Company: ADAMM
Filing Date: 2025-09-05
Form Type: S-3
Source: 0001104659-25-087812
Chunk: 69

Company: ADAMAS TRUST, INC.
Filing Date: 2025-09-05
Form: S-3
Chunk 69
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 of the original loan for the modified loan. IRS Revenue Procedure 2014-51 provides a safe harbor pursuant to which we will not be required to redetermine the fair market value of the real property securing a loan for purposes of the gross income and asset tests in connection with a loan modification that is: (i) occasioned by a borrower default; or (ii) made at a time when we reasonably believe that the modification to the loan will substantially reduce a significant risk of default on the original loan. No assurance can be provided that all of our loan modifications have or will qualify for the safe harbor in Revenue Procedure 2014-51. To the extent we significantly modify loans in a manner that does not qualify for that safe harbor, we will 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.