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.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

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.

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

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.

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 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.

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

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.