Company: ADAMM
Filing Date: 2025-06-13
Form Type: 424B5
Source: 0001104659-25-059349
Chunk: 191

Company: ADAMAS TRUST, INC.
Filing Date: 2025-06-13
Form: 424B5
Chunk 191
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 be required to redetermine the value of the real property securing the loan at the time it was significantly modified. In determining the value of the real property securing such a loan, we generally will not obtain third-party appraisals, but rather will rely on internal valuations. No assurance can be provided that the IRS will not successfully challenge our internal valuations. If the terms of our mortgage loans are significantly modified in a manner that does not qualify for the safe harbor in Revenue Procedure 2014-51 and the fair market value of the real property securing such loans has decreased significantly, we could fail the 75% gross income test, the 75% asset test and/or the 10% value test.

We own, and in the future may acquire, mortgage loans that were acquired at a discount to their outstanding principal balance. Revenue Procedure 2014-51 provides that that the IRS will treat mortgage loans that are acquired at a discount to their outstanding principal balance and acquired by a REIT that are secured by real property and other property as producing in part nonqualifying income for the 75% gross income test. Specifically, Revenue Procedure 2014-51 indicates that interest income on a mortgage loan that is acquired at a discount to its outstanding principal balance will be treated as qualifying income based on the ratio of: (i) the fair market value of the real property securing the debt determined as of the date the REIT committed to acquire the loan; and (ii) the face amount of the loan (and not the purchase price or current value of the loan). The face amount of a mortgage loan that was acquired at a discount to its outstanding principal balance typically exceeds the fair market value of the real property securing the mortgage loan on the date the REIT commits to acquire the loan. We have invested, and in the future will invest, in mortgage loans that we acquire at a discount to their outstanding principal balance in a manner that is consistent with maintaining our qualification as a REIT.

We have owned, and in the future may originate or acquire, mezzanine loans, which are loans secured by equity interests in an entity that directly or indirectly owns real property, rather than by a direct mortgage of the real property. In Revenue Procedure 2003-65, the IRS established a safe harbor under which loans secured by a first priority security interest in ownership interests in a partnership or limited liability company owning real property will be treated as real estate assets for purposes of the REIT asset tests described below, and interest derived from those loans will be