subject to change or termination at any time, with or without notice, at the discretion of the Company.

(f)Clawback. All incentive compensation (including without limitation, any Annual Bonuses or other performance-based compensation) paid or payable to Employee, whether pursuant to this Agreement or otherwise, shall be subject to any clawback, recoupment, or compensation recovery policy adopted by the Board or the Compensation Committee, regardless of whether the policy is adopted after the compensation is paid or payable.

(g)Signing Bonus. Employee shall be paid a one-time cash signing bonus of $100,000 within thirty (30) days following the Effective Date, subject to Employee’s continued employment hereunder through the payment date. If Employee resigns his employment other than for Good Reason or his employment is terminated by the Company for Cause, in either case within one year following the Effective Date, Employee shall promptly repay an amount equal to the product of $100,000 and a fraction, (i) the numerator of which is 365 minus the number of days Employee is employed hereunder following the Effective Date, and (ii) the denominator of which is 365.

(h)Equity Grant. As of the Effective Date, the Company shall grant Employee restricted stock units (“RSUs”) with respect to Company common stock with a value of $375,000 as of the grant date (with the number of RSUs determined by dividing $375,000 by the closing price per share of Company common stock on the date of grant). The RSUs shall vest ratably over three years, one-third per year of service, subject to Employee’s continued service through the applicable vesting date. The RSUs shall be subject to the terms of the Company’s 2019 Stock Incentive Plan (the “Plan”) and the standard form of RSU agreement thereunder. During the Employment Period, Employee will be eligible for future grants of Company equity awards to the extent available pursuant to the Plan, as the Board or the Compensation Committee may approve from time to time, but as of the Effective Date, such grants are anticipated to occur annually and to be generally consistent with the nature and terms (other than amounts) of grants for other executive officers of the Company at the time of such grants, other than for new hires.

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4.Termination. The Employment Period shall terminate as follows:

(a)Termination by Employee without Good Reason. In the event that Employee terminates his employment for any reason other than for Good Reason, Employee must provide the Company with written notice of such resignation. Employee will use his best efforts to provide the Company with such written notice at least sixty (60) days in advance of the effective date of the termination. In the event that at least sixty (60) days’ advance written notice is not provided, Employee agrees to be available as a resource to the Company for the transition of his responsibilities for a number of days equal to sixty (60) minus the number of days’ written notice provided.

(b)Termination by Employee for Good Reason. Employee may terminate his employment hereunder for Good Reason. “Good Reason” means (i) a material and sustained diminution in Employee’s duties under this Agreement or a reduction of Employee’s title, (ii) a material breach by the Company of this Agreement, (iii) relocation of Employee’s principal place of employment to a location that is more than fifty (50) miles from Employee’s place of employment as of the Effective Date, without Employee’s consent, (iv) a reduction in the Base Salary, unless such reduction is part of a temporary, across the board reduction for senior executive officers of the Company that does not last more than twelve (12) months, or (v) a material reduction in the Employee’s target Annual Bonus; provided that any such action shall not constitute Good Reason unless (A) Employee provides written notice to the Company of any such action within thirty (30) days of the date on which such action first occurs and provides the Company with thirty (30) days to remedy such action (the “Cure Period”), (B) the Company fails to remedy such action within the Cure Period, and (C) Employee resigns within thirty (30) days of the expiration of the Cure Period. If the Employment Period expires because the Expiration Date has been reached while Employee remains employed, neither that nor any subsequent resignation of Employee’s employment with the Company shall be considered a termination for Good Reason.

(c)Termination by the Company.

(i)Termination by the Company for Cause. The Company may terminate Employee’s employment for Cause (“Termination for Cause”). “Cause” shall mean any of the following:

(1)Any act of fraud, embezzlement, theft, intentional dishonesty, misrepresentation or breach of fiduciary duty with respect to the Company or its subsidiaries;

(2)Employee’s gross negligence or willful misconduct in the performance of his duties to the Company;

(3)Failure or refusal to follow any reasonable directive of the Board or the officer to whom Employee reports, and if such failure and refusal is curable, if such failure or refusal is not cured within fifteen (15) days after the Company’s written notice to Employee of such failure or refusal;

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(4)Employee’s (1) breach of Sections 6, 7 or 8 of this Agreement; (2) breach of any material written policy of the Company which if curable, is not cured within fifteen (15) days after the Company’s written notice of such breach; or (3) material breach of this Agreement, which if curable, is not cured within fifteen (15) days after the Company’s written notice of such breach; or

(5)Employee’s conviction of, indictment for, or entering of a guilty plea or plea of no contest or nolo contendere with respect to any felony or any crime involving an act of moral turpitude.

The Company may terminate this Agreement pursuant to a Termination for Cause at any time immediately upon notice to Employee.

(ii)Termination by the Company without Cause. The Company may terminate Employee’s employment without Cause (i.e., for any reason other than those described in Sections 4(c)(i) and 4(d) (“Termination without Cause”) at any time upon written notice to Employee. If the Employment Period expires because the Expiration Date has been reached while Employee remains employed, neither that nor any subsequent termination of Employee’s employment by the Company shall be considered a Termination without Cause.

(d)Death and Disability. Employee’s employment shall terminate immediately upon Employee’s death and the Company may terminate this Agreement upon thirty (30) days’ prior written notice to Employee if, by virtue of a physical or mental condition, Employee is unable to perform the essential functions of his work under this Agreement, with or without reasonable accommodation, for a period of one hundred eighty (180) days in any three hundred and sixty-five (365) day period (“Disability”). Any question as to the existence of the Employee’s Disability as to which the Employee and the Company cannot agree shall be determined in writing by a qualified independent physician selected by the Company and reasonable acceptable to the Employee. If the Employee and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Employee shall be final and conclusive for all purposes of this Agreement.

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(e)Obligations upon Termination.

(i)In the event of a resignation by Employee without Good Reason, as described in Section 4(a), all of the parties’ respective rights and obligations hereunder shall immediately terminate upon the expiration of the notice period required under Section 4(a) or upon notice by the Company waiving such notice, except that (A) Employee’s obligations and the Company’s rights under Sections 5 through 12 of this Agreement shall survive such termination and (B) the Company shall pay to Employee only the Base Salary and, in accordance with Company policy, together with any unreimbursed Business Expenses as of the date of termination (collectively, the “Accrued Benefits”).

(ii)In the event of a Termination for Cause, as described in Section 4(c)(i), all of the parties’ respective rights and obligations hereunder shall terminate upon the effective date of such termination, except that (A) Employee’s obligations and the Company’s rights under Sections 5 through 12 of this Agreement shall survive such termination and (B) the Company shall pay to Employee only the Accrued Benefits.

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(iii)In the event of a Termination without Cause, as described in Section 4(c)(ii), or Employee’s resignation for Good Reason pursuant to Section 4(b), all of the parties’ respective rights and obligations hereunder shall terminate upon the effective date of such termination pursuant to Section 4(c)(ii) or Section 4(b) as the case may be, except that (A) Employee’s obligations and the Company’s rights under Sections 5 through 12 of this Agreement shall survive such termination; (B) the Company shall pay Employee the Accrued Benefits; (C) the Company shall pay Employee, as severance, an amount equal to twelve (12) months of Employee’s then-current Base Salary payable in regular installments in accordance with the Company’s general payroll practices; and (D) the Company shall provide a cash payment in the amount equal to the premium for COBRA benefits under the Company’s group health plan for twelve (12) months, which the Employee may at Employee’s option, use to procure continuing benefits, payable in monthly installments on the first pay date for each month (the payments under Clauses (C) and (D) are collectively referred to as the “Severance Payment”). The payment of the Severance Payment under this Section 4(e)(iii) shall be conditioned upon Employee providing an effective execution of a full release of claims against the Company in a form reasonably satisfactory to the Company. The Company shall specify a period, not to exceed forty-five (45) days following termination, during which Employee may review, consider and return such release and may specify a period of up to seven days within which Employee may revoke the release following execution of the same (the “Review and Revocation Period”). The payment of the Severance Payment installments shall commence as of the first payroll period following the release becoming irrevocable and the first payment shall include all installments accrued from the date of termination of employment, provided that if the Review and Revocation Period spans two (2) calendar years, then the Severance Payment installments shall not commence before the first payroll period in the second calendar year and the first payment shall include all installments accrued from the date of termination of employment, regardless of the year in which the release is signed and returned.

(iv)In the event of Employee’s death or Disability, as described in Section 4(d), all of the parties’ respective rights and obligations hereunder shall immediately terminate upon the effective date of such termination pursuant to Section 4(d), except that (A) Employee’s obligations and the Company’s rights under Sections 5 through 12 of this Agreement shall survive such termination; (B) the Company shall pay to Employee the Accrued Benefits, and (C) the Company shall provide a payment in the amount equal to the premium for COBRA benefits under the Company’s group health plan for twelve (12) months, which the Employee or his estate, if applicable, may use to procure continuing benefits, payable in monthly installments on the first pay date for each month.

(v)Except as otherwise required by law (e.g., COBRA) or as specifically provided herein, all of Employee’s rights to salary, severance, fringe benefits and bonuses hereunder (if any) shall cease upon termination for any reason.

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(vi)Upon termination of Employee’s employment hereunder for any reason, Employee shall promptly resign from all other positions with the Company and its affiliates.

5.Acknowledgments.

(a)Employee acknowledges and agrees that as a result and as part of Employee’s employment with the Company, he has received and will receive knowledge and expertise in the Business of the Company that is special and unique. As used in this Agreement, the term “Business” shall mean the business of (i) originating mortgages, lending money or other financing, in each case, for the purpose of acquiring, developing or otherwise financing real estate and related assets or the operation of a real estate investment fund or such other fund, real estate investment trust or other entity that participates in the foregoing described real estate-related activities within the United States, whether through origination activities or in the secondary market (including, without limitation, through the acquisition of real estate related loans or interests therein) or (ii) Fundraising for, on behalf of, or with respect to persons (within the meaning of Section 7701 of the Internal Revenue Code) (“Persons”) engaged in the activities referenced in Clause (i). The Parties agree that a business, venture, entity or company or division of any of the foregoing will be conclusively presumed to be competitive for the purposes of Section 6 of this Agreement if a majority of the annual revenue of the business, venture, entity or company or division of any of the foregoing, measured over either the prior (i) five-year period or any (ii) shorter period of not less than one year (or in the case of a business, venture, entity or company or division of any of the foregoing, such shorter period than one year that it has been conducting business), is derived from the Business, or in case of a new business, venture, entity or company or division of any of the foregoing, a majority of annual revenue of which is reasonably expected to be derived from the Business; provided, however, that will not necessarily be the exclusive basis on which a business, venture, entity or company or division of any of the foregoing may be considered to be competitive for the purposes of Section 6 of this Agreement.

(b)For purposes of this Agreement, the term “Fundraising” means any action of a Person to secure third-party equity investments in a commercial business venture or investment fund, including but not limited to direct and indirect solicitation, marketing and distribution of investment material related to such commercial business venture or investment fund.

(c)For purposes of this Agreement, the term “Confidential Information” means any confidential or proprietary information of the Company, which is not already or does not become generally available to the public (but not through any breach of confidentiality by Employee), whether contained in documents, electronic media or other forms, including, but not limited to, information about materials, procedures, inventions, processes, manufacturing, expertise, customer lists, potential customer lists, customer data, financial data, vendors, marketing plans, and trade secrets. Confidential Information shall also include personal information of the Company’s customers, clients, employees, and vendors (“Personal Information”).

(d)For the purposes of this Agreement, the term “Territory” means any state or country (other than the USA) within which the Company has conducted any aspect of the Business during the then most recent two (2) years of Employee’s employment with the Company.

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(e)Employee acknowledges and agrees that the restrictive covenants and other continuing obligations in this Agreement are reasonable and necessary and that consideration and compensation provided to Employee pursuant to this Agreement constitute good and sufficient consideration for Employee’s agreements and covenants in Sections 6 and 7.

(f)For purposes of Sections 5 through 8, the term “Company” includes both the Company and its direct and indirect subsidiaries and any entities managed by the Company or any of it direct or indirect subsidiaries.

6. Non-Competition and Non-Solicitation.

(a)Employee acknowledges that, in the course of his employment with the Company, he will become familiar with the Company’s and its respective predecessors’ trade secrets and with other Confidential Information concerning the Company and its respective predecessors and that his services have been and will be of special, unique, and extraordinary value to the Company. Employee agrees that, in consideration of his employment as contemplated under this Agreement and all compensation and benefits being provided herein, it is both reasonable and fair as well as necessary for the protection of the Company’s confidential information, good will in the marketplace, and other protectable business interests, that he be subject to certain limitations in his activities in the event of this Agreement’s termination by either party for any reason.

(b)Therefore, in consideration of the foregoing, Employee agrees that during his employment by the Company and for a period of twelve (12) months following termination of employment for any reason, he will not (i) engage in, sell, or provide any products or services, within the Territory, which are the same as or similar to or otherwise competitive with the products and services sold or provided by the Company in connection with the Business; (ii) own, acquire, or control any interest, financial or otherwise, in any entity or business engaged within the Territory in selling or providing the same, similar or otherwise competitive services or products which the Company is selling or providing in connection with the Business; or (iii) act or provide services as an officer, consultant or advisor or loan or otherwise provide financing or financial assistance of any kind, to any third party who is or is attempting, directly or indirectly, to engage in any of the activities listed in Clauses (i) or (ii) above, or Section 6(c)(iii); provided that nothing in this Subsection (b) shall prohibit Employee from owning less than five percent (5%) of the outstanding shares of any public company as long as Employee has no other role with such company.

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(c)In addition, in consideration of the foregoing, Employee agrees that during his employment by the Company and for a period of twelve (12) months following termination of employment for any reason, Employee shall not, directly or indirectly, through another person or entity (i) induce, attempt to induce, or solicit any employee of the Company to terminate his employment with the Company, or in any way interfere with the relationship between the Company, on the one hand, and any employee thereof, on the other hand, (ii) employ, hire, induce, attempt to induce, or solicit the employment of any former employee of the Company until six (6) months after such employee’s employment relationship with the Company has been terminated, (iii) call on, solicit, service, divert or take away or attempt to call on, solicit, service, divert or take away any current or prospective customer, supplier, contractor, designer, licensee, distributor, developer, service provider or other business relation of the Company with respect to products or services related to the Business or induce any of such parties to cease doing business with the Company, or in any way interfere with the relationship between any such current or prospective customer, supplier, contractor, designer, licensee, distributor, developer, service provider or business relation, on the one hand, and the Company, on the other hand, or (iv) make any statement or do any act to impair, prejudice or destroy the goodwill of the Company, to prejudice or impair the relationship or dealing between the Company and any of its customers, suppliers, contractors, designers, licensees, employees, distributors, developers, service providers or other business relations, or to cause existing or potential customers of the Company to make use of the services or purchase the services or products of any competitive business.

6.Nondisclosure and Nonuse of Confidential Information; Nondisparagement.

(a)Employee acknowledges and agrees that he will be afforded access to Confidential Information which could have an adverse effect on the Company and the Business if it is used in an unauthorized manner and/or disclosed. Employee will not, at any time, either during the Employment Period or thereafter, disclose or use any Confidential Information, or permit any person to use, examine or make copies of any Confidential Information, except as may be required in his duties on behalf of the Company or any of its subsidiaries. Employee agrees to take reasonable measures to protect the secrecy of, and avoid the disclosure and the unauthorized use of, any Confidential Information.

(b)Employee shall deliver to the Company at the termination of the Employment Period, or at any time the Company may request, all memoranda, notes, plans, records, reports, files, electronic data, computer tapes, software and other documents and data (and copies thereof) that is Confidential Information or Personal Information or Work Product (each as defined herein) or other information relating to the Business of the Company which Employee may then possess or have under his control. Notwithstanding the foregoing, Employee will have the right to retain and remove all personal property and effects which are owned by Employee.

(c)Employee agrees that he will not view or access any Personal Information except as needed in the course of his job duties and responsibilities for the Company or any of its subsidiaries.

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(d) Employee agrees not to make, or cause any other person to make, any public statement that criticizes or disparages the Company, or its officers, employees, directors or products. Nothing set forth herein shall be interpreted to prohibit Employee from responding publicly to incorrect public statements, making truthful statements when required by law, subpoena, court order, or the like and/or from responding to any inquiry about this Agreement or its underlying facts and circumstances by any regulatory or investigatory organization and/or from making any truthful statements in the course of any litigation.

(e) Pursuant to 18 U.S.C. § 1833(b), Employee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret of the Company that (i) is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to Employee’s attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney and use the trade secret information in the court proceeding, if Employee files any document containing the trade secret under seal and does not disclose the trade secret except under court order. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section.

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7.Inventions and Patents. Employee agrees that all inventions, innovations, improvements, technical information, certifications, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) which relates to the Business, research and development or existing or future products or services and which are conceived, developed or made by Employee (whether or not during usual business hours and whether or not alone or in-conjunction with any other person) in the course of his employment with the Company or relationship with the Company or any predecessor, together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing (collectively referred to herein as “Work Product”) belong to the Company. Employee hereby assigns and agrees to assign to the Company any rights he may have or acquire in such Work Product, whether created before, on, after or prior to the Effective Time. Employee agrees that his copyrightable works prepared for the Company are “supplementary works” or “works for hire,” as defined in Title 17 of the United States Code, and if any such works are deemed not to be a supplementary work or work for hire, then Employee hereby assigns and agrees to assign his entire right, title and interest in the copyright to such works to the Company. Employee will take reasonable steps to promptly disclose such Work Product to the Company and perform all actions reasonably requested by the Company (whether during or after the Employment Period) to establish and confirm such ownership (including the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance to the Company in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product, to the extent the assistance of Employee is reasonably required to prosecute such applications or reissues thereof or to prosecute or defend such interferences. Notwithstanding the foregoing, this Section 8 does not require Employee to assign or offer to assign any of Employee’s rights to an invention for which no equipment, supplies, facilities, or trade secret information of the Company was used and which was developed entirely on Employee's own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by Employee for the Company.

8.Enforcement.

(a)If Employee breaches or threatens to commit a breach of any of the covenants set forth in Sections 6, 7, and 8 above, then the Company shall have the right to seek to have the covenants in Sections 6, 7, and 8 specifically enforced against Employee, including temporary restraining orders and injunctions by any court of competent jurisdiction, in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security), it being agreed by Employee that any breach or threatened breach by Employee of Sections 6, 7, and 8 would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. The prevailing party is entitled to its attorneys’ fees and costs incurred in relation to any action addressing Sections 6, 7, and 8 of this Agreement. In addition, the Company shall not be required to post any bond or other surety as a condition to the issuance of any temporary restraining order or injunction, and Employee irrevocably waives any such requirement of any statute or applicable law.

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(b)If, during the enforcement of any or all of the covenants and provisions set forth in Sections 6, 7, and 8 above, any court of competent jurisdiction enters a final judgment that declares that the duration, scope, or area restrictions stated therein are unreasonable under circumstances then existing, are invalid, or are otherwise unenforceable, then the parties hereto agree that the maximum enforceable duration, scope, or area reasonable under such circumstances shall be substituted for the stated duration, scope, or area, and that the court making the determination of invalidity or unenforceability shall have the power to revise the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes the closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified to cover the maximum duration, scope, or area permitted by law.

(c)If any of the provisions of Sections 6, 7, and 8 are violated, then the time limitations set forth in those sections shall be extended for a period of time equal to the period of time during which such breach occurs, and, in the event the Company is required to seek relief from such breach before any court, board or other tribunal, then the time limitation shall be extended for a period of time equal to the pendency of such proceedings, including all appeals.

(d)The provisions of Sections 5 through 12 shall survive any termination of Employee’s employment and termination of this Agreement; provided, however, if the Employment Period expires because the Expiration Date has been reached while Employee remains employed and the Company refuses to extend the Employment Period under this Agreement or another employment agreement with material terms (other than the length of the term) as favorable to Employee as in this Agreement, then Employee’s obligations under Section 6 shall expire as of the Expiration Date.

9.Representations and Warranties. Employee hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Employee is a party or any judgment, order or decree to which Employee is subject, (b) Employee is not and will not be a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any other person or entity that is inconsistent with the provisions of this Agreement and (c) this Agreement is a valid and binding obligation of Employee.

10.Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile or e-mail or (b) on the first business day following the date of dispatch if delivered utilizing an overnight delivery service or (c) on the date of receipt if mailed. All notices hereunder shall be delivered to the addresses set forth below as follows:

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If to Employee:

The last address on file with the Company

If to the Company:

Broadmark Realty Capital Inc.

1420 Fifth Ave, Suite 2000

Seattle, WA 98101

Facsimile: 206-623-2213

Attention: Chief Legal Officer

with a copy to:

Bryan Cave Leighton Paisner LLP

1201 W Peachtree St NW

14th Floor

Atlanta, GA 30309

Facsimile: 404-572-6999

Attention: Eliot Robinson

or to such other address as the parties hereto may designate in writing to the other in accordance with this Section 11. Any party may change the address to which notices are to be sent by giving written notice of such change of address to the other parties in the manner above provided for giving notice.

11.General Provisions.

(a)Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

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(b)Complete Agreement. This Agreement represents the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes and cancels all other contracts, agreements, representations, and understandings between the parties or their affiliates, whether written or oral, expressed or implied, including, but not limited to, the parties’ October 2022 offer letter. This Agreement shall bind and inure to the benefit of each party, their parent companies, subsidiaries and affiliates, and each of their respective officers, directors, shareholders, investors, business associates, owners, partners, employees, representatives, agents, contractors and assigns. The terms of this Agreement are the result of negotiations in which each party had the opportunity to review and revise any term herein. Consequently, this Agreement shall not be construed for or against either party as a result of the manner in which it was drafted.

(c)Successors and Assigns. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of Employee and the Company and its respective successors, permitted assigns, personal representatives, heirs and estates, as the case may be; provided, however, that the rights and obligations of Employee under this Agreement shall not be assigned without the prior written consent of the Company and the Company may assign the rights and obligations of this Agreement to any affiliate of the Company or any successor or permitted assign of the Company’s business or assets, and such assignment by the Company will not constitute a termination under Section 4.

(d)Governing Law. THIS AGREEMENT, AND ALL CLAIMS, DISPUTES AND CONTROVERSIES RELATED HERETO OR ARISING HEREFROM, SHALL BE GOVERNED BY, AND CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. NO DEFENSE, COUNTERCLAIM OR RIGHT OF SETOFF GIVEN OR ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON. THE PROVISIONS OF THIS AGREEMENT SHALL BE ENFORCEABLE NOTWITHSTANDING THE EXISTENCE OF ANY CLAIM OR CAUSE OF ACTION OF EMPLOYEE AGAINST COMPANY, WHETHER PREDICATED ON THIS AGREEMENT OR OTHERWISE.

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(e)Jurisdiction; Waiver of Jury Trial. EMPLOYEE HEREBY VOLUNTARILY, UNCONDITIONALLY AND IRREVOCABLY AGREES AND SUBMITS TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE OF WASHINGTON AND APPELLATE COURTS FROM ANY THEREOF FOR ANY CLAIM, ACTION OR DISPUTE ARISING OUT OF OR RELATED TO THIS AGREEMENT AND WAIVES AND AGREES NOT TO ASSERT ANY DEFENSE THAT ANY SUCH COURT LACKS JURISDICTION, VENUE IS IMPROPER, OR THE FORUM IS INCONVENIENT. EMPLOYEE AND COMPANY HEREBY IRREVOCABLY AND KNOWINGLY WAIVE (TO THE FULLEST EXTENT PERMITTED BY LAW) ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY COUNTERCLAIM) ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO, INCLUDING, WITHOUT LIMITATION, ANY ACTION OR PROCEEDING: (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT. COMPANY AND EMPLOYEE AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY.

(f)Withholdings. All payments hereunder are subject to withholding for applicable federal, state and local income and employment taxes and any other deductions authorized by Employee or required by law.

(g)Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Board or the Compensation Committee and Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof.

(h)Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

(i)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

(j)Business Days. If any time period for giving notice or taking action hereunder expires on a day which is not a business day in the State of Washington, the time period for giving notice or taking action shall be automatically extended to the immediately following business day.

(k)Survival of Representations, Warranties and Agreements. All representations, warranties and agreements contained herein shall survive the termination of this Agreement. For the avoidance of doubt, Employee’s obligations under Sections 6 through 8 hereof shall survive termination of this Agreement for any reason (including, without limitation, upon nonrenewal of the agreement by either party).

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(l)Section 409A. To the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Internal Revenue Code of 1986, as amended, and the Department of Treasury regulations and other interpretive guidelines issued thereunder (collectively, “Section 409A”). All payments under this Agreement are intended to be exempt from Section 409A to the maximum extent possible, and to the extent they are not exempt, they are intended to be compliant with Section 409A, and all provisions of this Agreement shall be construed consistent with that intent. Notwithstanding any provision to the contrary in this Agreement: (i) to the extent necessary to comply with the exemption from Section 409A under Treasury Regulations Section 1.409A-1(b)(9) or to comply with Section 409A, amounts that are payable in reference to Employee’s termination of employment shall be deemed to be payable in reference to “separation from service” within the meaning of Treasury Regulations Section 1.409A-1(h); (ii) if, on the date on which Employee incurs a separation from service, Employee is a “specified employee” as defined in Section 409A, any amount that constitutes deferred compensation and that becomes payable by reason of such separation from service (including any amount described in Clause (i)) shall be deferred until the earlier of the first day of the seventh month following the month that includes the separation from service or Employee’s death; (iii) for purposes of Section 409A, Employee’s right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments; and (iv) to the extent that any reimbursement of expenses or in-kind benefits constitutes “deferred compensation” under Section 409A, such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred. The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year. While the Company intends that no payment under this Agreement shall be subject to tax under Code Section 409A, the Company provides no guarantee of tax consequences to Employee and Employee shall be responsible for his own taxes.

(m)Nouns and Pronouns. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa.

(n)Construction. Where specific language (such as the word “including”) is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party hereto.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.

BROADMARK REALTY CAPITAL INC.

_/s/ Nevin Boparai________________

Name: Nevin Boparai

Title: Chief Legal Officer

JONATHAN HERMES

_/s/ Jonathan Hermes_______________

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EX-10

Exhibit 10.7

SEPARATION AND RELEASE AGREEMENT

This SEPARATION AND RELEASE Agreement (this “SeparationAgreement”) is made and entered into this 2nd day of November, 2022, by and between Broadmark Realty Capital Inc. (“Company”), a Maryland corporation, and Brian Ward (“Executive”).

WHEREAS, the Company and the Executive previously entered into an Employment Agreement dated as of February 2, 2022, pursuant to which the Executive provides services as the Chief Executive Officer of the Company (the “Employment Agreement”);

WHEREAS, the Company and the Executive have mutually agreed to terminate Executive’s employment relationship with the Company effective as of the close of business on November 7, 2022;

WHEREAS, the Company and the Executive desire to enter into an agreement that will provide for the release of any and all claims arising on or before the Separation Date that relate to Executive’s employment with Company, Executive’s separation of employment with the Company, and any and all claims Executive may have or has had against the Company, its affiliated companies, and their employees and agents, successors and assigns, in general; and

WHEREAS, any terms used but not defined in this Separation Agreement shall have the meanings ascribed to them in the Employment Agreement.

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

1.Separation. As of the close of business in November 7, 2022 (the “Separation Date”), the Executive will no longer be an employee, agent, or representative of the Company. Effective as of the Separation Date, Executive shall have resigned from all his other positions with the Company and its affiliates, including the Board of Directors and any operating committees

2.Consideration. In consideration of signing, and not revoking, this Separation Agreement, including the Releases provided for in Paragraph 4, in full settlement of any compensation and benefits to which Executive would otherwise be entitled, and in exchange for the promises, covenants, releases, and waivers set forth herein, the Company will provide Executive with payments and benefits described below (the “Severance Benefits”).

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(a)Continued Pay and Benefits; Cooperation. The Company will continue to pay Executive his full compensation and benefits to which he has elected as of the Effective Date, through November 30, 2022 (the “Salary Continuation Period”). As consideration for this salary continuation, Executive agrees that he will remain reasonably available to the Company as needed to assist in the smooth transition of Executive’s duties to one or more other employees or future employees of the Company, without additional compensation or remuneration, and to assist in the defense of the Company’s interests in pending or threatened litigation and any other administrative and regulatory proceedings which currently exist or which may arise in the future and involve the conduct of the Company’s business activities during the period of Executive’s employment with the Company. Executive’s duties during this Salary Continuation Period will include, without limitation, cooperation related to completing the Company’s third quarter 10-Q filing, completing the CEO certification(s) attendant to the 10-Q filing, and conducting sign-off conversations with Moss Adams. Executive’s obligations with respect to transition duties under this Paragraph shall terminate at the end of the Salary Continuation Period; however, Executive’s obligations under this Paragraph with respect to the defense of the Company’s interests shall continue indefinitely.

(b)Severance Payment. The Severance Payment set forth in Section 4(e)(iii) of the Employment Agreement shall commence at the end of the Salary Continuation Period. The first Severance Payment installment shall occur as of the first payroll period following the Separation Agreement becoming irrevocable and the first payment shall include any installments accrued from November 30, 2022. Company may, not earlier than January 1, 2023, elect to accelerate and pay in lump-sum all amounts remaining due to Employee pursuant to Section 4(e)(iii) of the Employment Agreement.

(c)Release of Covenant Not to Compete. Company agrees to release Executive, as of the Separation Date, from any and all obligations contained in Paragraph 6(b) of the Employment Agreement. The remaining provisions of Paragraph 6, as well as Paragraphs 7, 8, and 9, of the Employment Agreement, which were intended to survive Executive’s separation from the Company, shall remain in full force and effect.

3.Valuable Exchange. Executive acknowledges and agrees that the consideration provided in Paragraph 2 herein is in full discharge of any and all liabilities and obligations of the Company to the Executive as of the Separation Date and exceed any payment, benefit, or other thing of value to which Executive might otherwise be entitled.

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4.Release of Claims.

(a)In exchange for the consideration set forth in Paragraph 2, which Executive acknowledges is fair and sufficient, Executive hereby releases any and all claims that Executive had, has, or might have against the Company and all of its direct and indirect stockholders, subsidiaries, divisions, affiliates, successors, assigns, officers, directors, employees, insurers, funds, agents, investors, and representatives (collectively “Releasees”), from liability for any and all claims or damages that Executive had, has, or may have against any of the Releasees at any time prior to and including the Separation Date, whether known or unknown to Executive, including but not limited to: (i) any and all claims or rights arising out of, or which might be considered to arise out of or to be connected in any way with, Executive’s relationship with the Company, or the termination of Executive’s relationship with the Company; (ii) any claims under any contracts, agreements, or understandings Executive may have with any of the Releasees, written or oral, at any time prior to the date hereof; and (iii) any claims or causes of action arising under any federal, state, or local law, rule, or ordinance, tort, express or implied contract, public policy, or any other obligation, including without limitation any claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Older Workers Benefit Protection Act, the Employee Retirement Income Security Act of 1974, the Vietnam Era Veterans Readjustment Act of 1974, the Immigration Reform and Control Act of 1974, the Labor Management Relations Act, the National Labor Relations Act, the Occupational Safety and Health Act, the Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment Rights Act, the Worker Adjustment and Retraining Notification Act, the Sarbanes-Oxley Act of 2002, the Internal Revenue Code of 1986, the Washington Minimum Wage Requirements and Labor Standards Act, Title 49 of the Revised Code of Washington, the Washington Equal Pay Opportunity Act (EPOA), the Washington Industrial Welfare Act (IWA), and the Washington Fair Chance Act (FCA), the Washington Law Against Discrimination (WLAD), the Washington Family Leave Act (FLA), and the Washington Leave Law all as amended, and/or any other federal, state, or local labor laws, wage and hour laws, employee relations, and/or fair employment practices laws, any public policy, including whistleblower protections, any claim for misrepresentation, defamation, or invasion of privacy, any claim for compensation, wages, commissions, bonuses, royalties, stock options, deferred compensation, other monetary or equitable relief, vacation, personal or sick time, other fringe benefits, attorneys’ fees, or any tangible or intangible property of Executive’s that remains with the Company, and any other applicable laws, regulations, and rules, whether arising under any contract (express or implied), agreement, statute, regulation, ordinance, common law, public policy or any other source. Executive specifically intends this release to be the broadest possible release permitted under law.

(b)Executive acknowledges and agrees that he is releasing both known and unknown claims and waives the benefits of any statute purporting to prevent him from releasing unknown claims, including, but not limited to protection of Cal. Civ. Code Section 1542, which states:

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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

(c)Notwithstanding the foregoing, Executive shall not be deemed to have released: (a) any rights or obligations undertaken or received within this Separation Agreement or claims Executive may have arising from or related to a breach of this Separation Agreement by the Company; (b) any claims to indemnification and defense to which Executive may be entitled under the Company’s certificate of incorporation, bylaws, indemnification agreements, directors and officers insurance policies or applicable law with respect to the period of Executive’s employment; (c) any claims or rights which cannot be waived by law, including Executive’s right to workers compensation; and (d) any vested benefits under any employee benefit pension plan.

(d)In exchange for the consideration set forth in Paragraph 2, which Executive acknowledges is fair and sufficient, Executive hereby releases any and all claims that Executive had, has, or might have against the Releasees, whether known or unknown, from the beginning of time through the date of the Executive’s execution of this Separation Agreement arising under the Age Discrimination in Employment Act, as amended, and its implementing regulations. By signing this Separation Agreement, the Executive hereby acknowledges and confirms that:

(1)The Executive has read this Separation Agreement in its entirety and understands all of its terms;

(2)The Executive has been advised in writing to consult an attorney of the Executive’s choosing before signing this Separation Agreement;

(3)The Executive knowingly, freely, and voluntarily agrees to all of the terms and conditions set out in this Separation Agreement including, without limitation, the releases and covenants contained in it;

(4)The Executive was given at least 21 days to consider the terms of this Separation Agreement and consult with an attorney of the Executive’s choice, although the Executive may sign sooner if desired and changes to this Separation Agreement, whether material or immaterial, do not restart the running of the 21-day period;

(5)The Executive understands that the Executive has 7 days after signing this Separation Agreement to revoke the release in this Paragraph 6(B) by delivering notice of revocation before the end of the 7-day period to:

Broadmark Realty Capital Inc.

1420 Fifth Ave. Suite 2000

Seattle, WA 98101

Email: Nevin@broadmark.com

ATTN: Nevin Boparai, Chief Legal Officer

Page 4 of NUMPAGES 7

(6)The Executive understands that the release contained in this Paragraph 4(B) does not apply to rights and claims that may arise after the Executive signs this Separation Agreement.

5.No Claims Pending. Executive represents that he has not filed or caused to be filed any lawsuit, complaint, or charge against any of the Releasees in any court, any municipal, state or federal agency, or any other tribunal. Executive agrees that he will not, to the fullest extent permitted by law, sue or file a complaint, grievance or demand for arbitration in any forum pursuing any claim released under this Separation Agreement; assist or otherwise participate in any claim, arbitration, suit, action, investigation, or other proceeding of any claim released hereunder; or accept any monetary or other recovery in connection with any charge, complaint, grievance, demand, or other action brought by any other person or entity related to any claim released hereunder. Executive is not waiving or releasing Executive’s right to file a charge with, or participate in an investigation by, the Equal Employment Opportunity Commission or any other federal or state agency. Executive is, however, waiving his right to recover any money in connection with such a charge or investigation, whether such charge is filed by Executive or someone else. Executive further represents and warrants that he has not assigned or conveyed to any other person or entity any part of or interest in the Severance Benefits or in any of the claims released in Paragraph 4 of this Separation Agreement. Executive further expressly waives any claim to any monetary or other damages or any other form of recovery in connection with any proceeding that violates Paragraph 4 and/or 5 of this Separation Agreement.

6.No Additional Compensation Due. Executive acknowledges and agrees that none of the Releasees owes Executive any wages, commissions, bonuses, sick pay, personal leave pay, severance pay, vacation pay, or other compensation or payments, or continued coverage under any medical or other benefit policy or plan, qualified or non-qualified retirement benefits or forms of remuneration of any kind or nature, other than the Severance Benefits specifically provided in Paragraph 2 above.

Page 5 of NUMPAGES 7

7.Section 409A. This Separation Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Internal Revenue Code of 1986, as amended, and the Department of Treasury regulations and other interpretive guidelines issued thereunder (collectively, “Section 409A”). All payments under this Separation Agreement are intended to be exempt from Section 409A to the maximum extent possible, including by reason of the exemptions provided in Treasury Regulations Sections 1.409A-1(b)(4) and 1.409A-1(b)(9); to the extent they are not exempt, they are intended to be compliant with Section 409A, and all provisions of this Separation Agreement shall be construed consistent with that intent. The Parties acknowledge and agree that Executive’s termination of employment shall constitute an involuntary “separation from service” under Treas. Reg. 1.409A-1(n)(1). Notwithstanding the foregoing, the Company does not warrant or otherwise assure that the payments and benefits provided under this Separation Agreement will be considered by the federal Internal Revenue Service (“IRS”) or other appropriate governmental authorities to be exempt from the application of the requirements of Section 409A, and a finding by the IRS or other appropriate governmental authority that the payments and benefits (or any of them) provided under this Separation Agreement are not exempt, either in whole or in part, from the application of the requirements of Section 409A shall be no grounds for the Executive to seek or obtain any form of relief against the Company or rescission or reformation of this Separation Agreement, and Executive shall be solely responsible for any taxes or penalties under Section 409A that may apply to his payments and benefits described in this Separation Agreement.

8.Miscellaneous.

(a)This Separation Agreement shall be governed by and construed in accordance with the laws of the State of Washington, without giving effect to the conflict of law principles thereof. Any action or proceeding by either of the parties to enforce this Separation Agreement shall be brought in any state or federal court located in the State of Washington. The parties hereby irrevocably submit to the non-exclusive jurisdiction of these courts and waive the defense of inconvenient forum to the maintenance of any action or proceeding in such venue.

(b)This Separation Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements, written and oral, with respect thereto including the Employment Agreement; provided, however, the parties agree that Sections 5, 7 through 12 of the Employment Agreement survive. No change, amendment, or modification of any provision of this Separation Agreement shall be valid unless set forth in a written instrument signed by both parties.

(c)This Separation Agreement may be executed in any number of counterparts, each of which shall be deemed an original and together which shall constitute one and the same instrument.

(d)Each provision of this Separation Agreement shall be considered severable and if, for any reason, any provision hereof is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation of any court or agency having valid jurisdiction, such invalid provisions shall be deemed not to be a part of this Separation Agreement, and the remaining provisions shall continue to be given full force and effect and bind the parties hereto.

Page 6 of NUMPAGES 7

(e)The failure of either party to exercise any right or remedy provided for herein shall not be deemed a waiver of any right or remedy hereunder.

IN WITNESS WHEREOF, the parties hereto have executed this Separation Agreement on the dates set forth below.

Company:
BROADMARK REALTY CAPITAL INC.
By:	/s/ Nevin Boparai
Name: Nevin Boparai
Title: Chief Legal Officer
Executive:
/s/ Brian Ward
Name: Brian Ward

Page 7 of NUMPAGES 7

EX-21

Exhibit 21.1

SUBSIDIARIES OF BROADMARK REALTY CAPITAL INC.

Subsidiary	Jurisdiction of Incorporation or Formation
BRMK Lending, LLC	Delaware
BRMK Management, Corp.	Delaware
Broadmark Private REIT Management, LLC	Delaware
Cataldo Square, LLC	Washington
PBRELF Peak, LLC	Washington
BRMK Jefferson, LLC	Colorado
BRMK Wasatch Properties LLC	Washington
BRMK Dayton Townhomes LLC	Colorado
BRMK Roth Park Building B LLC	Colorado
BRMK Echo Lake LLC	Washington
BRMK Harrison, LLC	Colorado
BRMK Priest Point, LLC	Washington
BRMK Bellaire LLC	Texas
BRMK Bellaire II LLC	Texas
BRMK World Resorts LLC	Washington
BRMK Boerne Ranch LLC	Washington
BRMK Cedar Corners LLC	Washington
BRMK Tacony St LLC	Washington
BRMK Blue Sky LLC	Washington
BRMK Akard LLC BRMK Sage Creek LLC BRMK 411 Sam Houston, LLC	Washington Washington Texas
BRMK Dakin LLC BRMK Blueprint LLC BRMK Grove LLC	Colorado Colorado Washington

EX-23

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-8, No. 333-236197, Form S-3, No. 333-251075 and Form S-3, No. 333-235402) of Broadmark Realty Capital Inc. (the “Company”) as of December 31, 2022 and 2021, and for each of the three years in the period ended December 31, 2022, and the effectiveness of internal control over financial reporting as of December 31, 2022, appearing in this Annual Report on Form 10-K of Broadmark Realty Capital Inc. for the year ended December 31, 2022.

/s/ Moss Adams LLP

Everett, Washington

March 1, 2023

EX-31

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Certification

I, Jeffrey B. Pyatt, certify that:

1.I have reviewed this Annual Report on Form 10-K of Broadmark Realty Capital Inc.;

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 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 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: March 1, 2023

/s/ Jeffrey B. Pyatt

Jeffrey B. Pyatt

Interim Chief Executive Officer

EX-31

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER

Certifications

I, Jonathan R. Hermes, certify that:

1.I have reviewed this Annual Report on Form 10-K of Broadmark Realty Capital Inc.;

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 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 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: March 1, 2023

/s/ Jonathan R. Hermes

Jonathan R. Hermes

Chief Financial Officer

EX-32

Exhibit 32.1

SECTION 1350 CERTIFICATION

OF THE CHIEF EXECUTIVE OFFICER

I, Jeffrey B. Pyatt, Interim Chief Executive Officer of Broadmark Realty Capital Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(1)the Annual Report on Form 10-K of the Company for the year ended December 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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: March 1, 2023

/s/	Jeffrey B. Pyatt
	Jeffrey B. Pyatt
	Interim Chief Executive Officer

EX-32

Exhibit 32.2

SECTION 1350 CERTIFICATION

OF THE CHIEF FINANCIAL OFFICER

I, Jonathan R. Hermes, Chief Financial Officer of Broadmark Realty Capital Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:

(1)the Annual Report on Form 10-K of the Company for the year ended December 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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: March 1, 2023

/s/	Jonathan R. Hermes
	Jonathan R. Hermes
	Chief Financial Officer

XML

Document and Entity Information - USD ($)
$ in Billions

12 Months Ended

Dec. 31, 2022

Feb. 22, 2023

Jun. 30, 2022

Document Information [Line Items]

Entity Registrant Name

Broadmark Realty Capital Inc.

Entity Central Index Key

0001784797

Document Type

10-K

Document Annual Report

true

Document Transition Report

false

Document Period End Date

Dec. 31, 2022

Securities Act File Number

001-39134

Entity Incorporation, State or Country Code

MD

Entity Tax Identification Number

84-2620891

Entity Address, Address Line One

1420 Fifth Avenue, Suite 2000

Entity Address, City or Town

Seattle

Entity Address, State or Province

WA

Entity Address, Postal Zip Code

98101

City Area Code

206

Local Phone Number

971-0800

Current Fiscal Year End Date

--12-31

Entity Current Reporting Status

Yes

Entity Interactive Data Current

Yes

Entity Filer Category

Large Accelerated Filer

Entity Small Business

false

Entity Well-known Seasoned Issuer

Yes

Entity Voluntary Filers

No

Entity Emerging Growth Company

false

ICFR Auditor Attestation Flag

true

Entity Shell Company

false

Entity Public Float

$ 0.9

Entity Common Stock, Shares Outstanding

131,749,957

Document Fiscal Year Focus

2022

Document Fiscal Period Focus

FY

Amendment Flag

false

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement relating to its 2023 annual meeting of shareholders (the “2023 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2023 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Auditor Name

Moss Adams LLP

Auditor Location

Everett, Washington

Auditor Firm ID

659

Common Stock [Member]

Document Information [Line Items]

Title of 12(b) Security

Common Stock

Trading Symbol

BRMK

Security Exchange Name

NYSE

Warrant

Document Information [Line Items]

Title of 12(b) Security

Warrants

Trading Symbol

BRMK WS

Security Exchange Name

NYSEAMER

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Assets
Cash and cash equivalents	$ 54,964	$ 132,889
Mortgage notes receivable, net	881,950	901,350
Interest and fees receivable, net	14,775	17,526
Investment in real property held for sale, net	24,516	52,531
Investment in real property held for use, net	63,382	15,536
Right-of-use assets	5,609	6,016
Goodwill	0	136,965
Other assets	6,311	8,342
Total assets	1,051,507	1,271,155
Liabilities and stockholders' equity
Senior unsecured notes, net	97,789	97,223
Dividends payable	4,654	9,291
Accounts payable and accrued liabilities	13,489	8,180
Lease liabilities	7,522	7,993
Total liabilities	123,454	122,687
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding at December 31, 2022 and December 31, 2021	0	0
Common stock, $0.001 par value, 500,000,000 shares authorized, 131,645,145 and 132,716,338 issued and outstanding at December 31, 2022 and December 31, 2021, respectively	131	132
Additional paid in capital	1,215,229	1,216,957
Accumulated deficit	(287,307)	(68,621)
Total stockholders' equity	928,053	1,148,468
Total liabilities and stockholders' equity	$ 1,051,507	$ 1,271,155

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Preferred stock par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock shares authorized (in shares)	100,000,000	100,000,000
Preferred stock shares issued (in shares)	0	0
Preferred stock shares outstanding (in shares)	0	0
Common stock par value (in dollars per share)	$ 0.001	$ 0.001
Common stock shares authorized (in shares)	500,000,000	500,000,000
Common stock shares issued (in shares)	131,645,145	132,716,338
Common stock shares outstanding (in shares)	131,645,145	132,716,338

XML

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Revenues:
Total revenues	$ 108,877	$ 120,544	$ 122,358
Revenues	106,078	120,544	122,358
Real property revenue from operations	2,799	0	0
Expenses:
Compensation and employee benefits	16,935	15,093	15,646
General and administrative	13,300	11,518	15,083
Real property operating expenses and depreciation	6,365	108	168
Interest expense	8,638	3,320	0
Total expenses	45,238	30,039	30,897
Impairment:
Provision for credit losses, net	38,266	6,179	6,722
Goodwill Impairment	136,965	0	0
Total impairment	175,231	6,179	6,722
Other (expense) income:
Change in fair value of warrant liabilities	1,813	(1,838)	5,492
Gain on sale of real property	984	0	0
Impairment on real property	(7,596)	0	0
Total other (expense) income	(4,799)	(1,838)	5,492
(Loss) income before provision for income taxes	(116,391)	82,488	90,231
Income tax provision	0	0	0
Net (loss) income	$ (116,391)	$ 82,488	$ 90,231
Earnings per common share:
Basic	$ (0.88)	$ 0.62	$ 0.68
Diluted	$ (0.88)	$ 0.62	$ 0.68
Weighted-average shares of common stock outstanding, basic and diluted
Basic	132,841,196	132,579,289	132,209,495
Diluted	132,841,196	132,666,502	132,261,113
Interest Income [Member]
Revenues:
Revenues	$ 83,410	$ 89,957	$ 93,869
Fee Income [Member]
Revenues:
Revenues	$ 22,668	$ 30,587	$ 28,489

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment [Member]	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings (Accumulated Deficit) [Member]	Retained Earnings (Accumulated Deficit) [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]
Balance at Dec. 31, 2019	$ 1,184,472	$ (1,975)	$ 0	$ 132	$ 1,209,120	$ (24,780)	$ (1,975)
Balance, Shares at Dec. 31, 2019			0	132,015,635
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	90,231					90,231
Dividends	(103,174)					(103,174)
Issuance of shares for vested restricted stock units (in shares)				516,723
Issuance of shares for exercised warrants (in Shares)				25
Stock-based compensation expense for restricted stock units	4,867				4,867
Purchase of treasury stock	0
Balance at Dec. 31, 2020	1,174,421			$ 132	1,213,987	(39,698)
Balance, Shares at Dec. 31, 2020				132,532,383
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	82,488					82,488
Dividends	(111,411)					(111,411)
Issuance of shares for vested restricted stock units (in shares)				231,053
Shares withheld for tax liability	(485)				(485)
Shares withheld for tax liability (in shares)				(47,098)
Stock-based compensation expense for restricted stock units	3,455				3,455
Purchase of treasury stock	0
Balance at Dec. 31, 2021	1,148,468			$ 132	1,216,957	(68,621)
Balance, Shares at Dec. 31, 2021				132,716,338
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	(116,391)					(116,391)
Dividends	(102,295)					(102,295)
Issuance of shares for vested restricted stock units (in shares)				285,853
Shares withheld for tax liability	(508)				(508)	0
Shares withheld for tax liability (in shares)				(61,885)
Issuance of shares for exercised warrants (in Shares)				112
Stock-based compensation expense for restricted stock units	3,779				3,779	0
Repurchase of common stock (In Shares)				(1,295,273)
Repurchase of common stock	(5,000)			$ (1)	(4,999)	0
Purchase of treasury stock	(5,000)
Balance at Dec. 31, 2022	$ 928,053			$ 131	$ 1,215,229	$ (287,307)
Balance, Shares at Dec. 31, 2022				131,645,145

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities
Net income (loss)	$ (116,391)	$ 82,488	$ 90,231
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of deferred origination and amendment fees	(21,608)	(27,741)	(23,114)
Depreciation and amortization	1,314	741	(558)
Goodwill impairment	136,965	0	0
Amortization of right of use assets	407	382	446
Amortization of debt issuance costs	572	78	0
Amortization of credit facility costs	1,510	1,255	0
Stock-based compensation expense for restricted stock units	3,779	3,455	4,867
Provision for credit losses, net	38,266	6,179	6,722
Gain on sale of real property	(984)	0	0
Impairment on real property	7,596	0	0
Change in fair value of warrant liabilities	(1,813)	1,838	(5,492)
Changes in operating assets and liabilities:
Interest and fees receivable, net	1,507	(3,169)	(10,249)
Other assets	16	385	(1,073)
Accounts payable and accrued liabilities	6,553	(1,397)	2,469
Lease liabilities	(471)	(364)	(446)
Net cash provided by operating activities	57,218	64,130	63,803
Cash flows from investing activities:
Fundings of mortgage notes receivable	(540,579)	(675,009)	445,794
Principal collections	500,486	569,104	458,309
Origination and amendment fees received on mortgage notes receivable	15,073	13,916	13,670
Purchases of property and equipment	(137)	(476)	0
Proceeds from sale of real property	8,365	4,319	6,356
Improvements in real property	(5,911)	(4,435)	(119)
Repurchase of participations in mortgage notes receivable	0	(43,498)	0
Net cash provided by (used in) investing activities	(22,703)	(136,079)	32,422
Cash flows from financing activities:
Dividends paid	(106,932)	(110,072)	(111,064)
Purchase of treasury stock	(5,000)	0	0
Proceeds from issuance of senior unsecured notes	0	100,000	0
Payment of debt issue costs	0	(2,855)	0
Payment of costs to obtain financing	0	(5,125)	0
Proceeds from borrowings on credit facilities	45,000	50,000	0
Repayment of borrowings on credit facilities	(45,000)	(50,000)	0
Payment of taxes on shares withheld for tax liability	(508)	(485)	0
Net cash used in financing activities	(112,440)	(18,537)	(111,064)
Net decrease in cash and cash equivalents	(77,925)	(90,486)	(14,839)
Cash and cash equivalents, beginning of period	132,889	223,375	238,214
Cash and cash equivalents, end of period	54,964	132,889	223,375
Supplemental disclosure of cash flow information:
Interest paid	5,193	0	0
Supplemental disclosure of non-cash investing and financing activities
Dividends payable	4,654	9,291	7,952
Measurement Period Adjustment to Goodwill and Intangible Assets	0	0	5,000
Mortgage notes receivable converted to investment in real property	54,230	54,349	8,873
Investments in real property converted to mortgage notes receivable	25,900	0	0
Interest and fee receivables converted to investments in real property	1,244	4,129	0
Operating lease right-of-use assets	0	6,360	0
Lease liabilities arising from obtaining right-of-use assets	0	8,319	0
Property and equipment purchased through tenant improvement allowance	$ 0	$ 1,959	$ 0

XML

Organization and Business

12 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Business

Note 1 - Organization and Business

Broadmark Realty Capital Inc. (“Broadmark Realty,” “the Company,” “we,” “us” and “our”) is an internally managed commercial real estate finance company that provides secured financing to real estate investors and developers. Broadmark Realty’s objective is to preserve and protect stockholder capital while producing attractive risk-adjusted returns primarily through dividends generated from current income from its loan portfolio. Broadmark Realty has historically operated in states that it believes to have favorable demographic trends and provide Broadmark Realty the ability to efficiently access the underlying collateral in the event of borrower default.

The consolidated subsidiaries of Broadmark Realty include BRMK Lending, LLC, BRMK Management, Corp., and Broadmark Private REIT Management, LLC. BRMK Lending, LLC originates short-term loans generally secured by first deed of trust liens on residential and commercial real estate. BRMK Management, Corp. (the “Manager”) manages the underwriting, closing, servicing and disposition of mortgage notes, and performs all general and administrative duties for Broadmark Realty. Broadmark Private REIT Management, LLC (the “Private REIT Manager”) previously managed Broadmark Private REIT, LLC (the “Private REIT”), which was an unconsolidated affiliate of the Company that primarily participated in loans originated, underwritten and serviced by a subsidiary of Broadmark Realty. The Private REIT was liquidated during the quarter ended September 30, 2021. Refer to Note 14 for details about the liquidation of the Private REIT.

Broadmark Realty has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. Broadmark Realty generally will not be subject to U.S. federal corporate income tax on that portion of its net income that is distributed to stockholders if it annually distributes dividends equal to at least 90% of its REIT taxable income to its stockholders (determined without regard to the dividends-paid deduction and excluding net capital gains) by prescribed dates and complies with various other requirements. Broadmark Realty also operates its business in a manner that permits it to maintain an exclusion from registration under the Investment Company Act of 1940. As a REIT, Broadmark Realty may own up to 100% of the stock of one or more taxable REIT subsidiaries (“TRSs”), which may earn income that would not be qualifying income if earned directly by a REIT. The Manager is a TRS and this election applies to the wholly-owned subsidiaries of the Manager, including the Private REIT Manager.

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include Broadmark Realty Capital Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).

Principles of Consolidation

Broadmark Realty consolidates those entities in which it has control over significant operating, financial and investing decisions of the entity, as well as those entities deemed to be variable interest entities (“VIEs”), if any, in which Broadmark Realty is determined to be the primary beneficiary. Broadmark Realty is not the primary beneficiary of, and therefore does not consolidate, any VIEs in the accompanying consolidated financial statements.

The Private REIT was determined to be a voting interest entity for which we, through our wholly-owned subsidiary who previously acted as manager with no significant equity investment, did not hold a controlling interest in and, therefore, did not consolidate. Furthermore, the Private REIT's participation in loans originated by us met the characteristics of a participating interest and the criterion for sale accounting in accordance with GAAP and therefore, the loans were derecognized from our consolidated financial statements. The Private REIT was liquidated in August 2021 and all participations in mortgage notes receivable held by the Private REIT were purchased for cash by the Company at the settlement value which approximated fair value.

Reclassifications

Certain amounts in our prior period consolidated financial statements have been reclassified to conform to the presentation of our current period consolidated financial statements. These reclassifications had no effect on our previously reported net income or stockholders’ equity.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The most significant estimates relate to the expected credit losses on our loans, the fair value of financial instruments, goodwill impairment, exit prices for collateral dependent loans and the fair value of investments in real property. Accordingly, actual results could differ from those estimates.

For certain real properties, where a recent appraisal is either unavailable or not most representative of fair value, the fair value of the “as complete” property is based on a broker opinion of value including a capitalized income analysis and replacement cost analysis considering market rents, vacancy rates, capitalization rates, land cost comparisons, market trends and economic conditions. Depending on the stage of the underlying property, we also consider estimated costs to complete remaining construction and to lease up the finished property. The assessment of fair value of real property is subject to uncertainty and, in certain cases, sensitive to the selection of comparable properties.

Certain Significant Risks and Uncertainties

In the normal course of business, we encounter two primary types of economic risk in the form of credit and market risks. Credit risk is the risk of default on our investment in mortgage notes receivable resulting from a borrower's inability or unwillingness to make contractually required payments. Market risk is the risk of declining real estate values for the collateral underlying our loans which may make it more difficult for existing borrowers to remain current on their payment obligations, reduce the speed or ability for our loans to be repaid through the sale or refinance of the collateral and increase the likelihood that we will incur losses on our loans in the event of default as the value of collateral may be insufficient to cover our investment in the loan. We believe that the carrying values of our loans reasonably consider these risks.

In addition, we are subject to significant tax risks. If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal corporate income tax, which could be material.

We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: the economy in the areas we operate; the stability of the real estate market and the impact of interest rate changes; competition in our market; changes in government regulation affecting our business; public health crises, like the COVID-19 pandemic; natural disasters, catastrophic events and the physical effects of climate change; and our ability to attract and retain qualified employees and key personnel, among other things.

Reportable Segments

We operate the business as one reportable segment. Our principal business activities are related to the origination underwriting and serving of loans secured by real estate as well the investment in real property held for sale and use.

BALANCE SHEET MEASUREMENT

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. We have a cash management sweep account repurchase agreement, whereby our bank nightly sweeps cash in excess of $750,000, sells us specific U.S. government agency securities and then repurchases these securities the next day.

We maintain our cash and cash equivalents with financial institutions, which are insured up to a maximum of $250,000 per account as of December 31, 2022 and 2021. The balances in these accounts may exceed the insured limits. There were no restrictions on cash as of December 31, 2022 or 2021.

Mortgage Notes Receivable

Mortgage notes receivable (referred to herein as “mortgage notes receivable”, “construction loans”, “loans”, or “notes”) are classified as held for investment, as we have the intent and ability to hold until maturity or payoff and are carried in the consolidated balance sheets at amortized cost, net of construction holdbacks, interest reserves, allowance for credit losses and deferred origination and amendment fees as described in Note 3.

Current Expected Credit Losses Allowance

We adopted the current expected credit loss (“CECL”) standard during the year ended December 31, 2020. The initial CECL allowance adjustment of $2.0 million was recorded effective January 1, 2020 as a cumulative-effect of change in accounting principle through a direct charge to accumulated deficit on our consolidated statements of stockholders’ equity; however, subsequent changes to the CECL allowance are recognized in our consolidated statements of operations.

We record an allowance for credit losses in accordance with the CECL standard on our loan portfolio, including unfunded construction holdbacks, on a collective basis by assets with similar risk characteristics. In addition, for assets that are classified as collateral dependent where (1) we have begun a foreclosure, (2) bankruptcy is declared, (3) we have elected to pursue the appointment of a receiver, (4) Loan-to-value (“LTV”) or current LTV is greater than 100% or (5) we intend to obtain ownership of the property, we continue to record loan specific allowances based on the fair value of the collateral for expected credit losses under the CECL standard. Given the short-term nature of our loans, we evaluate the most recent external appraisal and, depending on the age of the appraisal, may order a new appraisal or, where available, will evaluate against existing comparable sales or other pertinent information to estimate the fair value of the collateral for such loans.

The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. The Company utilizes a probability of default/loss given default (“PD/LGD”) method for estimating current expected credit losses.

In accordance with the PD/LGD method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The PD/LGD method requires consideration of the timing of expected future funding of existing commitments and repayments over each asset’s remaining life. An annual loss factor, adjusted for macroeconomic estimates, is applied over each subsequent period and aggregated to arrive at the CECL allowance.

In determining the CECL allowance, we considered various factors including (1) historical loss experience in our portfolio, (2) historical loss experience in the commercial real estate lending market, (3) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral (4) timing of expected pay offs including prepayments and extensions where reasonably expected and (5) our current and future view of the macroeconomic environment. We utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus short-term extensions of one to three months that are reasonably expected for construction loans.

Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio. The CECL allowance related to the principal outstanding is presented within mortgage notes receivable, net and for unfunded commitments is within accounts payable and accrued liabilities in our consolidated balance sheets.

We have made an accounting policy election to exclude accrued interest receivable, included in interest and fees receivable, net on our consolidated balance sheets, from the amortized cost basis of the related mortgage notes receivable in determining the CECL allowance, as any uncollectable accrued interest receivable is written off either when the collateral underlying the loan is sold or upon transfer to real estate owned. No interest income is recognized on mortgage notes receivable that are in contractual default unless the collectability of all principal is not in doubt and collection of accrued amounts is reasonably assured or paid in cash. In addition, if a loan is deemed collateral dependent or high risk, it is placed on non-accrual status with interest income recognized on a cash-basis where principal collection is not in doubt.

Deferred Income

Deferred income represents the amount of our origination, loan servicing and amendment fees that have been deferred and will be recognized in income over the contractual maturity of the underlying loan. Origination and loan servicing fees are included in the total commitment to the borrower and financed at the time of loan origination. Amendment fees are either included in the total commitment to the borrower and financed at the time of the loan amendment or are billed to the borrower when the loan is amended and not capitalized into the principal outstanding. Deferred origination, loan servicing and amendment fees capitalized into the principal outstanding are included within mortgage notes receivable, net on the consolidated balance sheets. Deferred amendment fees that are not included in the principal outstanding are presented within interest and fees receivable, net in the consolidated balance sheets.

Interest and Fees Receivable

Interest on performing loans is accrued and recognized as interest income at the contractual rate of interest, or at the contractual rate of monthly minimum interest, if applicable. Extension fees are charged when we agree to extend the maturity dates of loans. In addition, late fees are charged when borrower payments are contractually past due. We monitor each note’s outstanding interest and fee receivables and, based on historical performance, generally reserve against the balance after a receivable is greater than 60 days past due unless collectability of all amounts due is reasonably assured.

Real Property

To maximize recovery against a defaulted loan, we may assume legal title or physical possession of the underlying collateral through foreclosure or the execution of a deed in lieu of foreclosure. The properties are initially measured at fair value. If the fair value of the property is lower than the carrying value of the loan, the difference is recognized as current expected credit loss reserves. In the case that there is a loss in excess of the cumulative reserve on the loan, the additional loss is recognized as a realized principal loss which is included as part of our provision for credit losses, net on our consolidated statements of operations. If the collateral value exceeds the carrying value of the loan, we then record some or all the unpaid, accrued interest and fees to the carrying value of the property.

Real Property Held for Sale

Real property is classified as held for sale in the period when we (1) commit to a plan and have the authority to sell the asset in its current condition, (2) have initiated an active marketing plan to sell the asset at a price that is reflective of its current fair value and (3) the sale of the asset is both probable and expected to qualify for full sales recognition within a period of 12 months. Real property classified as held for sale is held at the lower of cost or fair value at the time of acquisition and is evaluated for subsequent decreases in fair value on a quarterly basis. Any subsequent decreases in value are recorded as impairment in real property in our consolidated statements of operations. Depreciation is not recorded on assets classified as held for sale and operating and holding expenditures are charged to expense when incurred.

Based on a change in circumstances, we may have a change to a plan of sale and decide not to sell real property previously classified as held for sale, in which case we would reclassify as held for use. Upon reclassification to held for use, the real property is measured at the lower of (1) its carrying amount before the asset was classified as held for sale, adjusted for any depreciation or amortization expense that would have been recognized had the assets continued to be classified as held for use, or (2) the fair value at the date of the subsequent decision not to sell.

Real Property Held for Use

Properties that are classified as held for use are carried at cost less accumulated depreciation. We evaluate our real property held for use for impairment at the time of acquisition and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If an impairment indicator exists, we evaluate the undiscounted net cash flows that are expected to be generated by the property, including any estimated proceeds from the eventual disposition of the property. Based upon the analysis, if the carrying value of a property exceeds its undiscounted net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property. In evaluating and/or measuring impairment, we consider, among other things, current and estimated future cash flows associated with each property, market information for each sub-market, including, where applicable, competition levels, foreclosure levels, leasing trends, occupancy trends, lease or room rates, and the market prices of similar properties recently sold or currently being offered for sale and other quantitative and qualitative factors. Another key consideration in this assessment is our assumption about the highest and best use of the real estate investments and our intent and ability to hold them for a reasonable period that would allow for the recovery of their carrying values.

Costs related to acquisition, development, construction and improvements are capitalized to the extent the investment in the real property held for use does not exceed the fair value less estimated costs to sell. Expenditures for repairs and maintenance are charged to expense when incurred.

Once construction is complete and the property is held available for occupancy, real property held for use is depreciated using the straight-line method over the estimated useful life of the property. Depreciation expense is no longer recorded once the real property is classified as held for sale.

Leases

Our office space in Seattle, Washington is subject to an operating lease. The right of use assets and lease liabilities in our consolidated balance sheets relate to this lease. The lease agreement includes both lease components (e.g., fixed rent) and non-lease components (e.g., common-area maintenance). We account for the lease and non-lease components as a single component.

Right of use assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of the total lease payments not yet paid, including lease incentives not yet received, with the right of use assets further adjusted for any prepaid or accrued lease payments, lease incentives received and/or initial direct costs incurred. Our lease arrangement also includes variable payments for costs such as common-area maintenance, utilities, taxes or other operating costs, which are based on a percentage of actual expenses incurred. These variable lease payments are excluded from the measurement of the right of use assets and lease liabilities.

When our lease includes an option to extend the lease term, we consider several factors in determining if a renewal option is reasonably certain of being exercised at lease commencement, including, but not limited to, contract-based, asset-based and entity-based factors. We reassess the term of the existing lease if there is a significant event or change in circumstances within our control that affects whether we are reasonably certain to exercise the option to extend the lease. Examples of such events or changes include construction of significant leasehold improvements or other modifications or customizations to the underlying asset, relevant business decisions or subleases.

As our lease did not provide an implicit rate, we used our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

We recognize lease expense for our operating lease on a straight-line basis over the lease term. Variable lease payments are generally recognized when incurred. These expenses are included in general and administrative expenses in the consolidated statements of operations.

Goodwill

Goodwill represents the excess of the cost of an acquired business over the fair value of the assets acquired at the date of acquisition and is not amortized. Goodwill is assessed for impairment annually in the fourth quarter or more frequently if events occur or circumstances change that indicate an impairment may exist. Our assessment begins with an evaluation of qualitative factors, including macroeconomic conditions, industry and market considerations, current and projected financial performance, changes in strategy and market capitalization to determine whether it is more likely than not that the fair value of our single reporting unit exceeds the carrying value. A high degree of judgment is required in evaluating the qualitative factors. If we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative test is then performed. The quantitative test consists of comparing the estimated fair value of the reporting unit to its carrying amount, including goodwill, using income or market approaches. If the estimated fair value of the reporting unit is less than the carrying value including goodwill, an impairment write-down of goodwill would be required for the excess of carrying value over the estimated fair value. When market comparables or observable market values are not meaningful or not available, we estimate the fair value of a reporting unit using only the income approach. Estimating the fair value of our reporting unit requires the use of inputs and assumptions for which there is inherent uncertainty.

Other Assets

Other assets primarily consist of deferred financing costs related to our revolving credit facility, fixed assets, prepaid insurance and other operating receivables.

Fixed Assets

Fixed assets, which are included in other assets in the accompanying consolidated balance sheets are stated at cost, less accumulated depreciation. Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/or useful life are capitalized. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized. Depreciation and amortization are recorded on the straight-line basis over the estimated useful life of the assets. For computer equipment, office equipment, furniture and fixtures the useful lives range from three to seven years. For leasehold improvements, we amortize over the shorter of expected useful life or lease term.

Deferred Financing Costs

Deferred financing costs that are included in other assets represent direct costs associated with the execution of the revolving credit facility. Such costs are included in other assets because the revolving credit facility has no principal outstanding as of December 31, 2022 and there is no recognized debt liability. These costs are amortized on the straight-line basis over the initial term of our revolving credit facility.

Intangible Assets

We record intangible assets at fair value at the acquisition date and amortize their value into expense over the expected useful life. All of our intangible assets relate to the value of customer relationships. As of December 31, 2022, our intangible assets have been fully amortized.

Senior Unsecured Notes

Senior unsecured notes are recorded at the face amount of the notes net of unamortized issuance costs.

Debt Issuance Costs

Debt issuance costs represent direct costs associated with the issuance of a debt instrument that are deferred and amortized over the initial term of our debt instruments. Debt issuance costs are reported in the consolidated balance sheets as a direct deduction from the face amount of the debt issued. Costs that do not qualify as debt issuance costs are expensed as incurred.

INCOME RECOGNITION

Interest Income

Interest income on mortgage notes receivable is accrued based on contractual rates applied to the principal balance, unless there is a minimum interest provision in the mortgage note. Certain construction loans provide for minimum interest provisions, to which the contractual rate applies, which are typically between 50% and 70% of the face amount of the note until the actual outstanding principal exceeds the minimum threshold. Our loans originated since the second quarter of 2021 typically do not provide for minimum interest provisions.

Mortgage notes receivable can be placed in contractual default status for any of the following reasons: (1) interest receivable is 60 days past due, (2) the loan was not repaid at the maturity date (3) there is a breach of terms in the loan documents or (4) the value of the collateral is less than the loan amount.

The accrual of interest income is suspended when a loan is in contractual default unless the interest is paid in cash or collectability of all amounts due is reasonably assured. In addition, we may place a loan on non-accrual status when the loan is either deemed collateral dependent or high risk. The following criteria are used to determine if a loan is deemed high risk: (1) total outstanding interest and fee receivables are greater than 15% of the total commitment and outstanding face rate interest receivable if 60 days past due, (2) there is a significant decline in the value of the collateral due to entitlement, engineering or project changes, (3) introduction of significant uncertainty due to the project or collateral type, (4) significant decline in value of collateral due to market conditions, (5) significant damage or loss to the collateral, (6) adverse claim against the property or borrower and (7) unfunded construction cost overruns. Interest previously accrued may be reversed at that time, and such reversal is offset against interest income. The accrual of interest income resumes only when the loans are no longer deemed collateral dependent or high risk, with collectability being reasonably assured.

Fee Income

We charge loan origination and loan servicing fees in conjunction with origination. Amendment fees are charged when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan for the transition from horizontal development to vertical construction. We defer and amortize loan origination, loan servicing and amendment fees over the contractual terms of the loans. Extension fees are charged when we agree to extend the maturity dates of loans and we charge fees on past due receivables. Extension and late fees are recognized when billed to the borrower.

We charge inspection fees, which we use to hire independent inspectors to report on the status of construction projects. These fees are earned and recognized upon each construction draw request.

EXPENSE RECOGNITION

Interest Expense

Interest expense on debt obligations is accrued based on the note rate applied to the face amount of the debt outstanding. Amortization of debt issuance costs and deferred financing costs over the initial term of the debt instruments is reported as interest expense in the consolidated statements of operations.

Stock‑Based Compensation

We measure compensation expense for all share-based awards at fair value on the date of grant and recognize compensation expense over the service period on a straight-line basis for awards expected to vest, which is generally three years for employees and one year for directors.

Awards made to our employees and directors, typically consist of restricted stock units (“RSUs”). Employee stock-based compensation expense is included in compensation and employee benefits and director stock-based compensation expense is included in general and administrative in the consolidated statement of operations. For awards with only a service vesting condition, the fair value of the award is based on the grant date closing price of our common stock less the present value of expected dividends over the requisite service period, as the awards are not entitled to dividends. For these awards, we recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award, subject to periodic adjustments to ensure that the cumulative amount of expense recognized through the end of any reporting period is at least equal to the portion of the grant date fair value of the award that has vested through that date, and we account for forfeitures prospectively as they occur. For awards that contain both service vesting and market conditions, referred to as performance restricted stock units (“pRSUs”), we use a Monte Carlo simulation model to calculate the grant date fair value. For these market-condition awards, regardless of the outcome of the market condition, we recognize stock-based compensation expense on a straight-line basis over the longest of explicit and derived service periods, and we account for forfeitures prospectively as they occur. If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate or increase any remaining unrecognized or previously recorded stock-based compensation expense.

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes (the “Code”). As a REIT, we generally are not subject to U.S. federal income taxes on net income we distribute to our stockholders. We intend to make timely distributions sufficient to satisfy the annual distribution requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular corporate tax rates. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and U.S. federal income and excise taxes on our undistributed income. Our TRSs are subject to U.S. federal income taxes.

Earnings per Share (“EPS”)

Basic EPS is calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing the net (loss) income attributable to common stockholders by the weighted average number of shares of common stock outstanding determined for the basic EPS computation plus the effect of any dilutive securities. We include unvested shares of restricted stock in the computation of diluted EPS by using the treasury stock method. We include unvested performance units as contingently issuable shares in the computation of diluted EPS once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted EPS calculation.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for troubled debt restructurings (“TDR”) for creditors that have adopted the CECL standard and requires enhanced disclosures for loan modifications made to borrowers experiencing financial difficulty in the form of interest rate reductions, principal forgiveness, other-than-insignificant payment delays, or term extensions. In addition, the new guidance requires presentation in the vintage disclosures of current-period gross write-offs by year of origination. The guidance is effective for the Company in the first quarter of 2023. Entities are able to early adopt the guidance and have the ability to early adopt the TDR enhancements separately from the vintage disclosures. We have not yet adopted this ASU. While the guidance will result in expanded disclosures, we do not believe the adoption of this guidance will have a material impact on our financial position, results of operation or cash flows.

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Mortgage Notes Receivable

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Mortgage Notes Receivable

Note 3 - Mortgage Notes Receivable

The stated principal amount of mortgage notes receivable in our portfolio represents our interest in loans generally secured by first deeds of trust, security agreements or legal title to real estate located in the United States. Our lending standards typically require that all mortgage notes receivable be secured by a first deed of trust lien on real estate and that the maximum LTV be no greater than 65%. The LTV is calculated on an “as-complete” appraised value of the underlying collateral as determined by an independent appraiser at the time of the loan origination. The lending standards also typically limit the initial outstanding principal balance of the loan to a maximum LTV of up to 65% of the “as-is” appraised value of the underlying collateral, as determined by an independent appraiser at the time of the loan origination. Unless otherwise indicated, LTV is measured by the total commitment amount of the loan at origination divided by the “as-complete” appraisal. LTVs do not reflect interim loan activity such as construction draws or interest payments capitalized to loans, or partial repayments of the loan. The maximum amount of a single loan may not exceed 10% of our total assets and the maximum amount to a single borrower may not exceed 15% of our total assets. We consider the maximum LTV as an indicator for the credit quality of a mortgage note receivable.

Mortgage notes receivable are considered to be short-term financings. As of December 31, 2022, the weighted average term outstanding of our active loans was 22 months, which we often elect to extend for several months, based on our evaluation of the expected timeline for completion of construction. All loans require monthly interest only payments, with our weighted average interest rate on our portfolio being 10.2% as of December 31, 2022. Most loans are structured with an interest reserve holdback that covers the interest payments for the initial term of the loan. Once the interest reserve is depleted, borrowers are expected to pay their monthly interest payment within 10 days of month-end.

Mortgage notes receivable are presented net of construction holdbacks, interest reserves, allowance for credit losses and deferred origination and amendment fee income in the consolidated balance sheets. The construction holdback represents amounts withheld from the funding of construction loans until we deem construction to be sufficiently completed. The interest reserve represents amounts withheld from the funding of certain mortgage notes receivable for the purpose of satisfying monthly interest payments over all or part of the term of the related note. Accrued interest is paid out of the interest reserve and recognized as interest income at the end of each month. The deferred origination, loan servicing and amendment fee income represents amounts that will be recognized over the contractual life of the underlying mortgage notes receivable.

The following table reconciles outstanding mortgage loan commitments to the outstanding balance of mortgage notes receivable as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Total loan commitments	$	1,417,325	$	1,489,055
Less:
Construction holdbacks(1)		452,690		524,462
Interest reserves		33,633		39,880
Total principal outstanding for our mortgage notes receivable		931,002		924,713
Less:
Allowance for credit losses(2)		41,492		10,394
Deferred origination and amendment fees		7,560		12,969
Mortgage notes receivable, net	$	881,950	$	901,350

(1)As of December 31, 2022 and 2021 this amount includes $22.8 and $17.3 million, respectively, of construction holdbacks for defaulted loans that we are no longer required to pay. These amounts are included in the loan commitment totals.

(2)As of December 31, 2022 and 2021, $1.5 and $0.9 million, respectively, of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

When a loan is deemed collateral dependent or high risk, it is placed on non-accrual status with interest income recognized on a cash-basis where principal collection is not in doubt. As of December 31, 2022 and 2021, the principal outstanding on loans in contractual default status placed on non-accrual status was $217.2 and $101.9 million, respectively.

As of December 31, 2022 and 2021, the principal outstanding on loans in contractual default was $250.4 and $174.0 million, respectively.

The following tables show the carrying value of loans in contractual default status by collateral type and the LTV of the loans in contractual default at the dates indicated:

	December 31, 2022
(dollars in thousands)	Number of Loans		Carrying Value		% of Portfolio
Collateral Type
Residential lots		8	$	71,306		28.5	%
Condos		3		42,237		16.9
Hotel		2		28,919		11.5
Entitled Land		2		22,447		9.0
Townhomes		5		21,175		8.5
Single Family Housing		11		20,335		8.1
Mixed Use		4		14,795		5.9
Unentitled Land		1		10,496		4.2
Apartments		2		6,947		2.8
Offices		1		6,288		2.5
Retail		1		5,443		2.2
Total		40	$	250,388		100.0	%

	December 31, 2022
(dollars in thousands)	Carrying Value		% of Portfolio
LTV(1)
0 - 40%	$	3,969		1.6	%
41 - 60%		91,201		36.4
61 - 80%		139,537		55.7
Above 80%		15,681		6.3
Total	$	250,388		100.0	%

(1)Represents current LTV as of origination or latest amendment. At December 31, 2022, the weighted average LTV for loans in contractual default using the latest appraisal was 124.8%. The weighted average LTV of our loans in contractual default net of our allowance for credit losses was approximately 84.9%.

	December 31, 2021
(dollars in thousands)	Number of Loans		Carrying Value		% of Portfolio
Collateral Type
Condos		4	$	47,741		27.4	%
Senior Housing		1		25,337		14.6
Residential lots		3		19,541		11.2
Townhomes		6		18,870		10.8
Entitled Land		1		17,335		10.0
Mixed Use		4		15,858		9.1
Hotel		1		14,583		8.4
Unentitled Land		2		5,403		3.1
Apartments		2		5,341		3.1
Single Family Housing		7		3,973		2.3
Total		31	$	173,984		100.0	%

	December 31, 2021
(dollars in thousands)	Carrying Value		% of Portfolio
LTV (1)
0 - 40%	$	22,737		13.1	%
41 - 60%		26,902		15.5
61 - 80%		110,548		63.5
Above 80%		13,797		7.9
Total	$	173,984		100.0	%

(1)Represents LTV as of origination or latest amendment.

Current Expected Credit Losses

In assessing the CECL allowance, we consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. We derived an annual historical loss rate based on the Company’s historical loss experience in its portfolio and the historical loss experience in the commercial real estate industry provided by a third party adjusted to incorporate the risks of construction lending and to reflect our expectations of the macroeconomic environment based on forecast data per the Federal Reserve.

The following tables summarize the activity in the CECL allowance during the years ended December 31, 2022 and 2021:

	CECL Allowance
(dollars in thousands)	Funded			Unfunded(2)		Total
CECL allowance as of December 31, 2020	$	10,590		$	—	$	10,590
Provision for credit losses, net		5,275			904		6,179
Charge-offs(1)		(5,471	)		—		(5,471	)
CECL allowance as of December 31, 2021		10,394			904		11,298
Provision for credit losses, net		37,696			570		38,266
Charge-offs(1)		(6,598	)		—		(6,598	)
CECL allowance as of December 31, 2022	$	41,492		$	1,474	$	42,966

(1)Charge-offs result from either loan repayments where the proceeds are less than the principal outstanding or transfers to investment in real property at the time that we take ownership of the property where the fair values of the underlying collateral are less than the principal outstanding.

(2)CECL allowance related to unfunded commitments is presented as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

As of December 31, 2022, the funded and unfunded CECL allowance aggregated $43.0 million, which represents an increase of $38.3 million for the year ended December 31, 2022. This increased allowance reflects increased loan specific allowances for certain high risk and collateral dependent loans where the fair value of the underlying collateral was less than the amortized cost of the loan, as well as increased uncertainty in the macroeconomic outlook, including weakening credit indicators, inflationary pressures, rising interest rates and market volatility.

In determining our CECL allowance, we segment loans with similar characteristics. All of our loans are secured by residential or commercial real estate and, in assessing estimated credit losses, we evaluate various metrics, including, but not limited to, construction type, collateral type, LTV, market conditions of property location and borrower experience and financial strength.

The following tables allocate the carrying value of our loan portfolio based on our internal credit quality indicators in assessing estimated credit losses and vintage of origination at the dates indicated:

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
Construction Type
Vertical Construction	$	552,468			59.8	%	$	352,355	$	128,130	$	33,895	$	1,928	$	36,160
Horizontal Development		221,078			24.1			144,082		68,201		8,795		—		—
Investment		46,536			5.0			46,536		—		—		—		—
Rehabilitation		39,422			4.3			12,936		15,009		11,477		—		—
Land Entitlement		26,132			2.8			4,146		21,986		—		—		—
Bridge		22,611			2.4			19,450		937		—		2,224		—
Acquisition		15,195			1.6			13,454		1,741		—		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(2)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
Collateral Type
Apartments	$	191,708			20.8	%	$	134,816	$	49,944	$	5,020	$	1,928	$	—
Single Family Housing		133,702			14.5			124,218		9,245		239		—		—
Townhomes		106,888			11.6			81,393		24,701		794		—		—
Residential Lots		104,100			11.3			56,675		38,630		8,795		—		—
Entitled Land		76,251			8.3			54,265		21,986		—		—		—
Condos		71,975			7.8			29,738		2,515		3,562		—		36,160
Commercial		58,515			6.3			13,838		44,677		—		—		—
Mixed Use		50,127			5.4			6,209		30,217		11,477		2,224		—
Hotel		30,221			3.3			14,116		—		16,105		—		—
Offices		18,467			2.0			12,179		—		6,288		—		—
Unentitled Land		17,262			1.9			16,325		937		—		—		—
Senior Housing		16,595			1.8			16,595		—		—		—		—
Duplex		13,639			1.5			13,639		—		—		—		—
Commercial Other		11,411			1.2			—		11,411		—		—		—
Retail		9,071			1.0			5,443		1,741		1,887		—		—
Quadplex		8,932			1.0			8,932		—		—		—		—
Commercial Lots		4,018			0.4			4,018		—		—		—		—
Triplex		560			0.1			560		—		—		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(2)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
LTV (2)
0 - 40%	$	26,053			2.8	%	$	22,544	$	3,509	$	—	$	—	$	—
41 - 45%		29,025			3.1			7,039		21,986		—		—		—
46 - 50%		42,267			4.6			22,524		13,455		6,288		—		—
51 - 55%		144,649			15.7			76,978		58,876		8,795		—		—
56 - 60%		107,098			11.6			98,691		8,407		—		—		—
61 - 65%		456,743			49.5			284,722		112,569		21,364		1,928		36,160
66 - 70%		93,104			10.1			71,638		16,561		2,681		2,224		—
71 - 75%		4,280			0.5			4,280		—		—		—		—
76- 80%		2,540			0.3			2,540		—		—		—		—
Above 80%		17,683			1.9			2,003		641		15,039		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(3)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

(3)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
Construction Type
Vertical Construction	$	478,475			52.5	%	$	234,861	$	191,896	$	1,177	$	2,491	$	47,789	$	261
Horizontal Development		196,543			21.5			169,041		27,502		—		—		—		—
Acquisition		96,937			10.6			96,937		—		—		—		—		—
Investment		65,703			7.2			42,509		2,101		—		3,608		17,485		—
Rehabilitation		27,023			3.0			11,320		15,703		—		—		—		—
Land Entitlement		24,529			2.7			24,529		—		—		—		—		—
Bridge		22,534			2.5			18,072		2,537		1,925		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(2)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
Collateral Type
Residential Lots	$	111,644			12.2	%	$	85,219	$	26,425	$	—	$	—	$	—	$	—
Apartments		107,765			11.8			38,232		68,356		1,177		—		—		—
Townhomes		93,300			10.2			51,240		28,979		—		1,017		11,803		261
Mixed Use		85,929			9.5			53,530		30,474		1,925		—		—		—
Single Family Housing		87,902			9.6			84,703		3,049		—		—		150		—
Condos		64,492			7.1			8,805		18,227		—		1,474		35,986		—
Commercial		61,592			6.8			61,592		—		—		—		—		—
Senior Housing		61,236			6.7			35,899		25,337		—		—		—		—
Storage		56,481			6.2			56,481		—		—		—		—		—
Unentitled Land		46,019			5.0			42,411		—		—		3,608		—		—
Entitled Land		45,098			4.9			27,763		—		—		—		17,335		—
Hotel		31,665			3.5			4,886		26,779		—		—		—		—
Offices		15,348			1.7			8,280		7,068		—		—		—		—
Commercial Lots		10,227			1.1			6,670		3,557		—		—		—		—
Quadplex		9,769			1.1			9,769		—		—		—		—		—
Commercial Other		9,080			1.0			9,080		—		—		—		—		—
Retail		7,873			0.9			6,385		1,488		—		—		—		—
Duplex		6,324			0.7			6,324		—		—		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(2)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
LTV (2)
0 - 40%	$	53,907			5.9	%	$	32,634	$	—	$	—	$	3,608	$	17,665	$	—
41 - 45%		48,431			5.3			44,380		4,051		—		—		—		—
46 - 50%		63,690			7.0			41,356		21,317		—		1,017		—		—
51 - 55%		92,238			10.1			74,978		17,260		—		—		—		—
56 - 60%		79,039			8.7			27,115		40,190		—		—		11,473		261
61 - 65%		559,997			61.4			372,645		146,640		3,102		1,474		36,136		—
66 - 70%		645			0.1			645		—		—		—		—		—
71 - 80%		—			0.0			—		—		—		—		—		—
Above 80%		13,797			1.5			3,516		10,281		—		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(3)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

(3)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

The following tables allocate the carrying value of collateral dependent loans in our loan portfolio to the collateral type at the dates indicated:

	December 31, 2022
(dollars in thousands)	Carrying Value		CECL Allowance(1)			Carrying Value, net
Collateral Type
Residential Lots	$	70,664	$	(11,519	)	$	59,145
Condos		42,237		(5,892	)		36,345
Land		21,986		(108	)		21,878
Townhomes		18,296		(1,706	)		16,590
Single Family Housing		16,993		(950	)		16,043
Hotel		16,106		(9,151	)		6,955
Apartments		6,947		(978	)		5,969
Offices		6,288		(5,042	)		1,246
Mixed Use		3,318		(1,320	)		1,998
Total	$	202,835	$	(36,666	)	$	166,169

	December 31, 2021
(dollars in thousands)	Carrying Value		CECL Allowance(1)			Carrying Value, net
Collateral Type
Senior Housing	$	25,337	$	(1,103	)	$	24,234
Entitled Land		17,335		(42	)		17,293
Single Family Housing		1,730		(15	)		1,715
Condos		1,109		(673	)		436
Townhomes		261		(1	)		260
Total	$	45,772	$	(1,834	)	$	43,938

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Investment in Real Property

12 Months Ended

Dec. 31, 2022

Real Estate [Abstract]

Investment in Real Property

Note 4 – Investment in Real Property

As of December 31, 2022 and 2021, we owned 11 and nine properties or projects, with aggregate carrying value of $87.9 and $68.1 million, respectively.

The following tables provide information about the carrying value of our owned real property at the dates indicated:

(dollars in thousands)	December 31, 2022		December 31, 2021
Collateral Type
Senior Housing	$	49,917	$	—
Offices		15,414		19,388
Single Family Housing		8,538		4,134
Townhomes		6,712		9,281
Apartments		5,024		—
Residential Lots		2,293		3,012
Condos		—		28,441
Retail		—		3,811
Total	$	87,898	$	68,067

	December 31, 2022				December 31, 2021
(dollars in thousands)	Number of Properties		Carrying Value		Number of Properties		Carrying Value
Collateral Type
Held for sale		7	$	24,516		5	$	52,531
Held for use		4		63,382		4		15,536
Total		11	$	87,898		9	$	68,067

For the years ended December 31, 2022, 2021 and 2020, we recorded the operating revenue, expenses, fixed asset depreciation and impairment in our consolidated statement of operations as shown below for investment in real property, held for sale and held for use, respectively:

	Held for Sale
(dollars in thousands)	December 31, 2022			December 31, 2021			December 31, 2020
Revenue from operations	$	276		$	—		$	—
Gain on sale		984
Less:
Operating expenses		1,990			101			168
Depreciation(1)		125			—			—
Impairment		6,111			—			—
Net loss from investment in real property, held for sale	$	(6,966	)	$	(101	)	$	(168	)

(1)Depreciation incurred for a real property before it was reclassified to held for sale.

	Held for Use
(dollars in thousands)	December 31, 2022			December 31, 2021			December 31, 2020
Revenue from operations	$	2,523		$	—		$	—
Less:
Operating expenses		3,697			7			—
Depreciation		553			—			—
Impairment		1,485			—			—
Net loss from investment in real property, held for use	$	(3,212	)	$	(7	)	$	—

In April 2022, the Company executed an agreement with an unrelated party to sell a real property with a carrying value of $28.4 million for a sales price of $29.0 million. As part of the sale, the Company received a promissory note from the purchaser in the principal amount of $25.9 million. The note was amended to extend the financing term, resulting in an extension of the maturity date to December 31, 2022 after receiving partial payments on July 1, 2022 and August 31, 2022. In December 2022, the Company amended the loan to extend the maturity date to April 1, 2023, whereby we agreed to an additional advance of $0.4 million. This seller-financed sale of real property was evaluated for derecognition of the transferred assets and income recognition based on whether a sales contract existed and effective control was transferred to the purchaser and it was determined that the transaction met all of the criterion to be recognized as a sale.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 5 – Fair Value Measurements

The accounting guidance on fair value measurements and disclosures requires the categorization of fair value measurement into three broad levels of the fair value hierarchy as follows:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Our development of fair value estimates, particularly Level 3 fair value assets and liabilities with significant unobservable inputs, involves judgment and a high degree of subjectivity. While we anticipate that our valuation methods are appropriate and consistent with valuation methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Likewise, due to the general illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.

The following tables present estimated fair values of our financial instruments, as of the date indicated, whether or not recognized or recorded in the consolidated balance sheets at the periods indicated:

	December 31, 2022				Fair Value Measurements Using
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	54,964	$	54,964	$	54,964	$	—	$	—
Mortgage notes receivable, net		881,950		865,304		—		—		865,304
Interest and fees receivable, net		14,775		14,775		—		14,775		—
Financial Liabilities
Senior unsecured notes, net		97,789		99,990		99,990		—		—
Private placement warrant liability		25		25		—		25		—

	December 31, 2021				Fair Value Measurements Using
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	132,889	$	132,889	$	132,889	$	—	$	—
Mortgage notes receivable, net		901,350		901,350		—		—		901,350
Interest and fees receivable, net		17,526		17,526		—		17,526		—
Financial Liabilities
Senior unsecured notes, net		97,223		100,000		100,000		—		—
Private placement warrant liability		1,838		1,838		—		1,838		—

The following table sets forth assets measured and reported at fair value on a nonrecurring basis as of December 31, 2022 and 2021. All of these values are categorized as Level 3. The table also contains information about valuation methodologies and inputs for:

	Carrying Value				Fair Value
(dollars in thousands)	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021		Valuation Technique	Unobservable Inputs	Range of Inputs
Investment in real property held for sale(1)	$	14,628	$	—	$	15,075	$	—	Collateral valuations	Discount to appraised value based on comparable market prices, broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Investment in real property held for use (1)	$	25,167	$	—	$	33,379	$	—	Collateral valuations	Discount to appraised value based on comparable market prices, broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Collateral dependent loans, net of allowance for credit losses(1)		81,470		436		87,622		835	Collateral valuations	Discount to appraised value based on comparable market prices or broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Total	$	121,265	$	436	$	136,076	$	835

(1)Previously reported amounts included all real properties and collateral dependent loans regardless of whether an adjustment was required to mark to fair value in the reporting period. The current disclosure represents only those loans and properties for which an adjustment was required to report at fair value on a nonrecurring basis during the reporting periods.

Fair Value on a Recurring Basis

The private placement warrants are carried at fair value. Initially, the fair value of the private placement warrants was classified as Level 3 within the fair value hierarchy as it was valued using a lattice model, which primarily incorporates observable inputs such as our common stock price, exercise price, term of the warrant, dividend yield and the risk-free rate; however, it also incorporates an assumption for equity volatility. For the unobservable volatility input, we solved for the volatility of the public warrants using the lattice model that captures the redemption right and analyzed the calculated equity volatility based on the volatility of the common stock of comparable public companies. This valuation methodology resulted in the same value per share for both the public warrants and private placement warrants, indicating the redemption right, a feature excluded from private placement warrants, did not change the valuation; and therefore, the quoted price per share of the public warrants was used to value the private placement warrants on a recurring basis beginning September 30, 2021. As we utilized observable inputs in the valuation, specifically a quoted price for a similar item in an active market, we re-classified the private placement warrant liability from a Level 3 to a Level 2 within the fair value hierarchy as of September 30, 2021. The fair value of the 5.2 million private placement warrants, estimated using the quoted share price of the public warrants, was approximately $0.001 and $0.09 per warrant or $0.005 and $0.35 per share to arrive at $0.02 and $1.8 million, respectively, as of December 31, 2022 and 2021. Refer to Note 9 for additional details on the private placement warrants.

Fair Value on a Nonrecurring Basis

For our investments in real property held for sale, we compare the cost basis to the fair value of real properties at each reporting period, based upon the most recent independent third-party appraisals of value discounted based upon our experience with actual liquidation values. These discounts to the appraisals generally range from 0% to 10% and are considered unobservable inputs in Level 3 within the fair value hierarchy. Any decline in the fair value of real property held for sale will be recorded in a valuation account to offset the cost basis and carry at fair value on a non-recurring basis. Similarly, whenever changes in circumstances indicate that the carrying amounts may not be recoverable for our investments in real property held for use, we evaluate the undiscounted net cash flows that are expected to be generated from the property, including any estimated proceeds from the eventual disposition of the property. If the carrying value of a property held for use exceeds its undiscounted net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property and will be recorded in a valuation account on a non-recurring basis.

The fair value of collateral dependent loans is based upon the most recent independent third-party appraisal of value, discounted between 0% to 10% based upon our experience with actual liquidation values. For certain collateral dependent loans, where a recent appraisal is either unavailable or not most representative of fair value, the fair value is based on a broker opinion of value including a capitalized income analysis and replacement cost analysis considering historical operating results, market rents, vacancy rates, capitalization rates, land cost comparisons, market trends and economic conditions. The assessment of fair value of real property is subject to uncertainty and, in certain cases, sensitive to the selection of comparable properties. As the result of using unobservable inputs in the valuation, we classify collateral dependent as Level 3 within the fair value hierarchy.

Impairment indicators may subject goodwill to nonrecurring fair value measurements when certain triggering events occur. In the fourth quarter of 2022, the Company recorded impairment charges for goodwill. The implied fair value of our goodwill was estimated using both the discounted cash flow and market multiple approaches, which are Level 3 valuation techniques. Refer to Note 6 for additional details on significant inputs used in our analysis.

Fair Value Disclosure Only

For our financial instruments, including cash equivalents, which are classified under Level 1 within the fair value hierarchy as well as interest and fees receivable, accounts payable and accrued liabilities which are classified under Level 2 within the fair value hierarchy, the carrying amounts approximate fair value due to their short-term maturities.

Our mortgage notes receivable are evaluated for expected credit losses and are presented net of an allowance for credit losses. We determined the fair value of our mortgage notes receivable based on a discounted cash flow methodology, taking into consideration various factors including discount rates, interest rate spreads and third-party appraisals for estimating as-complete appraised values. The interest rate spreads range from 0.01% to 0.14%, with a weighted average spread of 0.04%. As we utilize unobservable inputs, we classify mortgage notes receivable as Level 3 within the fair value hierarchy.

Our senior unsecured notes were purchased at par by investors in a private placement, but trade in the secondary market. Fair value is estimated using current market quotes received from active markets and we classify as Level 1 within the fair value hierarchy.

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 6 – Goodwill and Intangible Assets

All of our goodwill and intangibles relate to the business combination (“Business Combination”), via a special purpose acquisition company that closed on November 14, 2019. In the first quarter of 2020, based on additional information obtained about facts and circumstances that existed as of November 14, 2019, we recorded a measurement period adjustment to reduce the fair value of intangible assets in the form of customer relationships from $6.0 to $1.0 million. This adjustment increased the preliminary amount of goodwill previously recorded by $5.0 million resulting in $137.0 million of goodwill as of September 30, 2020. As a result of this adjustment to preliminary values, $0.9 million of amortization of intangible assets recorded in 2019 was reversed in the first quarter of 2020.

Goodwill

We test our reporting unit for goodwill impairment annually in the fourth quarter, or upon a triggering event. Our qualitative analysis performed in the fourth quarter of 2022 considered continued interest rate hikes by the Federal Reserve to curb rising inflation and resulting market volatility, a significant slowdown in real estate transactions and less capital available in the marketplace to

finance real estate projects and further decreases in our stock price. We concluded that it was more likely than not that the fair value of our reporting unit was less than its carrying amount as of December 31, 2022 and, therefore, a quantitative analysis was necessary. The quantitative analysis was based on income and market multiples approaches. Under the income approach, the fair value of a reporting unit was estimated based on the present value of estimated future cash flows covering discrete forecast periods as well as terminal value determinations. We prepared cash flow projections based on management's estimates of long-term growth rates, pre-tax return on earnings, earning asset growth and return on tangible equity, taking into consideration industry and market conditions. The discount rate was based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, fair value was estimated based on market multiples of revenue and earnings derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit, as well as observable market values of our reporting unit based on any third-party attributions of value to such unit in the context of potential transactions with us. We weighted the fair value derived from the market approach commensurate with the level of comparability of these publicly traded companies to the reporting unit.

Our 2022 annual goodwill impairment analysis resulted in impairment charges for goodwill related to the Broadmark lending business which is our only reporting unit. The decline in fair value of the reporting unit below its carrying value resulted in changes from expected future cash flows as compared to prior year projections which is more broadly a result of macroeconomic factors and other operational challenges as well as an increase in cost of capital. As a result, we recorded a goodwill impairment charge of $137.0 million in the fourth quarter of 2022.

The reporting unit has no remaining goodwill as of December 31, 2022 and an excess of fair value over carrying value of net assets of 0% as of the annual test date. The business is facing challenges reflected in the results for the year ended December 31, 2022. In the later part of the third quarter of 2022 and continuing into the fourth quarter of 2022, market interest rates rose markedly and rapidly primarily as a result of the Federal Reserve's actions to curb rapidly rising inflation. This led to a significant slowdown in real estate transactions and less capital available in the marketplace to finance real estate projects. During the fourth quarter, rising interest rates and macroeconomic uncertainties in the capital markets lead to a significant decrease in real estate sales in the marketplace and in the availability of capital from traditional lenders for longer-term financing of completed construction and development projects, which negatively affected our borrowers' ability to sell or refinance our collateral and repay our loans. As a result, this led us to have a higher percentage of defaults go into non-accrual, additional properties foreclose or start the foreclosure process and the decision to slow origination pace to preserve liquidity.

The following table sets forth the changes in the carrying amount of goodwill:

(dollars in thousands)	Goodwill
Goodwill as of December 31, 2020	$	136,965
Goodwill as of December 31, 2021		136,965
Less:
Impairment		136,965
Goodwill as of December 31, 2022	$	—

Intangible Assets

The following table summarizes the balances of intangible assets as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Asset Type
Customer relationships	$	1,000	$	1,000
Less: Accumulated amortization		1,000		718
Intangible assets, net	$	—	$	282

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Accounts Payable and Accrued Liabilities

12 Months Ended

Dec. 31, 2022

Accounts Payable and Accrued Liabilities [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Accounts Payable and Accrued Liabilities

The following table presents a summary of accounts payable and accrued liabilities as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Accounts payable and accrued liabilities
Borrower deposits	$	5,519	$	925
Accounts payable and other liabilities		4,223	$	4,315
Accrued salaries, bonus and commissions.		2,272	$	2,034
Allowance for credit losses on unfunded commitments		1,475		906
Total	$	13,489	$	8,180

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Debt

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Debt

Note 8 - Debt

On February 19, 2021, we entered into a credit agreement with a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent for the lenders, providing for a $135.0 million revolving credit facility maturing on February 19, 2024. Advances under the revolving credit facility bear interest at prime rate plus 2.75% and the facility has a commitment fee of 1.0% of unfunded commitment per annum. We incurred fees of approximately $4.5 million in relation to the revolving credit facility, which were capitalized as deferred financing costs on the consolidated balance sheets and are being amortized over the three-year term. As of December 31, 2022, the revolving credit facility has no principal outstanding.

Our obligations under the revolving credit facility are secured by substantially all of the Company’s assets. The revolving credit facility contains covenants customary for financings of this type, including limitations on the incurrence of indebtedness, liens, asset dispositions, acquisitions, mergers and consolidations, certain dividends, distributions, stock repurchases and other payments, advances and investments, payments to affiliates, optional prepayments and other modifications of certain other indebtedness, and amendments, terminations and waivers of certain material agreements, as well as compliance with leverage and coverage ratios and maintenance of minimum tangible net worth. Among other things, the credit agreement provides that we may not pay cash dividends that would result in non-compliance with the financial covenants under the credit agreement or during an event of default under the credit agreement, except in the case of defaults other than payment defaults, for dividends in amounts necessary to maintain our REIT status. The revolving credit facility contains events of default customary for financings of this type, including failure to pay principal, interest and other amounts, materially incorrect representations or warranties, failure to observe covenants and other terms of the revolving credit facility, cross-defaults to other indebtedness, bankruptcy, insolvency, material judgments, certain ERISA violations, changes in control and failure to maintain REIT status, in some cases subject to customary grace periods.

On November 4, 2022, the credit agreement governing the revolving credit facility was amended to allow for repurchases of shares of the Company’s common stock, subject to certain limitations.

On November 12, 2021, we completed a private offering of $100.0 million of senior unsecured notes. Interest on the notes accrues at the fixed rate of 5.0% per annum, which is payable semi-annually on May 15 and November 15. The notes may be prepaid prior to their maturity date, subject to the payment of applicable premiums. The note purchase agreement governing the notes contains financial covenants that require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as other affirmative and negative covenants that may limit, among other things, our ability to incur liens and enter into mergers or transfer all or substantially all of our assets. The note purchase agreement also includes customary representations and warranties and customary events of default. The amounts outstanding under the notes will be due on November 15, 2026. We incurred fees of approximately $2.9 million in relation to the issuance of the notes, which are amortized to interest expense over the remaining life of the respective loan term.

The following table presents the carrying values of our senior unsecured notes as of the periods indicated:

(dollars in thousands)	December 31, 2022			December 31, 2021
Principal	$	100,000		$	100,000
Debt issuance costs		(2,861	)		(2,855	)
Amortization of debt issuance costs		650			78
Total notes, net	$	97,789		$	97,223

The following table summarizes the components of interest expense related to our senior unsecured notes and revolving credit facility for the periods indicated:

	Year Ended
	December 31, 2022						December 31, 2021
(dollars in thousands)	Amortization of Deferred Debt Issuance Costs		Interest on Borrowings		Undrawn Fees		Amortization of Deferred Debt Issuance Costs		Interest on Borrowings		Undrawn Fees
5.0% senior unsecured notes	$	572	$	4,986	$	—	$	78	$	694	$	—
Revolving credit facility		1,510		151		1,419		1,255		107		1,186
Total	$	2,082	$	5,137	$	1,419	$	1,333	$	801	$	1,186

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Stockholders' Equity and Earnings per Common Share

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

Stockholders' Equity and Earnings per Common Share

Note 9 - Stockholders’ Equity and Earnings per Common Share

Stockholders' Equity

Stockholders’ Voting Rights

Holders of our common stock are entitled to one vote for each share.

Equity Offering Program

On March 2, 2021, we entered into a distribution agreement with J.P. Morgan Securities LLC, Barclays Capital Inc., B. Riley Securities, Inc., JMP Securities LLC and Raymond James & Associates, Inc. as sales agents, to sell shares of our common stock having an aggregate gross sales price of up to $200,000,000, from time to time, through an “at-the-market” equity offering program (the “ATM Program”). We have no obligation to sell any shares under the ATM Program and sold no shares under the ATM Program during the year ended December 31, 2022 and 2021.

Stock Repurchase Authorizations

On November 7, 2022, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $75.0 million of its common stock, par value $0.001 per share. Repurchases under the stock repurchase program may be made at management’s discretion from time to time on the open market, in privately negotiated transactions or otherwise, in each case subject to compliance with all Securities and Exchange Commission rules and other legal requirements, and may be made in part under one or more Rule 10b5-1 plans, which permit stock repurchases at times when the Company might otherwise be precluded from doing so. The timing and amount of any repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors. There is no guarantee as to the exact number of shares that will be repurchased under the stock repurchase program, or that any repurchases will occur. In addition, the stock repurchase program may be suspended, extended or terminated by the Company at any time without prior notice. As of December 31, 2022, $70.0 million remained available for future repurchases.

Public and Private Warrants

As of December 31, 2022 and 2021 there were 41.7 million public warrants outstanding to purchase one-fourth of a share and 5.2 million private placement warrants outstanding to purchase one share of common stock. In the aggregate, we have outstanding warrants to purchase approximately 15.6 million shares of common stock at a price of $11.50 per whole share. Settlement of outstanding warrants will be in shares of our common stock, unless we elect (solely in our discretion) to settle warrants we have called for redemption in cash, and subject to customary adjustment in the event of business combinations and certain tender offers. Unless earlier redeemed, the public warrants will expire on November 19, 2024.

The liability for the private placement warrants was $0.02 million as of December 31, 2022 and is included in accounts payable and accrued liabilities in the consolidated balance sheet.

Earnings per Common Share

The table below presents the computation of basic and diluted net earnings per share of common stock for the periods presented:

	Year Ended
(dollars in thousands, except share and per share data):	December 31, 2022			December 31, 2021
Net (loss) income	$	(116,391	)	$	82,488
Basic weighted-average shares of common stock outstanding		132,841,196			132,579,289
Dilutive effect of share-based compensation – unvested restricted stock units (1)		—			87,213
Diluted weighted-average shares of common stock outstanding		132,841,196			132,666,502
Basic earnings per common share	$	(0.88	)	$	0.62
Diluted earnings per common share	$	(0.88	)	$	0.62

(1)Amounts exclude all potential common and common equivalent shares for periods when there is a net loss from continuing operations.

For the periods presented, the following common stock equivalents were excluded from the calculations of diluted earnings per share because their effect would have been anti-dilutive:

	Year Ended
	December 31, 2022		December 31, 2021
Weighted-average restricted stock units outstanding		27,091		199,709
Unexercised public warrants and private placement warrants		15,604,192		15,604,304
Total stock equivalents excluded		15,631,283		15,804,013

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Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 10 - Income Taxes

The Manager has elected to be treated as a TRS and this election applies to the wholly-owned subsidiaries of the Manager, including the Private REIT Manager. Having TRSs permit us to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Internal Revenue Code of 1986, as amended (the “Code”) and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, we will continue to maintain the qualification as a REIT.

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

Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Code, which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of assets and the sources of income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state, and local income tax on our taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of December 31, 2022 and 2021, we were in compliance with all REIT requirements.

Based on our evaluation, we concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements of a contingent tax liability for uncertain tax positions. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in the accompanying consolidated financial statements.

The state and local tax jurisdictions for which we are subject to tax-filing obligations recognize our status as a REIT, and therefore, we generally do not pay income tax in such jurisdictions. We may, however, be subject to certain minimum state and local tax filing fees as well as certain excise or business taxes. Our TRSs are subject to U.S. federal, state and local income taxes.

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Equity Incentive Plan

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Equity Incentive Plan

Note 11 - Equity Incentive Plan

Stock Incentive Plan

The Broadmark Realty 2019 Stock Incentive Plan (the “Plan”) allows for the issuance of up to 5,000,000 stock options, stock appreciation rights, restricted stock awards, restricted stock units or other equity-based awards or any combination thereof to the directors, employees, consultants or any other party providing services to us. The Plan is administered by the compensation committee of our board of directors. As of December 31, 2022, there were 3,291,351 shares available to be awarded under the Plan.

Awards made to our employees and directors typically consist of restricted stock units (“RSUs”) with only a service vesting condition. Awards to certain of our employees contain both service vesting and market conditions and are referred to as performance restricted stock units (“pRSUs”).

The RSUs granted under the Plan generally vest from one to three years depending on the terms of the specific award. All RSUs awarded will be settled upon vesting in shares of our common stock.

For the Company's pRSUs, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of market-based performance conditions. The market-based performance conditions are based on the Company's achievement of a relative total shareholder return (“TSR”) performance requirement, on a percentile basis, compared to a defined group of peer companies over a three year performance period, or contingent upon achieving specific stock price milestones over a five year performance period.

The Company uses a Monte Carlo simulation model to determine the grant-date fair value of awards with market-based performance conditions. The weighted average fair value and assumptions used to value the pRSU awards granted with market-based performance conditions are as follows:

	Year Ended
	December 31, 2022			December 31, 2021
Performance share fair value	$	6.74		$	8.20
Risk-free interest rate		1.74	%		0.27	%
Expected volatility		30.48	%		25.71	%
Expected life (in years)		2.85			2.77
Expected dividend yield		9.82	%		8.13	%

Dividend equivalents are not accrued or paid on unvested equity awards that were granted to employees, executive officers and directors and accordingly those unvested equity awards are not considered participating securities.

If an award granted under the Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid will again become available for the issuance of additional awards.

The following tables summarize the activity related to RSUs and pRSUs during 2022:

	Shares			Weighted Average Grant Date Fair Market Value
Unvested RSUs outstanding as of December 31, 2020		434,143
Granted		295,063		$	10.08
Vested		(231,053	)	$	10.61
Forfeited		(13,837	)	$	10.58
Unvested RSUs outstanding as of December 31, 2021		484,316
Granted		750,038		$	6.02
Vested		(285,853	)	$	10.01
Forfeited		(200,589	)	$	7.31
Unvested RSUs outstanding as of December 31, 2022		747,912

	Shares			Weighted Average Grant Date Fair Market Value
Unvested pRSUs outstanding as of December 31, 2020		—
Granted		113,958		$	8.20
Unvested pRSUs outstanding as of December 31, 2021		113,958
Granted		276,679		$	6.74
Forfeited		(182,976	)	$	7.07
Unvested pRSUs outstanding as of December 31, 2022		207,661

As of December 31, 2022, there was $4.1 million of net unrecognized compensation cost related to unvested stock-based compensation arrangements. This compensation will be recognized on a straight-line basis over a weighted-average recognition period of 1.5 years.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Note 12 - Commitments and Contingencies

The following table illustrates our contractual obligations and commercial commitments by due date as of December 31, 2022:

(dollars in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Construction holdbacks(1)	$	429,920	$	261,243	$	168,677	$	—	$	—
Operating lease obligations(2)		9,930		887		2,018		2,140		4,885
Total	$	439,850	$	262,130	$	170,695	$	2,140	$	4,885

(1)The funding timing and amounts of construction holdbacks are uncertain as these commitments relate to loans for construction costs and depend on the progress and performance of the underlying projects. In addition, $22.8 million of holdbacks are excluded from this table as they represent capital expenditures required to complete construction for defaulted loans that we are no longer required to pay.

(2)The total operating lease obligation includes $2.4 million of imputed interest.

Construction Loans

Our commitments and contingencies include usual obligations incurred by real estate lending companies in the normal course of business, including construction holdbacks as disclosed in Note 3.

Lease Commitments

On March 18, 2020, we entered into a non-cancelable operating lease agreement for our office space in Seattle with an original lease period expiring in January 2032, which includes an option to extend the lease term for an additional five years. We have concluded that the renewal option is not reasonably certain of being exercised, therefore, the renewal is not included in the right of use asset and lease liability. The lease commencement date was in the first quarter of 2021. The total future cash payments included in the measurement of our operating lease liabilities, net of lease incentives, was $11.7 million at inception of the lease. The right-of-use assets obtained in exchange for the new operating lease obligation and the tenant improvements were $6.4 and $2.0 million, respectively. The discount rate for the operating lease was 6%, resulting in an initial imputed interest amount of $3.3 million.

Legal Proceedings

From time to time, we are named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, we do not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect our results of operations, financial condition or cash flows.

Concentration Risk

Our loan portfolio as of December 31, 2022 is generally secured by first deed of trust liens on residential and commercial real estate located in 20 states and the District of Columbia. Our loan portfolio is also concentrated within ten counties, the largest being King County in Washington. As of December 31, 2022 and 2021, the top ten counties make up 46.7% of the total committed amount of loans in our total portfolio.

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Employee Benefit Plan

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Employee Benefit Plan

Note 13 - Employee Benefit Plan

In 2022, we adopted a defined contribution 401(k) retirement plan covering Broadmark employees who have met certain eligibility requirements (the “Broadmark 401(k) Plan”). Eligible employees may contribute pre-tax compensation up to a maximum amount allowable under Internal Revenue Service limitations. Employee contributions and earnings thereon vest immediately. We currently match 3.5% on employee contributions of up to 6% of their annual compensation. The total expense related to the Broadmark 401(k) Plan was $0.3 million for the year ended December 31, 2022.

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Related Party Transactions

12 Months Ended

Dec. 31, 2022

Related Party Transactions [Abstract]

Related Party Transactions

Note 14 - Related Party Transactions

In August 2021, in connection with the liquidation of the Private REIT, all participations in mortgage notes receivable held by the Private REIT were offered to and purchased for cash by the Company at the settlement value which approximated fair value of $43.5 million. As of September 30, 2021, the Private REIT had distributed the net assets in excess of cash required to discharge liabilities (including accrued liabilities for liquidation costs) to its investors based on their relative percentage interests. The Private REIT Manager, acting as liquidator, was responsible for discharging the Private REIT’s remaining liabilities and winding up its affairs, which was completed in the fourth quarter of 2021.

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Subsequent Events

12 Months Ended

Dec. 31, 2022

Subsequent Events [Abstract]

Subsequent Events

Note 15 - Subsequent Events

Dividend Declaration

On January 15, 2023, our board of directors declared a monthly cash dividend of $0.035 per common share payable on February 15, 2023 to stockholders of record as of January 31, 2023, and on February 15, 2023, our board of directors declared a cash dividend of $0.035 per common share payable on March 15, 2023 to stockholders of record as of February 28, 2023.

Investment in Real Property

On January 24, 2023, the Company acquired via a deed-in-lieu of foreclosure an 84,378 square foot luxury apartment property in Colorado. The property previously served as collateral for a loan held for investment with a carrying value of $33.4 million, net of a CECL reserve of $2.8 million at December 31, 2022.

On February 9, 2023 the Company acquired via a deed-in-lieu of foreclosure a 5.4 acre property in Illinois. The property previously served as collateral for a loan held for investment with a carrying value of $15.0 million, net of a CECL reserve of $0.3 million at December 31, 2022.

On February 10, 2023, the Company acquired via foreclosure a 70.6 acre property in Utah. The property previously served as collateral for a loan held for investment with a carrying value of $8.5 million, net of a CECL reserve of $0.3 million at December 31, 2022.

On February 15, 2023, the Company acquired via foreclosure a 123.4 acre property in Colorado. The property previously served as collateral for a loan held for investment with a carrying value of $9.5 million, net of a CECL reserve of $0.4 million at December 31, 2022.

Agreement and Plan of Merger

On February 26, 2023, the Company, Ready Capital Corporation (“Ready Capital”) and Ready Capital Merger Sub, LLC (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Agreement”), pursuant to which the Company will merge with and into Merger Sub and each share of the Company’s common stock will be converted into 0.47233 shares of Ready Capital common stock. The transaction is expected to close during the second quarter of 2023, subject to the respective approvals by the stockholders of Ready Capital and the Company and other customary closing conditions. Ready Capital is a multi-strategy real estate finance company that originates, acquires finances, and services small-to-medium balance commercial loans and is headquartered in New York, New York.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements include Broadmark Realty Capital Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).

Principles of Consolidation

Principles of Consolidation

Broadmark Realty consolidates those entities in which it has control over significant operating, financial and investing decisions of the entity, as well as those entities deemed to be variable interest entities (“VIEs”), if any, in which Broadmark Realty is determined to be the primary beneficiary. Broadmark Realty is not the primary beneficiary of, and therefore does not consolidate, any VIEs in the accompanying consolidated financial statements.

The Private REIT was determined to be a voting interest entity for which we, through our wholly-owned subsidiary who previously acted as manager with no significant equity investment, did not hold a controlling interest in and, therefore, did not consolidate. Furthermore, the Private REIT's participation in loans originated by us met the characteristics of a participating interest and the criterion for sale accounting in accordance with GAAP and therefore, the loans were derecognized from our consolidated financial statements. The Private REIT was liquidated in August 2021 and all participations in mortgage notes receivable held by the Private REIT were purchased for cash by the Company at the settlement value which approximated fair value.

Reclassifications

Reclassifications

Certain amounts in our prior period consolidated financial statements have been reclassified to conform to the presentation of our current period consolidated financial statements. These reclassifications had no effect on our previously reported net income or stockholders’ equity.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The most significant estimates relate to the expected credit losses on our loans, the fair value of financial instruments, goodwill impairment, exit prices for collateral dependent loans and the fair value of investments in real property. Accordingly, actual results could differ from those estimates.

For certain real properties, where a recent appraisal is either unavailable or not most representative of fair value, the fair value of the “as complete” property is based on a broker opinion of value including a capitalized income analysis and replacement cost analysis considering market rents, vacancy rates, capitalization rates, land cost comparisons, market trends and economic conditions. Depending on the stage of the underlying property, we also consider estimated costs to complete remaining construction and to lease up the finished property. The assessment of fair value of real property is subject to uncertainty and, in certain cases, sensitive to the selection of comparable properties.

Certain Significant Risks and Uncertainties

Certain Significant Risks and Uncertainties

In the normal course of business, we encounter two primary types of economic risk in the form of credit and market risks. Credit risk is the risk of default on our investment in mortgage notes receivable resulting from a borrower's inability or unwillingness to make contractually required payments. Market risk is the risk of declining real estate values for the collateral underlying our loans which may make it more difficult for existing borrowers to remain current on their payment obligations, reduce the speed or ability for our loans to be repaid through the sale or refinance of the collateral and increase the likelihood that we will incur losses on our loans in the event of default as the value of collateral may be insufficient to cover our investment in the loan. We believe that the carrying values of our loans reasonably consider these risks.

In addition, we are subject to significant tax risks. If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal corporate income tax, which could be material.

We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: the economy in the areas we operate; the stability of the real estate market and the impact of interest rate changes; competition in our market; changes in government regulation affecting our business; public health crises, like the COVID-19 pandemic; natural disasters, catastrophic events and the physical effects of climate change; and our ability to attract and retain qualified employees and key personnel, among other things.

Reportable Segments

Reportable Segments

We operate the business as one reportable segment. Our principal business activities are related to the origination underwriting and serving of loans secured by real estate as well the investment in real property held for sale and use.

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. We have a cash management sweep account repurchase agreement, whereby our bank nightly sweeps cash in excess of $750,000, sells us specific U.S. government agency securities and then repurchases these securities the next day.

We maintain our cash and cash equivalents with financial institutions, which are insured up to a maximum of $250,000 per account as of December 31, 2022 and 2021. The balances in these accounts may exceed the insured limits. There were no restrictions on cash as of December 31, 2022 or 2021.

Mortgage Notes Receivable

Mortgage Notes Receivable

Mortgage notes receivable (referred to herein as “mortgage notes receivable”, “construction loans”, “loans”, or “notes”) are classified as held for investment, as we have the intent and ability to hold until maturity or payoff and are carried in the consolidated balance sheets at amortized cost, net of construction holdbacks, interest reserves, allowance for credit losses and deferred origination and amendment fees as described in Note 3.

Current Expected Credit Losses Allowance

Current Expected Credit Losses Allowance

We adopted the current expected credit loss (“CECL”) standard during the year ended December 31, 2020. The initial CECL allowance adjustment of $2.0 million was recorded effective January 1, 2020 as a cumulative-effect of change in accounting principle through a direct charge to accumulated deficit on our consolidated statements of stockholders’ equity; however, subsequent changes to the CECL allowance are recognized in our consolidated statements of operations.

We record an allowance for credit losses in accordance with the CECL standard on our loan portfolio, including unfunded construction holdbacks, on a collective basis by assets with similar risk characteristics. In addition, for assets that are classified as collateral dependent where (1) we have begun a foreclosure, (2) bankruptcy is declared, (3) we have elected to pursue the appointment of a receiver, (4) Loan-to-value (“LTV”) or current LTV is greater than 100% or (5) we intend to obtain ownership of the property, we continue to record loan specific allowances based on the fair value of the collateral for expected credit losses under the CECL standard. Given the short-term nature of our loans, we evaluate the most recent external appraisal and, depending on the age of the appraisal, may order a new appraisal or, where available, will evaluate against existing comparable sales or other pertinent information to estimate the fair value of the collateral for such loans.

The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. The Company utilizes a probability of default/loss given default (“PD/LGD”) method for estimating current expected credit losses.

In accordance with the PD/LGD method, an annual historical loss rate is applied to the amortized cost of an asset or pool of assets over the remaining expected life. The PD/LGD method requires consideration of the timing of expected future funding of existing commitments and repayments over each asset’s remaining life. An annual loss factor, adjusted for macroeconomic estimates, is applied over each subsequent period and aggregated to arrive at the CECL allowance.

In determining the CECL allowance, we considered various factors including (1) historical loss experience in our portfolio, (2) historical loss experience in the commercial real estate lending market, (3) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral (4) timing of expected pay offs including prepayments and extensions where reasonably expected and (5) our current and future view of the macroeconomic environment. We utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus short-term extensions of one to three months that are reasonably expected for construction loans.

Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio. The CECL allowance related to the principal outstanding is presented within mortgage notes receivable, net and for unfunded commitments is within accounts payable and accrued liabilities in our consolidated balance sheets.

We have made an accounting policy election to exclude accrued interest receivable, included in interest and fees receivable, net on our consolidated balance sheets, from the amortized cost basis of the related mortgage notes receivable in determining the CECL allowance, as any uncollectable accrued interest receivable is written off either when the collateral underlying the loan is sold or upon transfer to real estate owned. No interest income is recognized on mortgage notes receivable that are in contractual default unless the collectability of all principal is not in doubt and collection of accrued amounts is reasonably assured or paid in cash. In addition, if a loan is deemed collateral dependent or high risk, it is placed on non-accrual status with interest income recognized on a cash-basis where principal collection is not in doubt.

Deferred Income

Deferred Income

Deferred income represents the amount of our origination, loan servicing and amendment fees that have been deferred and will be recognized in income over the contractual maturity of the underlying loan. Origination and loan servicing fees are included in the total commitment to the borrower and financed at the time of loan origination. Amendment fees are either included in the total commitment to the borrower and financed at the time of the loan amendment or are billed to the borrower when the loan is amended and not capitalized into the principal outstanding. Deferred origination, loan servicing and amendment fees capitalized into the principal outstanding are included within mortgage notes receivable, net on the consolidated balance sheets. Deferred amendment fees that are not included in the principal outstanding are presented within interest and fees receivable, net in the consolidated balance sheets.

Interest and Fees Receivable

Interest and Fees Receivable

Interest on performing loans is accrued and recognized as interest income at the contractual rate of interest, or at the contractual rate of monthly minimum interest, if applicable. Extension fees are charged when we agree to extend the maturity dates of loans. In addition, late fees are charged when borrower payments are contractually past due. We monitor each note’s outstanding interest and fee receivables and, based on historical performance, generally reserve against the balance after a receivable is greater than 60 days past due unless collectability of all amounts due is reasonably assured.

Real property

Real Property

To maximize recovery against a defaulted loan, we may assume legal title or physical possession of the underlying collateral through foreclosure or the execution of a deed in lieu of foreclosure. The properties are initially measured at fair value. If the fair value of the property is lower than the carrying value of the loan, the difference is recognized as current expected credit loss reserves. In the case that there is a loss in excess of the cumulative reserve on the loan, the additional loss is recognized as a realized principal loss which is included as part of our provision for credit losses, net on our consolidated statements of operations. If the collateral value exceeds the carrying value of the loan, we then record some or all the unpaid, accrued interest and fees to the carrying value of the property.

Real Property Held for Sale

Real property is classified as held for sale in the period when we (1) commit to a plan and have the authority to sell the asset in its current condition, (2) have initiated an active marketing plan to sell the asset at a price that is reflective of its current fair value and (3) the sale of the asset is both probable and expected to qualify for full sales recognition within a period of 12 months. Real property classified as held for sale is held at the lower of cost or fair value at the time of acquisition and is evaluated for subsequent decreases in fair value on a quarterly basis. Any subsequent decreases in value are recorded as impairment in real property in our consolidated statements of operations. Depreciation is not recorded on assets classified as held for sale and operating and holding expenditures are charged to expense when incurred.

Based on a change in circumstances, we may have a change to a plan of sale and decide not to sell real property previously classified as held for sale, in which case we would reclassify as held for use. Upon reclassification to held for use, the real property is measured at the lower of (1) its carrying amount before the asset was classified as held for sale, adjusted for any depreciation or amortization expense that would have been recognized had the assets continued to be classified as held for use, or (2) the fair value at the date of the subsequent decision not to sell.

Real Property Held for Use

Properties that are classified as held for use are carried at cost less accumulated depreciation. We evaluate our real property held for use for impairment at the time of acquisition and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If an impairment indicator exists, we evaluate the undiscounted net cash flows that are expected to be generated by the property, including any estimated proceeds from the eventual disposition of the property. Based upon the analysis, if the carrying value of a property exceeds its undiscounted net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property. In evaluating and/or measuring impairment, we consider, among other things, current and estimated future cash flows associated with each property, market information for each sub-market, including, where applicable, competition levels, foreclosure levels, leasing trends, occupancy trends, lease or room rates, and the market prices of similar properties recently sold or currently being offered for sale and other quantitative and qualitative factors. Another key consideration in this assessment is our assumption about the highest and best use of the real estate investments and our intent and ability to hold them for a reasonable period that would allow for the recovery of their carrying values.

Costs related to acquisition, development, construction and improvements are capitalized to the extent the investment in the real property held for use does not exceed the fair value less estimated costs to sell. Expenditures for repairs and maintenance are charged to expense when incurred.

Once construction is complete and the property is held available for occupancy, real property held for use is depreciated using the straight-line method over the estimated useful life of the property. Depreciation expense is no longer recorded once the real property is classified as held for sale.

Leases

Leases

Our office space in Seattle, Washington is subject to an operating lease. The right of use assets and lease liabilities in our consolidated balance sheets relate to this lease. The lease agreement includes both lease components (e.g., fixed rent) and non-lease components (e.g., common-area maintenance). We account for the lease and non-lease components as a single component.

Right of use assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of the total lease payments not yet paid, including lease incentives not yet received, with the right of use assets further adjusted for any prepaid or accrued lease payments, lease incentives received and/or initial direct costs incurred. Our lease arrangement also includes variable payments for costs such as common-area maintenance, utilities, taxes or other operating costs, which are based on a percentage of actual expenses incurred. These variable lease payments are excluded from the measurement of the right of use assets and lease liabilities.

When our lease includes an option to extend the lease term, we consider several factors in determining if a renewal option is reasonably certain of being exercised at lease commencement, including, but not limited to, contract-based, asset-based and entity-based factors. We reassess the term of the existing lease if there is a significant event or change in circumstances within our control that affects whether we are reasonably certain to exercise the option to extend the lease. Examples of such events or changes include construction of significant leasehold improvements or other modifications or customizations to the underlying asset, relevant business decisions or subleases.

As our lease did not provide an implicit rate, we used our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

We recognize lease expense for our operating lease on a straight-line basis over the lease term. Variable lease payments are generally recognized when incurred. These expenses are included in general and administrative expenses in the consolidated statements of operations.

Goodwill

Goodwill

Goodwill represents the excess of the cost of an acquired business over the fair value of the assets acquired at the date of acquisition and is not amortized. Goodwill is assessed for impairment annually in the fourth quarter or more frequently if events occur or circumstances change that indicate an impairment may exist. Our assessment begins with an evaluation of qualitative factors, including macroeconomic conditions, industry and market considerations, current and projected financial performance, changes in strategy and market capitalization to determine whether it is more likely than not that the fair value of our single reporting unit exceeds the carrying value. A high degree of judgment is required in evaluating the qualitative factors. If we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative test is then performed. The quantitative test consists of comparing the estimated fair value of the reporting unit to its carrying amount, including goodwill, using income or market approaches. If the estimated fair value of the reporting unit is less than the carrying value including goodwill, an impairment write-down of goodwill would be required for the excess of carrying value over the estimated fair value. When market comparables or observable market values are not meaningful or not available, we estimate the fair value of a reporting unit using only the income approach. Estimating the fair value of our reporting unit requires the use of inputs and assumptions for which there is inherent uncertainty.

Other Assets

Other Assets

Other assets primarily consist of deferred financing costs related to our revolving credit facility, fixed assets, prepaid insurance and other operating receivables.

Fixed Assets

Fixed Assets

Fixed assets, which are included in other assets in the accompanying consolidated balance sheets are stated at cost, less accumulated depreciation. Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/or useful life are capitalized. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized. Depreciation and amortization are recorded on the straight-line basis over the estimated useful life of the assets. For computer equipment, office equipment, furniture and fixtures the useful lives range from three to seven years. For leasehold improvements, we amortize over the shorter of expected useful life or lease term.

Deferred Financing Costs

Deferred Financing Costs

Deferred financing costs that are included in other assets represent direct costs associated with the execution of the revolving credit facility. Such costs are included in other assets because the revolving credit facility has no principal outstanding as of December 31, 2022 and there is no recognized debt liability. These costs are amortized on the straight-line basis over the initial term of our revolving credit facility.

Intangible Assets

Intangible Assets

We record intangible assets at fair value at the acquisition date and amortize their value into expense over the expected useful life. All of our intangible assets relate to the value of customer relationships. As of December 31, 2022, our intangible assets have been fully amortized.

Debt, Policy

Senior Unsecured Notes

Senior unsecured notes are recorded at the face amount of the notes net of unamortized issuance costs.

Debt Issuance Costs

Debt issuance costs represent direct costs associated with the issuance of a debt instrument that are deferred and amortized over the initial term of our debt instruments. Debt issuance costs are reported in the consolidated balance sheets as a direct deduction from the face amount of the debt issued. Costs that do not qualify as debt issuance costs are expensed as incurred.

Interest Income

Interest Income

Interest income on mortgage notes receivable is accrued based on contractual rates applied to the principal balance, unless there is a minimum interest provision in the mortgage note. Certain construction loans provide for minimum interest provisions, to which the contractual rate applies, which are typically between 50% and 70% of the face amount of the note until the actual outstanding principal exceeds the minimum threshold. Our loans originated since the second quarter of 2021 typically do not provide for minimum interest provisions.

Mortgage notes receivable can be placed in contractual default status for any of the following reasons: (1) interest receivable is 60 days past due, (2) the loan was not repaid at the maturity date (3) there is a breach of terms in the loan documents or (4) the value of the collateral is less than the loan amount.

The accrual of interest income is suspended when a loan is in contractual default unless the interest is paid in cash or collectability of all amounts due is reasonably assured. In addition, we may place a loan on non-accrual status when the loan is either deemed collateral dependent or high risk. The following criteria are used to determine if a loan is deemed high risk: (1) total outstanding interest and fee receivables are greater than 15% of the total commitment and outstanding face rate interest receivable if 60 days past due, (2) there is a significant decline in the value of the collateral due to entitlement, engineering or project changes, (3) introduction of significant uncertainty due to the project or collateral type, (4) significant decline in value of collateral due to market conditions, (5) significant damage or loss to the collateral, (6) adverse claim against the property or borrower and (7) unfunded construction cost overruns. Interest previously accrued may be reversed at that time, and such reversal is offset against interest income. The accrual of interest income resumes only when the loans are no longer deemed collateral dependent or high risk, with collectability being reasonably assured.

Fee Income

Fee Income

We charge loan origination and loan servicing fees in conjunction with origination. Amendment fees are charged when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan for the transition from horizontal development to vertical construction. We defer and amortize loan origination, loan servicing and amendment fees over the contractual terms of the loans. Extension fees are charged when we agree to extend the maturity dates of loans and we charge fees on past due receivables. Extension and late fees are recognized when billed to the borrower.

We charge inspection fees, which we use to hire independent inspectors to report on the status of construction projects. These fees are earned and recognized upon each construction draw request.

Interest Expense

Interest Expense

Interest expense on debt obligations is accrued based on the note rate applied to the face amount of the debt outstanding. Amortization of debt issuance costs and deferred financing costs over the initial term of the debt instruments is reported as interest expense in the consolidated statements of operations.

Share-Based Payments

Stock‑Based Compensation

We measure compensation expense for all share-based awards at fair value on the date of grant and recognize compensation expense over the service period on a straight-line basis for awards expected to vest, which is generally three years for employees and one year for directors.

Awards made to our employees and directors, typically consist of restricted stock units (“RSUs”). Employee stock-based compensation expense is included in compensation and employee benefits and director stock-based compensation expense is included in general and administrative in the consolidated statement of operations. For awards with only a service vesting condition, the fair value of the award is based on the grant date closing price of our common stock less the present value of expected dividends over the requisite service period, as the awards are not entitled to dividends. For these awards, we recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award, subject to periodic adjustments to ensure that the cumulative amount of expense recognized through the end of any reporting period is at least equal to the portion of the grant date fair value of the award that has vested through that date, and we account for forfeitures prospectively as they occur. For awards that contain both service vesting and market conditions, referred to as performance restricted stock units (“pRSUs”), we use a Monte Carlo simulation model to calculate the grant date fair value. For these market-condition awards, regardless of the outcome of the market condition, we recognize stock-based compensation expense on a straight-line basis over the longest of explicit and derived service periods, and we account for forfeitures prospectively as they occur. If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate or increase any remaining unrecognized or previously recorded stock-based compensation expense.

Income Taxes

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes (the “Code”). As a REIT, we generally are not subject to U.S. federal income taxes on net income we distribute to our stockholders. We intend to make timely distributions sufficient to satisfy the annual distribution requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular corporate tax rates. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and U.S. federal income and excise taxes on our undistributed income. Our TRSs are subject to U.S. federal income taxes.

Earnings per Share

Earnings per Share (“EPS”)

Basic EPS is calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing the net (loss) income attributable to common stockholders by the weighted average number of shares of common stock outstanding determined for the basic EPS computation plus the effect of any dilutive securities. We include unvested shares of restricted stock in the computation of diluted EPS by using the treasury stock method. We include unvested performance units as contingently issuable shares in the computation of diluted EPS once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted EPS calculation.

Recent Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for troubled debt restructurings (“TDR”) for creditors that have adopted the CECL standard and requires enhanced disclosures for loan modifications made to borrowers experiencing financial difficulty in the form of interest rate reductions, principal forgiveness, other-than-insignificant payment delays, or term extensions. In addition, the new guidance requires presentation in the vintage disclosures of current-period gross write-offs by year of origination. The guidance is effective for the Company in the first quarter of 2023. Entities are able to early adopt the guidance and have the ability to early adopt the TDR enhancements separately from the vintage disclosures. We have not yet adopted this ASU. While the guidance will result in expanded disclosures, we do not believe the adoption of this guidance will have a material impact on our financial position, results of operation or cash flows.

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Mortgage Notes Receivable (Tables)

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Schedule of mortgage notes receivable

The following table reconciles outstanding mortgage loan commitments to the outstanding balance of mortgage notes receivable as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Total loan commitments	$	1,417,325	$	1,489,055
Less:
Construction holdbacks(1)		452,690		524,462
Interest reserves		33,633		39,880
Total principal outstanding for our mortgage notes receivable		931,002		924,713
Less:
Allowance for credit losses(2)		41,492		10,394
Deferred origination and amendment fees		7,560		12,969
Mortgage notes receivable, net	$	881,950	$	901,350

(1)As of December 31, 2022 and 2021 this amount includes $22.8 and $17.3 million, respectively, of construction holdbacks for defaulted loans that we are no longer required to pay. These amounts are included in the loan commitment totals.

(2)As of December 31, 2022 and 2021, $1.5 and $0.9 million, respectively, of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

When a loan is deemed collateral dependent or high risk, it is placed on

Schedule of carrying value of loans in contractual default status by collateral type and the LTV

The following tables show the carrying value of loans in contractual default status by collateral type and the LTV of the loans in contractual default at the dates indicated:

	December 31, 2022
(dollars in thousands)	Number of Loans		Carrying Value		% of Portfolio
Collateral Type
Residential lots		8	$	71,306		28.5	%
Condos		3		42,237		16.9
Hotel		2		28,919		11.5
Entitled Land		2		22,447		9.0
Townhomes		5		21,175		8.5
Single Family Housing		11		20,335		8.1
Mixed Use		4		14,795		5.9
Unentitled Land		1		10,496		4.2
Apartments		2		6,947		2.8
Offices		1		6,288		2.5
Retail		1		5,443		2.2
Total		40	$	250,388		100.0	%

	December 31, 2022
(dollars in thousands)	Carrying Value		% of Portfolio
LTV(1)
0 - 40%	$	3,969		1.6	%
41 - 60%		91,201		36.4
61 - 80%		139,537		55.7
Above 80%		15,681		6.3
Total	$	250,388		100.0	%

(1)Represents current LTV as of origination or latest amendment. At December 31, 2022, the weighted average LTV for loans in contractual default using the latest appraisal was 124.8%. The weighted average LTV of our loans in contractual default net of our allowance for credit losses was approximately 84.9%.

	December 31, 2021
(dollars in thousands)	Number of Loans		Carrying Value		% of Portfolio
Collateral Type
Condos		4	$	47,741		27.4	%
Senior Housing		1		25,337		14.6
Residential lots		3		19,541		11.2
Townhomes		6		18,870		10.8
Entitled Land		1		17,335		10.0
Mixed Use		4		15,858		9.1
Hotel		1		14,583		8.4
Unentitled Land		2		5,403		3.1
Apartments		2		5,341		3.1
Single Family Housing		7		3,973		2.3
Total		31	$	173,984		100.0	%

	December 31, 2021
(dollars in thousands)	Carrying Value		% of Portfolio
LTV (1)
0 - 40%	$	22,737		13.1	%
41 - 60%		26,902		15.5
61 - 80%		110,548		63.5
Above 80%		13,797		7.9
Total	$	173,984		100.0	%

(1)Represents LTV as of origination or latest amendment.

Schedule of activity in the CECL Allowance

The following tables summarize the activity in the CECL allowance during the years ended December 31, 2022 and 2021:

	CECL Allowance
(dollars in thousands)	Funded			Unfunded(2)		Total
CECL allowance as of December 31, 2020	$	10,590		$	—	$	10,590
Provision for credit losses, net		5,275			904		6,179
Charge-offs(1)		(5,471	)		—		(5,471	)
CECL allowance as of December 31, 2021		10,394			904		11,298
Provision for credit losses, net		37,696			570		38,266
Charge-offs(1)		(6,598	)		—		(6,598	)
CECL allowance as of December 31, 2022	$	41,492		$	1,474	$	42,966

(1)Charge-offs result from either loan repayments where the proceeds are less than the principal outstanding or transfers to investment in real property at the time that we take ownership of the property where the fair values of the underlying collateral are less than the principal outstanding.

(2)CECL allowance related to unfunded commitments is presented as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

As of December 31, 2022, the funded and unfunded CECL allowance aggregated $43.0 million, which represents an increase of $38.3 million for the year ended December 31, 2022. This increased allowance reflects increased loan specific allowances for certain high risk and collateral dependent loans where the fair value of the underlying collateral was less than the amortized cost of the loan, as well as increased uncertainty in the macroeconomic outlook, including weakening credit indicators, inflationary pressures, rising interest rates and market volatility.

Schedule of composition of loan portfolio

The following tables allocate the carrying value of our loan portfolio based on our internal credit quality indicators in assessing estimated credit losses and vintage of origination at the dates indicated:

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
Construction Type
Vertical Construction	$	552,468			59.8	%	$	352,355	$	128,130	$	33,895	$	1,928	$	36,160
Horizontal Development		221,078			24.1			144,082		68,201		8,795		—		—
Investment		46,536			5.0			46,536		—		—		—		—
Rehabilitation		39,422			4.3			12,936		15,009		11,477		—		—
Land Entitlement		26,132			2.8			4,146		21,986		—		—		—
Bridge		22,611			2.4			19,450		937		—		2,224		—
Acquisition		15,195			1.6			13,454		1,741		—		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(2)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
Collateral Type
Apartments	$	191,708			20.8	%	$	134,816	$	49,944	$	5,020	$	1,928	$	—
Single Family Housing		133,702			14.5			124,218		9,245		239		—		—
Townhomes		106,888			11.6			81,393		24,701		794		—		—
Residential Lots		104,100			11.3			56,675		38,630		8,795		—		—
Entitled Land		76,251			8.3			54,265		21,986		—		—		—
Condos		71,975			7.8			29,738		2,515		3,562		—		36,160
Commercial		58,515			6.3			13,838		44,677		—		—		—
Mixed Use		50,127			5.4			6,209		30,217		11,477		2,224		—
Hotel		30,221			3.3			14,116		—		16,105		—		—
Offices		18,467			2.0			12,179		—		6,288		—		—
Unentitled Land		17,262			1.9			16,325		937		—		—		—
Senior Housing		16,595			1.8			16,595		—		—		—		—
Duplex		13,639			1.5			13,639		—		—		—		—
Commercial Other		11,411			1.2			—		11,411		—		—		—
Retail		9,071			1.0			5,443		1,741		1,887		—		—
Quadplex		8,932			1.0			8,932		—		—		—		—
Commercial Lots		4,018			0.4			4,018		—		—		—		—
Triplex		560			0.1			560		—		—		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(2)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2022						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2022		2021		2020		2019		Prior
LTV (2)
0 - 40%	$	26,053			2.8	%	$	22,544	$	3,509	$	—	$	—	$	—
41 - 45%		29,025			3.1			7,039		21,986		—		—		—
46 - 50%		42,267			4.6			22,524		13,455		6,288		—		—
51 - 55%		144,649			15.7			76,978		58,876		8,795		—		—
56 - 60%		107,098			11.6			98,691		8,407		—		—		—
61 - 65%		456,743			49.5			284,722		112,569		21,364		1,928		36,160
66 - 70%		93,104			10.1			71,638		16,561		2,681		2,224		—
71 - 75%		4,280			0.5			4,280		—		—		—		—
76- 80%		2,540			0.3			2,540		—		—		—		—
Above 80%		17,683			1.9			2,003		641		15,039		—		—
Total		923,442			100.0	%	$	592,959	$	236,004	$	54,167	$	4,152	$	36,160
CECL allowance(3)		(41,492	)
Carrying value, net	$	881,950

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

(3)Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
Construction Type
Vertical Construction	$	478,475			52.5	%	$	234,861	$	191,896	$	1,177	$	2,491	$	47,789	$	261
Horizontal Development		196,543			21.5			169,041		27,502		—		—		—		—
Acquisition		96,937			10.6			96,937		—		—		—		—		—
Investment		65,703			7.2			42,509		2,101		—		3,608		17,485		—
Rehabilitation		27,023			3.0			11,320		15,703		—		—		—		—
Land Entitlement		24,529			2.7			24,529		—		—		—		—		—
Bridge		22,534			2.5			18,072		2,537		1,925		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(2)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
Collateral Type
Residential Lots	$	111,644			12.2	%	$	85,219	$	26,425	$	—	$	—	$	—	$	—
Apartments		107,765			11.8			38,232		68,356		1,177		—		—		—
Townhomes		93,300			10.2			51,240		28,979		—		1,017		11,803		261
Mixed Use		85,929			9.5			53,530		30,474		1,925		—		—		—
Single Family Housing		87,902			9.6			84,703		3,049		—		—		150		—
Condos		64,492			7.1			8,805		18,227		—		1,474		35,986		—
Commercial		61,592			6.8			61,592		—		—		—		—		—
Senior Housing		61,236			6.7			35,899		25,337		—		—		—		—
Storage		56,481			6.2			56,481		—		—		—		—		—
Unentitled Land		46,019			5.0			42,411		—		—		3,608		—		—
Entitled Land		45,098			4.9			27,763		—		—		—		17,335		—
Hotel		31,665			3.5			4,886		26,779		—		—		—		—
Offices		15,348			1.7			8,280		7,068		—		—		—		—
Commercial Lots		10,227			1.1			6,670		3,557		—		—		—		—
Quadplex		9,769			1.1			9,769		—		—		—		—		—
Commercial Other		9,080			1.0			9,080		—		—		—		—		—
Retail		7,873			0.9			6,385		1,488		—		—		—		—
Duplex		6,324			0.7			6,324		—		—		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(2)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

	December 31, 2021						Year Originated(1)
(dollars in thousands)	Carrying Value			% of Portfolio			2021		2020		2019		2018		2017		Prior
LTV (2)
0 - 40%	$	53,907			5.9	%	$	32,634	$	—	$	—	$	3,608	$	17,665	$	—
41 - 45%		48,431			5.3			44,380		4,051		—		—		—		—
46 - 50%		63,690			7.0			41,356		21,317		—		1,017		—		—
51 - 55%		92,238			10.1			74,978		17,260		—		—		—		—
56 - 60%		79,039			8.7			27,115		40,190		—		—		11,473		261
61 - 65%		559,997			61.4			372,645		146,640		3,102		1,474		36,136		—
66 - 70%		645			0.1			645		—		—		—		—		—
71 - 80%		—			0.0			—		—		—		—		—		—
Above 80%		13,797			1.5			3,516		10,281		—		—		—		—
Total		911,744			100.0	%	$	597,269	$	239,739	$	3,102	$	6,099	$	65,274	$	261
CECL allowance(3)		(10,394	)
Carrying value, net	$	901,350

(1)Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

(2)Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

(3)Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

Schedule of carrying value of collateral dependent loans

The following tables allocate the carrying value of collateral dependent loans in our loan portfolio to the collateral type at the dates indicated:

	December 31, 2022
(dollars in thousands)	Carrying Value		CECL Allowance(1)			Carrying Value, net
Collateral Type
Residential Lots	$	70,664	$	(11,519	)	$	59,145
Condos		42,237		(5,892	)		36,345
Land		21,986		(108	)		21,878
Townhomes		18,296		(1,706	)		16,590
Single Family Housing		16,993		(950	)		16,043
Hotel		16,106		(9,151	)		6,955
Apartments		6,947		(978	)		5,969
Offices		6,288		(5,042	)		1,246
Mixed Use		3,318		(1,320	)		1,998
Total	$	202,835	$	(36,666	)	$	166,169

	December 31, 2021
(dollars in thousands)	Carrying Value		CECL Allowance(1)			Carrying Value, net
Collateral Type
Senior Housing	$	25,337	$	(1,103	)	$	24,234
Entitled Land		17,335		(42	)		17,293
Single Family Housing		1,730		(15	)		1,715
Condos		1,109		(673	)		436
Townhomes		261		(1	)		260
Total	$	45,772	$	(1,834	)	$	43,938

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Investment in Real Property (Tables)

12 Months Ended

Dec. 31, 2022

Real Estate [Abstract]

Schedule of carrying value of owned real estate

The following tables provide information about the carrying value of our owned real property at the dates indicated:

(dollars in thousands)	December 31, 2022		December 31, 2021
Collateral Type
Senior Housing	$	49,917	$	—
Offices		15,414		19,388
Single Family Housing		8,538		4,134
Townhomes		6,712		9,281
Apartments		5,024		—
Residential Lots		2,293		3,012
Condos		—		28,441
Retail		—		3,811
Total	$	87,898	$	68,067

	December 31, 2022				December 31, 2021
(dollars in thousands)	Number of Properties		Carrying Value		Number of Properties		Carrying Value
Collateral Type
Held for sale		7	$	24,516		5	$	52,531
Held for use		4		63,382		4		15,536
Total		11	$	87,898		9	$	68,067

Schedule of investment in real property, held for sale and held for use

For the years ended December 31, 2022, 2021 and 2020, we recorded the operating revenue, expenses, fixed asset depreciation and impairment in our consolidated statement of operations as shown below for investment in real property, held for sale and held for use, respectively:

	Held for Sale
(dollars in thousands)	December 31, 2022			December 31, 2021			December 31, 2020
Revenue from operations	$	276		$	—		$	—
Gain on sale		984
Less:
Operating expenses		1,990			101			168
Depreciation(1)		125			—			—
Impairment		6,111			—			—
Net loss from investment in real property, held for sale	$	(6,966	)	$	(101	)	$	(168	)

(1)Depreciation incurred for a real property before it was reclassified to held for sale.

	Held for Use
(dollars in thousands)	December 31, 2022			December 31, 2021			December 31, 2020
Revenue from operations	$	2,523		$	—		$	—
Less:
Operating expenses		3,697			7			—
Depreciation		553			—			—
Impairment		1,485			—			—
Net loss from investment in real property, held for use	$	(3,212	)	$	(7	)	$	—

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of fair value of assets and liabilities

The following tables present estimated fair values of our financial instruments, as of the date indicated, whether or not recognized or recorded in the consolidated balance sheets at the periods indicated:

	December 31, 2022				Fair Value Measurements Using
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	54,964	$	54,964	$	54,964	$	—	$	—
Mortgage notes receivable, net		881,950		865,304		—		—		865,304
Interest and fees receivable, net		14,775		14,775		—		14,775		—
Financial Liabilities
Senior unsecured notes, net		97,789		99,990		99,990		—		—
Private placement warrant liability		25		25		—		25		—

	December 31, 2021				Fair Value Measurements Using
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	132,889	$	132,889	$	132,889	$	—	$	—
Mortgage notes receivable, net		901,350		901,350		—		—		901,350
Interest and fees receivable, net		17,526		17,526		—		17,526		—
Financial Liabilities
Senior unsecured notes, net		97,223		100,000		100,000		—		—
Private placement warrant liability		1,838		1,838		—		1,838		—

Schedule of valuation methodologies and inputs used for assets that are measured at fair value

The following table sets forth assets measured and reported at fair value on a nonrecurring basis as of December 31, 2022 and 2021. All of these values are categorized as Level 3. The table also contains information about valuation methodologies and inputs for:

	Carrying Value				Fair Value
(dollars in thousands)	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021		Valuation Technique	Unobservable Inputs	Range of Inputs
Investment in real property held for sale(1)	$	14,628	$	—	$	15,075	$	—	Collateral valuations	Discount to appraised value based on comparable market prices, broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Investment in real property held for use (1)	$	25,167	$	—	$	33,379	$	—	Collateral valuations	Discount to appraised value based on comparable market prices, broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Collateral dependent loans, net of allowance for credit losses(1)		81,470		436		87,622		835	Collateral valuations	Discount to appraised value based on comparable market prices or broker opinion of value, discounted cash flows or capitalization rate applied to estimate net operating income	0 - 10%
Total	$	121,265	$	436	$	136,076	$	835

(1)Previously reported amounts included all real properties and collateral dependent loans regardless of whether an adjustment was required to mark to fair value in the reporting period. The current disclosure represents only those loans and properties for which an adjustment was required to report at fair value on a nonrecurring basis during the reporting periods.

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Carrying amount of goodwill

The following table sets forth the changes in the carrying amount of goodwill:

(dollars in thousands)	Goodwill
Goodwill as of December 31, 2020	$	136,965
Goodwill as of December 31, 2021		136,965
Less:
Impairment		136,965
Goodwill as of December 31, 2022	$	—

Schedule of change in net book value of intangible assets

The following table summarizes the balances of intangible assets as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Asset Type
Customer relationships	$	1,000	$	1,000
Less: Accumulated amortization		1,000		718
Intangible assets, net	$	—	$	282

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Accounts Payable and Accrued Liabilities (Tables)

12 Months Ended

Dec. 31, 2022

Accounts Payable and Accrued Liabilities [Abstract]

Summary of accounts payable and accrued liabilities

The following table presents a summary of accounts payable and accrued liabilities as of December 31, 2022 and 2021:

(dollars in thousands)	December 31, 2022		December 31, 2021
Accounts payable and accrued liabilities
Borrower deposits	$	5,519	$	925
Accounts payable and other liabilities		4,223	$	4,315
Accrued salaries, bonus and commissions.		2,272	$	2,034
Allowance for credit losses on unfunded commitments		1,475		906
Total	$	13,489	$	8,180

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Debt (Tables)

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Schedule of Carrying Values of The Company's Debt

The following table presents the carrying values of our senior unsecured notes as of the periods indicated:

(dollars in thousands)	December 31, 2022			December 31, 2021
Principal	$	100,000		$	100,000
Debt issuance costs		(2,861	)		(2,855	)
Amortization of debt issuance costs		650			78
Total notes, net	$	97,789		$	97,223

Schedule of Interest Expense Related to Senior Unsecured Notes and Revolving Credit Facility

The following table summarizes the components of interest expense related to our senior unsecured notes and revolving credit facility for the periods indicated:

	Year Ended
	December 31, 2022						December 31, 2021
(dollars in thousands)	Amortization of Deferred Debt Issuance Costs		Interest on Borrowings		Undrawn Fees		Amortization of Deferred Debt Issuance Costs		Interest on Borrowings		Undrawn Fees
5.0% senior unsecured notes	$	572	$	4,986	$	—	$	78	$	694	$	—
Revolving credit facility		1,510		151		1,419		1,255		107		1,186
Total	$	2,082	$	5,137	$	1,419	$	1,333	$	801	$	1,186

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Stockholders' Equity and Earnings per Common Share (Tables)

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

Schedule of basic and diluted earnings per common share

The table below presents the computation of basic and diluted net earnings per share of common stock for the periods presented:

	Year Ended
(dollars in thousands, except share and per share data):	December 31, 2022			December 31, 2021
Net (loss) income	$	(116,391	)	$	82,488
Basic weighted-average shares of common stock outstanding		132,841,196			132,579,289
Dilutive effect of share-based compensation – unvested restricted stock units (1)		—			87,213
Diluted weighted-average shares of common stock outstanding		132,841,196			132,666,502
Basic earnings per common share	$	(0.88	)	$	0.62
Diluted earnings per common share	$	(0.88	)	$	0.62

(1)Amounts exclude all potential common and common equivalent shares for periods when there is a net loss from continuing operations.

Schedule of stock equivalents excluded from diluted net income per share

For the periods presented, the following common stock equivalents were excluded from the calculations of diluted earnings per share because their effect would have been anti-dilutive:

	Year Ended
	December 31, 2022		December 31, 2021
Weighted-average restricted stock units outstanding		27,091		199,709
Unexercised public warrants and private placement warrants		15,604,192		15,604,304
Total stock equivalents excluded		15,631,283		15,804,013

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Equity Incentive Plan (Tables)

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of Assumptions Used in Estimating Fair Value of Derivative Liability

The weighted average fair value and assumptions used to value the pRSU awards granted with market-based performance conditions are as follows:

	Year Ended
	December 31, 2022			December 31, 2021
Performance share fair value	$	6.74		$	8.20
Risk-free interest rate		1.74	%		0.27	%
Expected volatility		30.48	%		25.71	%
Expected life (in years)		2.85			2.77
Expected dividend yield		9.82	%		8.13	%

Summary of Activity Related to Restricted Stock

The following tables summarize the activity related to RSUs and pRSUs during 2022:

	Shares			Weighted Average Grant Date Fair Market Value
Unvested RSUs outstanding as of December 31, 2020		434,143
Granted		295,063		$	10.08
Vested		(231,053	)	$	10.61
Forfeited		(13,837	)	$	10.58
Unvested RSUs outstanding as of December 31, 2021		484,316
Granted		750,038		$	6.02
Vested		(285,853	)	$	10.01
Forfeited		(200,589	)	$	7.31
Unvested RSUs outstanding as of December 31, 2022		747,912

	Shares			Weighted Average Grant Date Fair Market Value
Unvested pRSUs outstanding as of December 31, 2020		—
Granted		113,958		$	8.20
Unvested pRSUs outstanding as of December 31, 2021		113,958
Granted		276,679		$	6.74
Forfeited		(182,976	)	$	7.07
Unvested pRSUs outstanding as of December 31, 2022		207,661

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of contractual obligations and commercial commitments

The following table illustrates our contractual obligations and commercial commitments by due date as of December 31, 2022:

(dollars in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Construction holdbacks(1)	$	429,920	$	261,243	$	168,677	$	—	$	—
Operating lease obligations(2)		9,930		887		2,018		2,140		4,885
Total	$	439,850	$	262,130	$	170,695	$	2,140	$	4,885

(1)The funding timing and amounts of construction holdbacks are uncertain as these commitments relate to loans for construction costs and depend on the progress and performance of the underlying projects. In addition, $22.8 million of holdbacks are excluded from this table as they represent capital expenditures required to complete construction for defaulted loans that we are no longer required to pay.

(2)The total operating lease obligation includes $2.4 million of imputed interest.

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Summary of Significant Accounting Policies - Additional information (Details)	12 Months Ended
	Dec. 31, 2022 USD ($) Property Segment	Dec. 31, 2021 USD ($) Property	Dec. 31, 2020 USD ($)	Jan. 01, 2020 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Additional paid in capital	$ 1,215,229,000	$ 1,216,957,000
Number of Reportable Segments | Segment	1
Threshold Sweep Account Balance	$ 750,000
Cash and cash equivalents insured maximum per account	250,000	250,000
Restricted cash	0	0
Accumulated deficit	(287,307,000)	(68,621,000)
Provision for credit losses, net	38,266,000	6,179,000	$ 6,722,000
Net income (Loss)	$ (116,391,000)	$ 82,488,000	90,231,000
Number of properties | Property	11	9
Real Estate Project Value	$ 87,900,000	$ 68,100,000
Goodwill Impairment	136,965,000	0	0
Provision for income taxes	$ 0	$ 0	$ 0
Cumulative Effect, Period of Adoption, Adjustment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accumulated deficit				$ 2,000,000.0
Employees
Accounts, Notes, Loans and Financing Receivable [Line Items]
Vesting period	3 years
Directors
Accounts, Notes, Loans and Financing Receivable [Line Items]
Vesting period	1 year
Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Estimated Useful Lives of fixed assets	7 years
Contractual Rate	70.00%
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Estimated Useful Lives of fixed assets	3 years
Contractual Rate	50.00%

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Business Combination - Schedule of Preliminary Fair Values of Assets Acquired and Liabilities Assumed by BRELF II (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Liabilities assumed:
Goodwill	$ 0	$ 136,965	$ 136,965

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Business Combination - Additional information (Details) $ in Millions	12 Months Ended
	Dec. 31, 2022 USD ($)
Customer Relationships [Member]
Business Acquisition [Line Items]
Goodwill, period increase decrease	$ 5.0

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Mortgage Notes Receivable - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Loans and Leases Receivable Disclosure [Line Items]
Percentage of maximum loan to value ratio	65.00%
Percentage of maximum of amount of a single loan	10.00%
Percentage of maximum amount of loans to single borrower	15.00%
Term of mortgage notes receivable	22 months
Interest rate (as a percent)	10.20%
Monthly interest rate payment term	10 days
Principal outstanding on non accrual status	$ 217.2	$ 101.9
Contractual loans	250.4	$ 174.0
Funded and unfunded allowance aggregated	43.0
Increase Decrease in founded unfounded allowance aggregate	$ 38.3
Maximum [Member]
Loans and Leases Receivable Disclosure [Line Items]
Percentage of maximum loan to value ratio	65.00%
Interest rate (as a percent)	0.14%
Minimum [Member]
Loans and Leases Receivable Disclosure [Line Items]
Interest rate (as a percent)	0.01%

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Mortgage Notes Receivable - Information pertaining to mortgage notes receivable (Details) - USD ($) $ in Thousands		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2020
Loans and Leases Receivable Disclosure [Line Items]
Construction holdbacks		$ 22,800
Total principal outstanding for our mortgage notes receivable held for investment		923,442	[1]	$ 911,744	[2]
Adoption of ASU 2016-13		41,492	[1],[3],[4]	10,394	[2],[5],[6]
Mortgage notes receivable held for investment, net		881,950		901,350
Mortgage notes receivables
Loans and Leases Receivable Disclosure [Line Items]
Total loan commitments		1,417,325		1,489,055
Construction holdbacks	[7]	452,690		524,462
Interest reserves		33,633		39,880
Total principal outstanding for our mortgage notes receivable held for investment		931,002		924,713
Adoption of ASU 2016-13	[8]	41,492		10,394
Deferred origination and amendment fees		7,560		12,969
Mortgage notes receivable held for investment, net		881,950		901,350
Broadmark Private REIT, LLC
Loans and Leases Receivable Disclosure [Line Items]
Construction holdbacks				17,300
Unfunded Loan Commitment [Member]
Loans and Leases Receivable Disclosure [Line Items]
Adoption of ASU 2016-13	[9]	1,474		904		$ 0
Unfunded Loan Commitment [Member] | Accounts payable and accrued liabilities
Loans and Leases Receivable Disclosure [Line Items]
Adoption of ASU 2016-13		1,500		900
Funded And Unfunded Loan Commitment [Member]
Loans and Leases Receivable Disclosure [Line Items]
Adoption of ASU 2016-13		$ 42,966		$ 11,298		$ 10,590

[1] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

[2] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

[3] Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[4] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[5] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[6] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[7] As of December 31, 2022 and 2021 this amount includes $22.8 and $17.3 million, respectively, of construction holdbacks for defaulted loans that we are no longer required to pay. These amounts are included in the loan commitment totals.

[8] As of December 31, 2022 and 2021, $1.5 and $0.9 million, respectively, of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[9] CECL allowance related to unfunded commitments is presented as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

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Mortgage Notes Receivable - Schedule reconciles outstanding mortgage loan commitments to the outstanding balance of recevable (Parenthetical) (Details) - USD ($) $ in Thousands		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2020
Defined Benefit Plan Disclosure [Line Items]
Construction Hold Backs		$ 22,800
Financing Receivable, Allowance for Credit Loss		$ 41,492	[1],[2],[3]	$ 10,394	[4],[5],[6]
Debt, Weighted Average Interest Rate		0.04%
Unfunded Loan Commitment [Member]
Defined Benefit Plan Disclosure [Line Items]
Financing Receivable, Allowance for Credit Loss	[7]	$ 1,474		904		$ 0
LTV [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt, Weighted Average Interest Rate		124.80%
Accounts payable and accrued liabilities | Unfunded Loan Commitment [Member]
Defined Benefit Plan Disclosure [Line Items]
Financing Receivable, Allowance for Credit Loss		$ 1,500		900
Broadmark Private Reit Llc [Member]
Defined Benefit Plan Disclosure [Line Items]
Construction Hold Backs				$ 17,300

[1] Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[2] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

[3] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[4] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[5] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[6] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

[7] CECL allowance related to unfunded commitments is presented as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

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Mortgage Notes Receivable - Schedule of carrying value of loans in contractual default status by collateral type and the LTV (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) Loan		Dec. 31, 2021 USD ($) Loan
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 923,442	[1]	$ 911,744	[2]
Percentage of portfolio	100.00%	[1]	100.00%	[2]
Number of Loans | Loan	11		9
Apartments
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 191,708		$ 107,765
Percentage of portfolio	20.80%		11.80%
Residential Lots
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 104,100		$ 111,644
Percentage of portfolio	11.30%		12.20%
Single Family Housing
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 133,702		$ 87,902
Percentage of portfolio	14.50%		9.60%
Townhomes
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 106,888		$ 93,300
Percentage of portfolio	11.60%		10.20%
Entitled Land
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 76,251		$ 45,098
Percentage of portfolio	8.30%		4.90%
Condos
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 71,975		$ 64,492
Percentage of portfolio	7.80%		7.10%
Mixed Use
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 50,127		$ 85,929
Percentage of portfolio	5.40%		9.50%
Offices
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 6,288
Senior Housing
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 16,595		$ 61,236
Percentage of portfolio	1.80%		6.70%
Commercial other
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 11,411		$ 9,080
Percentage of portfolio	1.20%		1.00%
Duplex
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 13,639		$ 6,324
Percentage of portfolio	1.50%		0.70%
Retail
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 9,071		$ 7,873
Percentage of portfolio	1.00%		0.90%
Quadplex
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 8,932		$ 9,769
Percentage of portfolio	1.00%		1.10%
Commercial Lots
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 4,018		$ 10,227
Percentage of portfolio	0.40%		1.10%
Triplex
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 560
Percentage of portfolio	0.10%
0 - 40%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 26,053	[1]	$ 53,907	[2]
Percentage of portfolio	2.80%	[1]	5.90%	[2]
LTV [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 250,388		$ 173,984
Percentage of portfolio	100.00%		100.00%
Number of Loans | Loan	40		31
LTV [Member] | Apartments
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 6,947		$ 5,341
Percentage of portfolio	2.80%		3.10%
Number of Loans | Loan	2		2
LTV [Member] | Residential Lots
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 71,306		$ 19,541
Percentage of portfolio	28.50%		11.20%
Number of Loans | Loan	8		3
LTV [Member] | Single Family Housing
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 20,335		$ 3,973
Percentage of portfolio	8.10%		2.30%
Number of Loans | Loan	11		7
LTV [Member] | Townhomes
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 21,175		$ 18,870
Percentage of portfolio	8.50%		10.80%
Number of Loans | Loan	5		6
LTV [Member] | Entitled Land
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 22,447		$ 17,335
Percentage of portfolio	9.00%		10.00%
Number of Loans | Loan	2		1
LTV [Member] | Condos
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 42,237		$ 47,741
Percentage of portfolio	16.90%		27.40%
Number of Loans | Loan	3		4
LTV [Member] | Mixed Use
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 14,795		$ 15,858
Percentage of portfolio	5.90%		9.10%
Number of Loans | Loan	4		4
LTV [Member] | Hotel
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 28,919		$ 14,583
Percentage of portfolio	11.50%		8.40%
Number of Loans | Loan	2		1
LTV [Member] | Unentitled Land
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 10,496		$ 5,403
Percentage of portfolio	4.20%		3.10%
Number of Loans | Loan	1		2
LTV [Member] | Offices
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 6,288
Percentage of portfolio	2.50%
Number of Loans | Loan	1
LTV [Member] | Senior Housing
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value			$ 25,337
Percentage of portfolio			14.60%
Number of Loans | Loan			1
LTV [Member] | Retail
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 5,443
Percentage of portfolio	2.20%
Number of Loans | Loan	1
LTV [Member] | 0 - 40%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 3,969		$ 22,737
Percentage of portfolio	1.60%		13.10%
LTV [Member] | 41 - 60%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 91,201		$ 26,902
Percentage of portfolio	36.40%		15.50%
LTV [Member] | 61 - 80%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 139,537		$ 110,548
Percentage of portfolio	55.70%		63.50%
LTV [Member] | 81 - 100%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	$ 15,681		$ 13,797
Percentage of portfolio	6.30%		7.90%

[1] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

[2] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

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Mortgage Notes Receivable - Allowance for loan loss (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2022		Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Credit Loss, Beginning Balance	[1],[2],[3]	$ 10,394
Adoption of ASU 2016-13		41,492	[4],[5],[6]	$ 10,394	[1],[2],[3]
Allowance for Credit Loss, Ending Balance		41,492	[4],[5],[6]	10,394	[1],[2],[3]
Unfunded Loan Commitment [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Credit Loss, Beginning Balance	[7]	904		0
Adoption of ASU 2016-13	[7]	1,474		904
Provision for credit losses, net	[7]	570		904
Charge-offs	[7],[8]	0		0
Allowance for Credit Loss, Ending Balance	[7]	1,474		904
Funded And Unfunded Loan Commitment [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Credit Loss, Beginning Balance		11,298		10,590
Adoption of ASU 2016-13		42,966		11,298
Provision for credit losses, net		38,266		6,179
Charge-offs	[8]	(6,598)		(5,471)
Allowance for Credit Loss, Ending Balance		42,966		11,298
Funded Loan Commitment [Member]
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for Credit Loss, Beginning Balance		10,394		10,590
Adoption of ASU 2016-13		41,492		10,394
Provision for credit losses, net		37,696		5,275
Charge-offs	[8]	(6,598)		(5,471)
Allowance for Credit Loss, Ending Balance		$ 41,492		$ 10,394

[1] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[2] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[3] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

[4] Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[5] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

[6] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[7] CECL allowance related to unfunded commitments is presented as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[8] Charge-offs result from either loan repayments where the proceeds are less than the principal outstanding or transfers to investment in real property at the time that we take ownership of the property where the fair values of the underlying collateral are less than the principal outstanding.

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Mortgage Notes Receivable - Composition of loan portfolio (Details) - USD ($) $ in Thousands		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2020
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 923,442	[1]	$ 911,744	[2]
CECL Allowance		(41,492)	[1],[3],[4]	(10,394)	[2],[5],[6]
Carrying value, net		$ 881,950	[1]	$ 901,350	[2]
Percentage of portfolio		100.00%	[1]	100.00%	[2]
2022		$ 592,959	[1],[7],[8],[9]	$ 597,269	[2],[10]
2021		236,004	[1],[7],[8],[9]	239,739	[2],[10]
2020		54,167	[1],[7],[8],[9]	3,102	[2],[10]
2019		4,152	[1],[7],[8],[9]	6,099	[2],[10]
2018	[2],[10]			65,274
Prior		$ 36,160	[1],[4],[9]	$ 261	[2],[10]
LTV general percent indicating default status		65		65
Allowances on excess amortized cost over fair value				$ 700
0 - 40%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 26,053	[1]	$ 53,907	[2]
Percentage of portfolio		2.80%	[1]	5.90%	[2]
2022		$ 22,544	[1],[8]	$ 32,634	[2],[11]
2021	[1],[8]	3,509
2019	[2],[11]			3,608
2018	[2],[11]			17,665
Prior	[2],[11]			0
41 - 45%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 29,025	[1]	$ 48,431	[2]
Percentage of portfolio		3.10%	[1]	5.30%	[2]
2022		$ 7,039	[1],[8]	$ 44,380	[2],[11]
2021		21,986	[1],[8]	4,051	[2],[11]
2020	[1],[8]	0
2019	[2],[11]			0
46 - 50%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 42,267	[1]	$ 63,690	[2]
Percentage of portfolio		4.60%	[1]	7.00%	[2]
2022		$ 22,524	[1],[8]	$ 41,356	[2],[11]
2021		13,455	[1],[8]	21,317	[2],[11]
2020	[1],[8]	6,288
2019	[2],[11]			1,017
Prior	[2],[11]			0
51 - 55%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 144,649	[1]	$ 92,238	[2]
Percentage of portfolio		15.70%	[1]	10.10%	[2]
2022		$ 76,978	[1],[8]	$ 74,978	[2],[11]
2021		58,876	[1],[8]	17,260	[2],[11]
2020	[1],[8]	8,795
2018	[2],[11]			0
56 - 60%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 107,098	[1]	$ 79,039	[2]
Percentage of portfolio		11.60%	[1]	8.70%	[2]
2022		$ 98,691	[1],[8]	$ 27,115	[2],[11]
2021		8,407	[1],[8]	40,190	[2],[11]
2020		0	[1],[8]	0	[2],[11]
2019	[1],[8]	0
2018	[2],[11]			11,473
Prior	[2],[11]			261
61 - 65%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 456,743	[1]	$ 559,997	[2]
Percentage of portfolio		49.50%	[1]	61.40%	[2]
2022		$ 284,722	[1],[8]	$ 372,645	[2],[11]
2021		112,569	[1],[8]	146,640	[2],[11]
2020		21,364	[1],[8]	3,102	[2],[11]
2019		1,928	[1],[8]	1,474	[2],[11]
2018	[2],[11]			36,136
Prior	[1],[8]	36,160
66 - 70%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 93,104	[1]	$ 645	[2]
Percentage of portfolio		10.10%	[1]	0.10%	[2]
2022		$ 71,638	[1],[8]	$ 645	[2],[11]
2021	[1],[8]	16,561
2020	[1],[8]	2,681
2019	[1],[8]	2,224
71 - 75%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	[1]	$ 4,280
Percentage of portfolio	[1]	0.50%
2022	[1],[8]	$ 4,280
2021	[8]	0
2020	[8]	0
2019	[8]	0
Prior	[8]	0
71 - 80%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	[2]			$ 0
Percentage of portfolio	[2]			0.00%
2022	[2],[11]			$ 0
76 - 80%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value	[1]	$ 2,540
Percentage of portfolio	[1]	0.30%
2022	[1],[8]	$ 2,540
2021	[8]	0
2020	[8]	0
2019	[8]	0
Prior	[8]	0
Above 80%
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 17,683	[1]	$ 13,797	[2]
Percentage of portfolio		1.90%	[1]	1.50%	[2]
2022		$ 2,003	[8]	$ 3,516	[2],[11]
2021		641	[1],[8]	10,281	[2],[11]
2020		15,039	[1],[8]	0	[2],[11]
2018	[2],[11]			0
Prior	[8]	0
Apartments
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 191,708		$ 107,765
Percentage of portfolio		20.80%		11.80%
2022		$ 134,816	[7]	$ 38,232	[12]
2021		49,944	[7]	68,356	[12]
2020		5,020	[7]	1,177	[12]
2019		1,928	[7]	0	[12]
2018	[12]			0
Prior	[4]	0
Residential Lots
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 104,100		$ 111,644
Percentage of portfolio		11.30%		12.20%
2022		$ 56,675	[4]	$ 85,219	[12]
2021		38,630	[4]	26,425	[12]
2020	[4]	8,795
2019	[4]	0
2018	[12]			0
Prior	[4]	0
Single Family Housing
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 133,702		$ 87,902
Percentage of portfolio		14.50%		9.60%
2022		$ 124,218	[4]	$ 84,703	[12]
2021		9,245	[4]	3,049	[12]
2020		239	[4]	0	[12]
2019		0	[4]	0	[12]
2018	[12]			150
Prior		0	[4]	0	[12]
Townhomes
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 106,888		$ 93,300
Percentage of portfolio		11.60%		10.20%
2022		$ 81,393	[4]	$ 51,240	[12]
2021		24,701	[4]	28,979	[12]
2020		794	[4]	0	[12]
2019		0	[4]	1,017	[12]
2018	[12]			11,803
Prior		0	[4]	261	[12]
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 58,515		$ 61,592
Percentage of portfolio		6.30%		6.80%
2022		$ 13,838	[4]	$ 61,592	[12]
2021		44,677	[4]	0	[12]
2020	[4]	0
2019	[4]	0
Prior	[4]	0
Entitled Land
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 76,251		$ 45,098
Percentage of portfolio		8.30%		4.90%
2022		$ 54,265	[4]	$ 27,763	[12]
2021	[4]	21,986
2020	[4]	0
2019	[4]	0
Prior	[4]	0
Condos
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 71,975		$ 64,492
Percentage of portfolio		7.80%		7.10%
2022		$ 29,738	[4]	$ 8,805	[12]
2021		2,515	[4]	18,227	[12]
2020		3,562	[4]	0	[12]
2019		0	[4]	1,474	[12]
2018	[12]			35,986
Prior	[4]	36,160
Mixed Use
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 50,127		$ 85,929
Percentage of portfolio		5.40%		9.50%
2022		$ 6,209	[4]	$ 53,530	[12]
2021		30,217	[4]	30,474	[12]
2020		11,477	[4]	1,925	[12]
2019	[4]	2,224
Prior	[4]	0
Hotel
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 30,221		$ 31,665
Percentage of portfolio		3.30%		3.50%
2022		$ 14,116	[4]	$ 4,886	[12]
2021		0	[4]	26,779	[12]
2020	[4]	16,105
2019	[4]	0
Prior	[4]	0
Unentitled Land
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 17,262		$ 46,019
Percentage of portfolio		1.90%		5.00%
2022		$ 16,325	[4]	$ 42,411	[12]
2021	[4]	937
2020		0	[4]	0	[12]
2019		0	[4]	3,608	[12]
Prior		0	[4]	0	[12]
Offices
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 18,467		$ 15,348
Percentage of portfolio		2.00%		1.70%
2022		$ 12,179	[4]	$ 8,280	[12]
2021		0	[4]	7,068	[12]
2020	[4]	6,288
2019	[4]	0
Prior	[4]	0
Senior Housing
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 16,595		$ 61,236
Percentage of portfolio		1.80%		6.70%
2022		$ 16,595	[4]	$ 35,899	[12]
2021		0	[4]	25,337	[12]
2020	[4]	0
2019	[4]	0
Prior	[4]	0
Commercial other
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 11,411		$ 9,080
Percentage of portfolio		1.20%		1.00%
2022		$ 0	[4]	$ 9,080	[12]
2021	[4]	11,411
2020	[4]	0
2019	[4]	0
Prior	[4]	0
Duplex
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 13,639		$ 6,324
Percentage of portfolio		1.50%		0.70%
2022		$ 13,639	[4]	$ 6,324	[12]
2021	[4]	0
2020	[4]	0
2019		0	[4]	0	[12]
Prior	[4]	0
Retail
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 9,071		$ 7,873
Percentage of portfolio		1.00%		0.90%
2022		$ 5,443	[4]	$ 6,385	[12]
2021		1,741	[4]	1,488	[12]
2020	[4]	1,887
2019	[4]	0
Prior	[4]	0
Quadplex
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 8,932		$ 9,769
Percentage of portfolio		1.00%		1.10%
2022		$ 8,932	[4]	$ 9,769	[12]
2021	[4]	0
2020	[4]	0
2019	[4]	0
Prior	[4]	0
Commercial Lots
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 4,018		$ 10,227
Percentage of portfolio		0.40%		1.10%
2022		$ 4,018	[4]	$ 6,670	[12]
2021		0	[4]	3,557	[12]
2020	[4]	0
2019	[4]	0
Prior	[4]	0
Triplex
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 560
Percentage of portfolio		0.10%
2022	[4]	$ 560
2021	[4]	0
2020	[4]	0
2019	[4]	0
Prior	[4]	0
Storage
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value				$ 56,481
Percentage of portfolio				6.20%
2022	[12]			$ 56,481
Vertical Construction
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 552,468		$ 478,475
Percentage of portfolio		59.80%		52.50%
2022		$ 352,355	[9]	$ 234,861	[10]
2021		128,130	[9]	191,896	[10]
2020		33,895	[9]	1,177	[10]
2019		1,928	[9]	2,491	[10]
2018	[10]			47,789
Prior		36,160	[9]	261	[10]
Horizontal Development
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 221,078		$ 196,543
Percentage of portfolio		24.10%		21.50%
2022		$ 144,082	[9]	$ 169,041	[10]
2021		68,201	[9]	27,502	[10]
2020	[9]	8,795
2019		0	[9]	0	[10]
2018	[10]			0
Prior	[9]	0
Acquisition
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 15,195		$ 96,937
Percentage of portfolio		1.60%		10.60%
2022		$ 13,454	[9]	$ 96,937	[10]
2021	[9]	1,741
2019	[9]	0
Prior	[9]	0
Investment
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 46,536		$ 65,703
Percentage of portfolio		5.00%		7.20%
2022		$ 46,536	[9]	$ 42,509	[10]
2021		0	[9]	2,101	[10]
2020	[10]			0
2019		0	[9]	3,608	[10]
2018	[10]			17,485
Prior		0	[9]	0	[10]
Rehabilitation
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 39,422		$ 27,023
Percentage of portfolio		4.30%		3.00%
2022		$ 12,936	[9]	$ 11,320	[10]
2021		15,009	[9]	15,703	[10]
2020	[9]	11,477
2019	[9]	0
Prior	[9]	0
Land Entitlement
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 26,132		$ 24,529
Percentage of portfolio		2.80%		2.70%
2022		$ 4,146	[9]	$ 24,529	[10]
2021	[9]	21,986
2019	[9]	0
2018	[12]			17,335
Prior	[9]	0
Bridge
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 22,611		$ 22,534
Percentage of portfolio		2.40%		2.50%
2022		$ 19,450	[9]	$ 18,072	[10]
2021		937	[9]	2,537	[10]
2020	[10]			1,925
2019	[9]	2,224
Prior	[9]	0
Unfunded Loan Commitment [Member]
Loans and Leases Receivable Disclosure [Line Items]
CECL Allowance	[13]	(1,474)		(904)		$ 0
Unfunded Loan Commitment [Member] | Accounts payable and accrued liabilities
Loans and Leases Receivable Disclosure [Line Items]
CECL Allowance		(1,500)		$ (900)
Allowances on excess amortized cost over fair value		$ 35,000

[1] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

[2] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

[3] Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[4] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[5] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[6] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[7] Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[8] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[9] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment

[10] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[11] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[12] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[13] CECL allowance related to unfunded commitments is presented as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

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Mortgage Notes Receivable - Schedule of carrying value of collateral dependent loans (Details) - USD ($) $ in Thousands		Dec. 31, 2022		Dec. 31, 2021
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		$ 923,442	[1]	$ 911,744	[2]
CECL Allowance		(41,492)	[1],[3],[4]	(10,394)	[2],[5],[6]
Financing Receivable, after Allowance for Credit Loss, Total		881,950	[1]	901,350	[2]
Allowances on excess amortized cost over fair value				700
Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		202,835		45,772
CECL Allowance		(36,666)		(1,834)
Financing Receivable, after Allowance for Credit Loss, Total		166,169		43,938
Senior Housing [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		16,595		61,236
Senior Housing [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value				25,337
CECL Allowance				(1,103)
Financing Receivable, after Allowance for Credit Loss, Total				24,234
Entitled Land [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		76,251		45,098
Entitled Land [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value				17,335
CECL Allowance				(42)
Financing Receivable, after Allowance for Credit Loss, Total				17,293
Single Family Housing [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		16,993
CECL Allowance		(950)
Financing Receivable, after Allowance for Credit Loss, Total		16,043
Single Family Housing [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value				1,730
CECL Allowance				(15)
Financing Receivable, after Allowance for Credit Loss, Total				1,715
Condos [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		71,975		64,492
Condos [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		42,237		1,109
CECL Allowance		(5,892)		(673)
Financing Receivable, after Allowance for Credit Loss, Total		36,345		436
Townhomes [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		106,888		93,300
Townhomes [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		18,296		261
CECL Allowance		(1,706)		(1)
Financing Receivable, after Allowance for Credit Loss, Total		16,590		260
Hotel | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		16,106
CECL Allowance		(9,151)
Financing Receivable, after Allowance for Credit Loss, Total		6,955
Offices [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		6,288
CECL Allowance	[7]	(5,042)
Financing Receivable, after Allowance for Credit Loss, Total		1,246
Offices [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		6,947
CECL Allowance		(978)
Financing Receivable, after Allowance for Credit Loss, Total		5,969
Residential Lots [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		104,100		111,644
Residential Lots [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		70,664
CECL Allowance		(11,519)
Financing Receivable, after Allowance for Credit Loss, Total		59,145
Commercial Other [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		11,411		9,080
Mixed Use [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		50,127		85,929
Mixed Use [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		3,318
CECL Allowance		(1,320)
Financing Receivable, after Allowance for Credit Loss, Total		1,998
Retail [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		9,071		$ 7,873
Retail [Member] | Loan portfolio [Member]
Loans and Leases Receivable Disclosure [Line Items]
Carrying Value		21,986
CECL Allowance		(108)
Financing Receivable, after Allowance for Credit Loss, Total		$ 21,878

[1] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to facilitate successful completion of the construction and return of capital.

[2] Represents LTV as of origination or latest amendment. LTVs above 65% generally represent loans in contractual default status where we have agreed to extend funds to the borrower above 65% in order to ensure successful completion of the construction and return of capital.

[3] Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[4] Represents the year of either origination or amendment where the loan incurred a full re-underwriting in connection with the amendment.

[5] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[6] Includes $0.7 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $0.9 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

[7] Includes $35.0 million in loan specific allowances for loans deemed collateral dependent based on the excess amortized cost over the fair value of the underlying collateral. In addition, $1.5 million of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in our consolidated balance sheet.

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Investment in Real Property - Schedule of carrying value of owned real estate (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) Loan	Dec. 31, 2021 USD ($) Loan
Real Estate [Line Items]
Investment in real property held for use, net	$ 63,382	$ 15,536
Investment in real property held for sale, net	24,516	52,531
Real Estate Investment Property, Net, Total	$ 87,898	$ 68,067
Number of Loans | Loan	11	9
Condos
Real Estate [Line Items]
Real Estate Investment Property, Net, Total	$ 0	$ 28,441
Offices
Real Estate [Line Items]
Real Estate Investment Property, Net, Total	15,414	19,388
Townhomes
Real Estate [Line Items]
Real Estate Investment Property, Net, Total	6,712	9,281
Single Family Housing
Real Estate [Line Items]
Real Estate Investment Property, Net, Total	8,538	4,134
Retail
Real Estate [Line Items]
Real Estate Investment Property, Net, Total	0	3,811
Residential Lots
Real Estate [Line Items]
Real Estate Investment Property, Net, Total	2,293	3,012
Real Estate Held-for-sale One [Member]
Real Estate [Line Items]
Investment in real property held for sale, net	$ 24,516	$ 52,531
Number of Loans | Loan	7	5
Real Estate Held-for-sale Two [Member]
Real Estate [Line Items]
Investment in real property held for use, net	$ 63,382	$ 15,536
Number of Loans | Loan	4	4
Senior Housing [Member]
Real Estate [Line Items]
Real Estate Investment Property, Net, Total	$ 49,917	$ 0
Apartments
Real Estate [Line Items]
Real Estate Investment Property, Net, Total	$ 5,024	$ 0

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Investment in Real Property - Schedule of investment in real property, held for sale and held for use (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Real Estate [Line Items]
Real property operating expenses and depreciation		$ 6,365	$ 108	$ 168
Impairment on real property		7,596	0	0
Net (loss) income		(116,391)	82,488	90,231
Real Estate Held-for-sale One [Member]
Real Estate [Line Items]
Real property operating expenses and depreciation		1,990	101	168
Revenue from operations		276	0	0
Gain on sale		984
Depreciation	[1]	125	0	0
Impairment on real property		6,111	0	0
Net (loss) income		(6,966)	(101)	(168)
Real Estate Held-for-sale Two [Member]
Real Estate [Line Items]
Real property operating expenses and depreciation		3,697	7	0
Revenue from operations		2,523	0	0
Depreciation		553	0	0
Impairment on real property		1,485	0	0
Net (loss) income		$ (3,212)	$ (7)	$ 0

[1] Depreciation incurred for a real property before it was reclassified to held for sale.

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Investment in Real Property - Additional Information (Details) $ in Millions	12 Months Ended
	Dec. 31, 2022 USD ($) Property	Apr. 30, 2022 USD ($)	Dec. 31, 2021 USD ($) Property
Defined Benefit Plan Disclosure [Line Items]
Number of properties | Property	11		9
Real Estate Project Value	$ 87.9		$ 68.1
Extend maturity date	Apr. 01, 2023
Promissory note principal amount		$ 25.9
Additional advance payment	$ 0.4
Unrelated Party [Member]
Defined Benefit Plan Disclosure [Line Items]
Real property carrying value		28.4
Real property sale price		$ 29.0

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Fair Value Measurements - Fair value of assets and liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Carrying Value
Financial Assets
Cash and cash equivalents	$ 54,964	$ 132,889
Mortgage notes receivable held for investment, net	881,950	901,350
Interest and fees receivable, net	14,775	17,526
Financial Liabilities
Senior unsecured notes	97,789	97,223
Private placement warrant liability	25	1,838
Estimated Fair Value
Financial Assets
Cash and cash equivalents	54,964	132,889
Mortgage notes receivable held for investment, net	865,304	901,350
Interest and fees receivable, net	14,775	17,526
Financial Liabilities
Senior unsecured notes	99,990	100,000
Private placement warrant liability	25	1,838
Level 1 | Estimated Fair Value
Financial Assets
Cash and cash equivalents	54,964	132,889
Financial Liabilities
Senior unsecured notes	99,990	100,000
Level 2 | Estimated Fair Value
Financial Assets
Interest and fees receivable, net	14,775	17,526
Financial Liabilities
Private placement warrant liability	25	1,838
Level 3 | Estimated Fair Value
Financial Assets
Mortgage notes receivable held for investment, net	$ 865,304	$ 901,350

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Fair Value Measurements - Valuation Methodologies and Inputs Used for Assets Measured at Fair Value (Details) - Non recurring $ in Thousands		Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Real Property Held For Sale [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of inputs	[1]	0
Real Property Held For Sale [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of inputs	[1]	10
Collateral Dependent Loans [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of inputs	[1]	0
Collateral Dependent Loans [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of inputs	[1]	10
Real Property Held For Use [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of inputs	[1]	0
Real Property Held For Use [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of inputs	[1]	10
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		$ 136,076	$ 835
Carrying Value		121,265	436
Level 3 | Real Property Held For Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[1]	15,075	0
Carrying Value	[1]	14,628	0
Level 3 | Collateral Dependent Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[1]	87,622	835
Carrying Value	[1]	81,470	436
Level 3 | Real Property Held For Use [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[1]	33,379	0
Carrying Value	[1]	$ 25,167	$ 0

[1] Previously reported amounts included all real properties and collateral dependent loans regardless of whether an adjustment was required to mark to fair value in the reporting period. The current disclosure represents only those loans and properties for which an adjustment was required to report at fair value on a nonrecurring basis during the reporting periods.

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Fair Value Measurement - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions		12 Months Ended
		Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Change in fair value of warrant liabilities		$ (1,813)	$ 1,838	$ (5,492)
Investment Interest Rate		10.20%
Debt, Weighted Average Interest Rate		0.04%
Maximum [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment Interest Rate		0.14%
Maximum [Member] | Real Property [Member] | Fair Value, Nonrecurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Range of inputs	[1]	10
Maximum [Member] | Collateral Dependent Loans [Member] | Fair Value, Nonrecurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Range of inputs	[1]	10
Minimum [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment Interest Rate		0.01%
Minimum [Member] | Real Property [Member] | Fair Value, Nonrecurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Range of inputs	[1]	0
Minimum [Member] | Collateral Dependent Loans [Member] | Fair Value, Nonrecurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Range of inputs	[1]	0
Warrant [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Share price		$ 0.005	$ 0.35
Private Placement Warrants
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrants outstanding (in shares)		5.2	5.2
Warrants outstanding		$ 20	$ 1,800
Share price		$ 0.001	$ 0.09
Fair Value Measurement Transfer from Level 3 To Level 2 Description		The fair value of the 5.2 million private placement warrants, estimated using the quoted share price of the public warrants, was approximately $0.001 and $0.09 per warrant or $0.005 and $0.35 per share to arrive at $0.02 and $1.8 million, respectively, as of December 31, 2022 and 2021. Refer to Note 9 for additional details on the private placement warrants.

[1] Previously reported amounts included all real properties and collateral dependent loans regardless of whether an adjustment was required to mark to fair value in the reporting period. The current disclosure represents only those loans and properties for which an adjustment was required to report at fair value on a nonrecurring basis during the reporting periods.

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Goodwill and Intangible Assets - Carrying amount of goodwill (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, Beginning Balance	$ 136,965	$ 136,965
Goodwill Impairment	136,965	0	$ 0
Goodwill, Ending Balance	$ 0	$ 136,965	$ 136,965

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Goodwill and Intangible Assets - Schedule of change in net book value of intangible assets (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Less Accumulated amortization	$ 1,000	$ 718
Intangible assets, net	0	282
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired Intangibles, Gross	$ 1,000	$ 1,000

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Goodwill and Intangible Assets (Additional Information) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Goodwill		$ 0	$ 136,965	$ 136,965
Goodwill Impairment		$ 136,965	$ 0	$ 0
Net assets of fair value over carrying value		0.00%
Remaining goodwill		$ 0
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Adjustment to fair value of intangible assets	$ 6,000
Goodwill, Period Increase (Decrease)		5,000
Goodwill		$ 137,000
Amortization of intangible assets	900
Increase (Decrease) in Intangible Assets, Current	$ 1,000

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Accounts Payable and Accrued Liabilities - Summary of accounts payable and accrued liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Accounts Payable and Accrued Liabilities [Abstract]
Borrower deposits	$ 5,519	$ 925
Accounts payable and other liabilities	4,223	4,315
Accrued salaries, bonus and commissions.	2,272	2,034
Allowance for credit losses on unfunded commitments	1,475	906
Total	$ 13,489	$ 8,180

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Debt - Additional Information (Details) - USD ($) $ in Thousands	Nov. 12, 2021	Feb. 19, 2021	Dec. 31, 2022	Dec. 31, 2021
Line of Credit Facility [Line Items]
Aggregate principal amount			$ 100,000	$ 100,000
Average interest rate			0.04%
Debt issuance cost			$ 97,789	$ 97,223
5.0% Senior Unsecured Notes Due 2026 [Member] | Private Offering [Member]
Line of Credit Facility [Line Items]
Aggregate principal amount	$ 100,000
Fixed interest rate	5.00%
Debt issuance cost	$ 2,900
5.0% Senior Unsecured Notes Due 2026 [Member] | Private Offering [Member] | Future [Member]
Line of Credit Facility [Line Items]
Maturity Date	Nov. 15, 2026
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Commitment Fee Percentage		1.00%
Amount of revolving credit facility		$ 135,000
Maturity Date		Feb. 19, 2024
Amortization period		3 years
Revolving credit facility outstanding, amount			$ 0
Deferred financing costs		$ 4,500
Revolving Credit Facility [Member] | Prime Rate Member
Line of Credit Facility [Line Items]
Line of Credit Facility, Interest Rate During Period		2.75%

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Debt - Schedule of Carrying Values Senior Unsecured Notes (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Aggregate principal amount	$ 100,000	$ 100,000
Debt issuance costs	(2,861)	(2,855)
Amortization of debt issuance costs	650	78
Total notes, net	$ 97,789	$ 97,223

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Debt - Schedule of Senior Unsecured Notes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Line of Credit Facility [Line Items]
Aggregate principal amount	$ 100,000	$ 100,000
Amortization of Deferred Debt Issuance Costs	$ 2,082	$ 1,333

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Debt - Summary of Interest Expense Related to Senior Unsecured Notes and Revolving Credit Facility (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Line of Credit Facility [Line Items]
Amortization of Deferred Debt Issuance Costs	$ 2,082	$ 1,333
Interest on Borrowings	5,137	801
Undrawn Fees	1,419	1,186
5.00% Senior Unsecured Notes [Member]
Line of Credit Facility [Line Items]
Amortization of Deferred Debt Issuance Costs	572	78
Interest on Borrowings	4,986	694
Undrawn Fees	0	0
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Amortization of Deferred Debt Issuance Costs	1,510	1,255
Interest on Borrowings	151	107
Undrawn Fees	$ 1,419	$ 1,186

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Stockholders' Equity and Earnings per Common Share - Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
		Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net income		$ (116,391)	$ 82,488
Basic weighted-average shares of common stock outstanding		132,841,196	132,579,289	132,209,495
Dilutive effect of share-based compensation - unvested restricted stock units	[1]	0	87,213
Diluted weighted-average shares of common stock outstanding		132,841,196	132,666,502	132,261,113
Basic earnings per common share		$ (0.88)	$ 0.62	$ 0.68
Diluted earnings per share		$ (0.88)	$ 0.62	$ 0.68

[1] Amounts exclude all potential common and common equivalent shares for periods when there is a net loss from continuing operations.

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Stockholders' Equity and Earnings per Common Share - Schedule of Stock Equivalents Excluded from Diluted Net Income Per Share (Details) - shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Earnings Per Share [Abstract]
Weighted-average restricted stock units outstanding	27,091	199,709
Unexercised public and private warrants	15,604,192	15,604,304
Total stock equivalents excluded	15,631,283	15,804,013

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Stockholders' Equity and Earnings per Common Share - (Additional Information) (Details) $ / shares in Units, shares in Millions		12 Months Ended
	Nov. 07, 2022 USD ($) $ / shares	Dec. 31, 2022 USD ($) Vote $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	Mar. 02, 2021 USD ($)
Class of Warrant or Right [Line Items]
Exercise price per share (in dollars per share) | $ / shares		$ 11.50	$ 11.50
Warrants issued | shares		15.6	15.6
Private placement warrant liabilities		$ 20,000.00
Common stock number of voting rights | Vote		1
Common Stock Aggregate Gross Sales Price				$ 200,000,000
Common stock par value (in dollars per share) | $ / shares		$ 0.001	$ 0.001
Remained available for future repurchases		$ 70,000,000.0
Public Warrants
Class of Warrant or Right [Line Items]
Warrants outstanding (in shares) | shares		41.7	41.7
Private Placement Warrants
Class of Warrant or Right [Line Items]
Warrants outstanding (in shares) | shares		5.2	5.2
Warrants outstanding		$ 20,000.00	$ 1,800,000
Share Price | $ / shares		$ 0.001	$ 0.09
Directors
Class of Warrant or Right [Line Items]
Payments for Repurchase of Common Stock	$ 75,000,000.0
Common stock par value (in dollars per share) | $ / shares	$ 0.001

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Income Taxes - Additional information (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Income Tax Disclosure [Abstract]
Uncertain tax positions	$ 0
Amount accrued for penalties or interest	$ 0
Nondeductible excise tax	4.00%

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Equity Incentive Plan - Additional information (Details) - 2019 Stock Incentive Plan [Member] - shares	Dec. 31, 2022	Nov. 14, 2019
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares authorized under plan		5,000,000
Shares available for grant	3,291,351

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Equity Incentive Plan - Schedule of Assumptions Used in Estimating Fair Value of Derivative Liability (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Share-Based Payment Arrangement [Abstract]
Performance share fair value	$ 6,740	$ 8,200
Risk-free interest rate	1.74%	0.27%
Expected volatility	30.48%	25.71%
Expected life (in years)	2 years 10 months 6 days	2 years 9 months 7 days
Expected dividend yield	9.82%	8.13%

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Equity Incentive Plan - Summary of Activity Related to Restricted Stock - (Details) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Restricted Stock Units [Member]
Shares
Outstanding at the beginning	484,316	434,143
Granted	750,038	295,063
Vested	(285,853)	(231,053)
Forfeited	(200,589)	(13,837)
Outstanding at the end	747,912	484,316
Weighted Average Grant Date Fair Market Value
Granted	$ 6.02	$ 10.08
Vested	10.01	10.61
Forfeited	$ 7.31	$ 10.58
Performance Based Restricted Share Unit [Member]
Shares
Outstanding at the beginning	113,958	0
Granted	276,679	113,958
Forfeited	(182,976)
Outstanding at the end	207,661	113,958
Weighted Average Grant Date Fair Market Value
Granted	$ 6.74	$ 8.20
Forfeited	$ 7.07

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Equity Incentive Plan - Compensation Additional information (Details) - Restricted Stock Units [Member] $ in Millions	12 Months Ended
	Dec. 31, 2022 USD ($)
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unrecognized compensation cost related to unvested stock-based compensation arrangements	$ 4.1
Weighted-average recognition period	1 year 6 months

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Commitments and Contingencies - Contractual Obligations (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Other Commitments [Line Items]
Less than 1 year	$ 262,130
1-3 years	170,695
3-5 years	2,140
More than 5 years	4,885
Total	439,850
Construction holdbacks
Other Commitments [Line Items]
Less than 1 year	261,243	[1]
1-3 years	168,677	[1]
3-5 years	0	[1]
More than 5 years	0	[1]
Total	429,920	[1]
Operating lease obligations
Other Commitments [Line Items]
Less than 1 year	887	[2]
1-3 years	2,018	[2]
3-5 years	2,140	[2]
More than 5 years	4,885	[2]
Total	$ 9,930	[2]

[1] The funding timing and amounts of construction holdbacks are uncertain as these commitments relate to loans for construction costs and depend on the progress and performance of the underlying projects. In addition, $22.8 million of holdbacks are excluded from this table as they represent capital expenditures required to complete construction for defaulted loans that we are no longer required to pay.

[2] The total operating lease obligation includes $2.4 million of imputed interest.

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Commitments and Contingencies - Contractual Obligations (Parenthetical) (Details) $ in Millions	12 Months Ended
	Dec. 31, 2022 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Imputed Interest	$ 2.4
Capital expenditures	$ 22.8

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Commitments and Contingencies (Details) - Mortgage notes receivables - Geographic concentration risk	12 Months Ended
	Dec. 31, 2022 State Country	Dec. 31, 2021
Concentration Risk [Line Items]
Number of states in mortgage loans were originated | State	20
Number of counties in which loan portfolio concentrated | Country	10
Major Country
Concentration Risk [Line Items]
Concentration risk percentage	46.70%	46.70%

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Commitments and Contingencies - Lease Commitments (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Lease incentives	$ 11,700
Right-of-use assets obtained in exchange		$ 6,400	$ 0	$ 6,360	$ 0
Tenant improvements		$ 2,000	$ 0	$ 1,959	$ 0
Discount rate for the operation lease	6.00%
Imputed interest amount	$ 3,300

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Employee Benefit Plan (Additional Information) (Details) $ in Millions	12 Months Ended
	Dec. 31, 2022 USD ($)
Retirement Benefits [Abstract]
Broadmark annual contributions on employee contributions	3.50%
Employees contributions of annual compensation	6.00%
Total Expenses of Compensations	$ 0.3

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Related Party Transactions Additional information (Details) - USD ($) $ in Thousands		12 Months Ended
	Aug. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Related Party Transaction [Line Items]
Payments to acquire mortgage notes receivable		$ 0	$ 43,498	$ 0
Broadmark Private Reit Llc [Member]
Related Party Transaction [Line Items]
Payments to acquire mortgage notes receivable	$ 43,500

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Subsequent Events Additional information (Details) $ / shares in Units, $ in Millions				12 Months Ended
	Feb. 26, 2023	Feb. 15, 2023 $ / shares	Jan. 15, 2023 $ / shares	Dec. 31, 2022 USD ($)	Feb. 10, 2023 USD ($) a	Feb. 09, 2023 USD ($) a	Jan. 24, 2023 USD ($) ft²
Denver Colorado
Subsequent Event [Line Items]
Current expected credit loss reserve				$ 2.8
Northbrook Illinois
Subsequent Event [Line Items]
Current expected credit loss reserve				0.3
Loveland Colorado
Subsequent Event [Line Items]
Current expected credit loss reserve				0.4
Utah
Subsequent Event [Line Items]
Current expected credit loss reserve				$ 84.9
Subsequent Event
Subsequent Event [Line Items]
Common stock dividend declared | $ / shares		$ 0.035	$ 0.035
Subsequent Event | Denver Colorado
Subsequent Event [Line Items]
Collateral security held investment							$ 33.4
Area of Land | ft²							84,378
Subsequent Event | Northbrook Illinois
Subsequent Event [Line Items]
Collateral security held investment						$ 15.0
Area of Land | a						5.4
Subsequent Event | Loveland Colorado
Subsequent Event [Line Items]
Collateral security held investment					$ 9.5
Area of Land | a					123.4
Subsequent Event | Utah
Subsequent Event [Line Items]
Collateral security held investment					$ 8.5
Area of Land | a					70.6
Subsequent Event | Ready Capital Member
Subsequent Event [Line Items]
Conversion of stock, type of stock converted	0.47233