QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||||||||
Large accelerated filer | ¨ | Accelerated filer | ¨ | ||||||||
þ | Smaller reporting company | ||||||||||
Emerging growth company |
Page | ||||||||
PART I | ||||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
June 30, 2024 | December 31, 2023 | ||||||||||
(Unaudited) | |||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Cash held in escrow by lender | |||||||||||
Marketable securities | |||||||||||
Loans held for investment, net of allowance for credit losses of $ and $ | |||||||||||
Loans held for investment acquired through participation, net of allowance for credit losses of $ | |||||||||||
Equity investment in unconsolidated investments | |||||||||||
Land, building and building improvements, net | |||||||||||
Lease intangible assets, net | |||||||||||
Interest receivable | |||||||||||
Due from related parties | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Equity | |||||||||||
Liabilities: | |||||||||||
Unsecured notes payable, net | $ | $ | |||||||||
Secured financing agreements, net | |||||||||||
Interest reserve and other deposits held on investments | |||||||||||
Interest payable | |||||||||||
Accounts payable and accrued expenses | |||||||||||
Unearned income | |||||||||||
Other liabilities | |||||||||||
Total liabilities | |||||||||||
Equity: | |||||||||||
Preferred stock, $ | |||||||||||
Class A Common Stock, $ issued, as of both June 30, 2024 and December 31, 2023 | |||||||||||
Class B Common Stock, $ and December 31, 2023, respectively | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive loss | ( | ||||||||||
Total equity | |||||||||||
Total liabilities and equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Interest income | $ | $ | $ | $ | |||||||||||||||||||
Real estate operating revenue | |||||||||||||||||||||||
Other operating income | |||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Operating expenses reimbursed to Manager | |||||||||||||||||||||||
Asset management fee | |||||||||||||||||||||||
Asset servicing fee | |||||||||||||||||||||||
Provision for credit losses | |||||||||||||||||||||||
Real estate operating expenses | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Professional fees | |||||||||||||||||||||||
Directors’ fees | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Impairment charge | |||||||||||||||||||||||
Operating income (loss) | ( | ||||||||||||||||||||||
Other income and expenses | |||||||||||||||||||||||
Interest expense on secured financing | ( | ( | ( | ( | |||||||||||||||||||
Interest expense on unsecured notes payable | ( | ( | ( | ( | |||||||||||||||||||
Interest expense on obligations under participation agreements | ( | ( | ( | ( | |||||||||||||||||||
Unrealized gain on investments, net | |||||||||||||||||||||||
Income (loss) from equity investment in unconsolidated investments | ( | ( | |||||||||||||||||||||
Realized loss on investments, net | ( | ( | ( | ( | |||||||||||||||||||
( | ( | ( | ( | ||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Series A preferred stock dividend declared | $ | $ | $ | $ | ( | ||||||||||||||||||
Net loss allocable to common stock | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Other comprehensive income (loss) | |||||||||||||||||||||||
Available-for-sale debt securities | ( | ||||||||||||||||||||||
( | |||||||||||||||||||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Per share data | |||||||||||||||||||||||
Loss per share — basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted-average shares — basic and diluted | |||||||||||||||||||||||
Distributions declared per common share | $ | $ | $ | $ |
Preferred Stock | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued from reinvestment of shareholder distributions | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on common shares ($ | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale debt securities | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2024 | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued from reinvestment of shareholder distributions | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on common shares ($ | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income: | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale debt securities | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2024 | $ | $ | $ | $ | $ | ( | $ | ( | $ |
Preferred Stock | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2023 | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued from reinvestment of shareholder distributions | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redemption of Series A Preferred Stock | — | ( | ( | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on common shares ($ | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on preferred shares | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued from reinvestment of shareholder distributions | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on common shares ($ | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | $ |
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Provision for credit losses | |||||||||||
Amortization of net purchase premiums on loans | |||||||||||
Straight-line rent adjustments | ( | ||||||||||
Amortization of deferred financing costs | |||||||||||
Amortization of discount on unsecured notes payable | |||||||||||
Amortization of above- and below-market rent intangibles | ( | ( | |||||||||
Amortization and accretion of investment-related fees, net | ( | ( | |||||||||
Impairment charge | |||||||||||
Amortization of above-market rent ground lease | ( | ||||||||||
Realized loss on investments, net | |||||||||||
Unrealized gain on investments, net | ( | ( | |||||||||
Distributions received from equity investment in unconsolidated investments | |||||||||||
(Income) loss from equity investment in unconsolidated investments | ( | ||||||||||
Changes in operating assets and liabilities: | |||||||||||
Deal deposits | |||||||||||
Interest receivable | ( | ( | |||||||||
Due from related parties | ( | ( | |||||||||
Other assets | ( | ||||||||||
Due to Manager | ( | ( | |||||||||
Unearned income | ( | ||||||||||
Interest payable | |||||||||||
Accounts payable and accrued expenses | ( | ||||||||||
Other liabilities | ( | ( | |||||||||
Net cash (used in) provided by operating activities | ( | ||||||||||
Cash flows from investing activities: | |||||||||||
Proceeds from repayments of loans | |||||||||||
Origination, purchase and funding of loans | ( | ( | |||||||||
Purchase of equity interests in unconsolidated investments | ( | ||||||||||
Distributions received in excess of equity income | |||||||||||
Repayments of promissory note receivable | |||||||||||
Funding for promissory note receivable | ( | ||||||||||
Proceeds from sale of marketable securities | |||||||||||
Purchase of marketable securities | ( | ||||||||||
Purchase of equity securities | ( | ||||||||||
Purchase of held-to-maturity securities | ( | ||||||||||
Proceeds from redemption of held-for-maturity securities | |||||||||||
Purchase of real estate properties | ( | ||||||||||
Cash acquired in purchase of real estate | |||||||||||
Return of capital on equity interests in unconsolidated investments | |||||||||||
Net cash provided by (used in) investing activities | ( |
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Cash flows from financing activities: | |||||||||||
Principal repayments on secured financing | ( | ( | |||||||||
Proceeds from secured financing | |||||||||||
Proceeds from obligations under participation agreements | |||||||||||
Distributions paid | ( | ( | |||||||||
Payment of financing costs | ( | ( | |||||||||
Change in interest reserve and other deposits held on investments | ( | ||||||||||
Redemption of Series A Preferred Stock | ( | ||||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||
Net increase in cash, cash equivalents and restricted cash | |||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
$ | $ |
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Supplemental Disclosure of Cash Flows Information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Supplemental non-cash information: | |||||||||||
Reinvestment of shareholder distributions | $ | $ |
Total Capitalized Costs: | ||||||||
Cash and cash equivalents | $ | |||||||
Loans held for investment | ||||||||
Equity investment in unconsolidated investment | ||||||||
Interest receivable | ||||||||
Other assets | ||||||||
$ | ||||||||
Net Assets Acquired | ||||||||
Cash and cash equivalents | $ | |||||||
Other assets | ||||||||
Land | ||||||||
Buildings and Improvements | ||||||||
Intangible asset and liability: | ||||||||
In-please lease | ||||||||
Below-market rent | ( | |||||||
Accounts payable and accrued expenses | ( | |||||||
$ |
June 30, | ||||||||||||||
2024 | 2023 | |||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Restricted cash | ||||||||||||||
Cash held in escrow by lender | ||||||||||||||
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | $ |
June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
Fixed Rate | Floating Rate (1)(2)(3) | Total | Fixed Rate | Floating Rate (1)(2)(3) | Total | ||||||||||||||||||||||||||||||
Number of loans | |||||||||||||||||||||||||||||||||||
Principal balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Carrying value | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Fair value | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Weighted-average coupon rate | % | % | % | % | % | % | |||||||||||||||||||||||||||||
Weighted-average remaining term (years) |
Loans Held for Investment | Loans Held for Investment through Participation Interests | Total | |||||||||||||||
Balance, January 1, 2024 | $ | $ | $ | ||||||||||||||
Principal repayments received | ( | ( | |||||||||||||||
New loans made | |||||||||||||||||
Net amortization of premiums on loans | ( | ( | |||||||||||||||
Accrual, payment and accretion of investment-related fees and other, net | |||||||||||||||||
Provision for credit losses | ( | ( | ( | ||||||||||||||
Balance, June 30, 2024 | $ | $ | $ |
Loans Held for Investment | Loans Held for Investment through Participation Interests | Total | |||||||||||||||
Balance, January 1, 2023 | $ | $ | $ | ||||||||||||||
Cumulative effect of credit loss accounting standard effective | ( | ( | ( | ||||||||||||||
New loans made | |||||||||||||||||
Principal repayments received | ( | ( | ( | ||||||||||||||
Net amortization of premiums on loans | ( | ( | |||||||||||||||
( | ( | ||||||||||||||||
Accrual, payment and accretion of investment-related fees and other, net | ( | ( | ( | ||||||||||||||
Provision for credit losses | ( | ( | ( | ||||||||||||||
Balance, June 30, 2023 | $ | $ | $ |
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
Loan Structure | Principal Balance | Carrying Value | % of Total | Principal Balance | Carrying Value | % of Total | ||||||||||||||||||||||||||||||||
First mortgages | $ | $ | % | $ | $ | % | ||||||||||||||||||||||||||||||||
Preferred equity investments | % | % | ||||||||||||||||||||||||||||||||||||
Mezzanine loans | % | % | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses | — | ( | ( | % | — | ( | ( | % | ||||||||||||||||||||||||||||||
Total | $ | $ | % | $ | $ | % |
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
Property Type | Principal Balance | Carrying Value | % of Total | Principal Balance | Carrying Value | % of Total | ||||||||||||||||||||||||||||||||
Office | $ | $ | % | $ | $ | % | ||||||||||||||||||||||||||||||||
Industrial | % | % | ||||||||||||||||||||||||||||||||||||
Infill land | % | % | ||||||||||||||||||||||||||||||||||||
Multifamily | % | % | ||||||||||||||||||||||||||||||||||||
Mixed-use | % | % | ||||||||||||||||||||||||||||||||||||
Hotel - full/select service | % | % | ||||||||||||||||||||||||||||||||||||
Student housing | % | % | ||||||||||||||||||||||||||||||||||||
Infrastructure | % | % | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses | — | ( | ( | % | — | ( | ( | % | ||||||||||||||||||||||||||||||
Total | $ | $ | % | $ | $ | % |
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
Geographic Location | Principal Balance | Carrying Value | % of Total | Principal Balance | Carrying Value | % of Total | ||||||||||||||||||||||||||||||||
United States | ||||||||||||||||||||||||||||||||||||||
California | $ | $ | % | $ | $ | % | ||||||||||||||||||||||||||||||||
New York | % | % | ||||||||||||||||||||||||||||||||||||
New Jersey | % | % | ||||||||||||||||||||||||||||||||||||
Arizona | % | % | ||||||||||||||||||||||||||||||||||||
Georgia | % | % | ||||||||||||||||||||||||||||||||||||
Utah | % | % | ||||||||||||||||||||||||||||||||||||
North Carolina | % | % | ||||||||||||||||||||||||||||||||||||
Washington | % | % | ||||||||||||||||||||||||||||||||||||
Massachusetts | % | % | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses | — | ( | ( | % | — | ( | ( | % | ||||||||||||||||||||||||||||||
Total | $ | $ | % | $ | $ | % |
Six Months Ended June 30, | ||||||||||||||
2024 | 2023 | |||||||||||||
Allowance for credit losses, beginning of period | $ | $ | ||||||||||||
— | ||||||||||||||
Provision for credit losses | ||||||||||||||
Charge-offs | ( | |||||||||||||
Recoveries | ||||||||||||||
Allowance for credit losses, end of period | $ | $ |
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Liability for credit losses on unfunded commitments, beginning of period | $ | $ | |||||||||
— | |||||||||||
Provision for credit losses | |||||||||||
Liability for credit losses on unfunded commitments, end of period | $ | $ |
Risk Rating | Description | |||||||
1 | Very low risk | |||||||
2 | Low risk | |||||||
3 | Moderate/average risk | |||||||
4 | Higher risk | |||||||
5 | Highest risk |
June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loan Risk Rating | Number of Loans | Amortized Cost | % of Total | Amortized Cost by Year Originated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2024 | 2023 | 2022 | 2021 | 2020 | Prior | |||||||||||||||||||||||||||||||||||||||||||||||||||
1 | $ | % | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
2 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-performing | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
% | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for credit losses | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total, net of allowance for credit losses | $ |
December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loan Risk Rating | Number of Loans | Amortized Cost | % of Total | Amortized Cost by Year Originated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | Prior | |||||||||||||||||||||||||||||||||||||||||||||||||||
1 | $ | % | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
2 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-performing | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
% | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for credit losses | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total, net of allowance for credit losses | $ |
June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
Ownership Interest | Carrying Value | Unfunded Commitment | Ownership Interest | Carrying Value | Unfunded Commitment | ||||||||||||||||||||||||||||||||||||
Equity investment in RESOF | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Income (loss) from equity investment in RESOF | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Distributions received from RESOF | $ | $ | $ | $ |
June 30, 2024 | December 31, 2023 | |||||||||||||
Investments at fair value (cost of $ | $ | $ | ||||||||||||
Other assets | ||||||||||||||
Total assets | ||||||||||||||
Revolving line of credit, net of financing costs | ||||||||||||||
Obligations under participation agreement (proceeds of $ $ | ||||||||||||||
Other liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
Partners’ capital | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Total investment income | $ | $ | $ | $ | |||||||||||||||||||
Total expenses | |||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||
Unrealized appreciation (depreciation) on investments | ( | ( | |||||||||||||||||||||
Provision for income tax | ( | ( | |||||||||||||||||||||
Net increase in partners’ capital resulting from operations | $ | $ | $ | $ |
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||
Entity | Co-owner | Beneficial Ownership Interest | Carrying Value | Beneficial Ownership Interest | Carrying Value | |||||||||||||||||||||||||||
LEL Arlington JV LLC | Third party/Affiliate | $ | $ | |||||||||||||||||||||||||||||
LEL NW 49th JV LLC (1) | Third party/Affiliate | |||||||||||||||||||||||||||||||
TCG Corinthian FL Portfolio JV LLV | Third party/Affiliate | |||||||||||||||||||||||||||||||
610 Walnut Investors LLC | Third party | |||||||||||||||||||||||||||||||
MASPEN MS I LLC (2) | Affiliates | |||||||||||||||||||||||||||||||
Axar Special Opportunity Fund VI-B LLC (3) | N/A | |||||||||||||||||||||||||||||||
$ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Loss from equity investment in the joint ventures | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Distributions received from the joint ventures | $ | $ | $ | $ |
June 30, 2024 | December 31, 2023 | |||||||||||||
Net investments in real estate | $ | $ | ||||||||||||
Other assets | ||||||||||||||
Total assets | ||||||||||||||
Mortgage loans payable | ||||||||||||||
Other liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
Members’ capital | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||||||||||
Operating expenses | ( | ( | ( | ( | |||||||||||||||||||
Depreciation and amortization expense | ( | ( | ( | ( | |||||||||||||||||||
Interest expense | ( | ( | ( | ( | |||||||||||||||||||
Gain on sale of real estate | |||||||||||||||||||||||
Unrealized loss | ( | ( | ( | ( | |||||||||||||||||||
Net income (loss) | $ | $ | ( | $ | ( | $ | ( |
Property Location | Number of Properties | Date of Acquisition | Property Type | Total Capitalized Costs | ||||||||||||||||||||||
Texas, United States | 3/24/2023 | Industrial | $ | |||||||||||||||||||||||
Texas, United States | 5/25/2023 | Industrial | ||||||||||||||||||||||||
$ |
Total Capitalized Costs: | ||||||||
Cash and cash equivalents | $ | |||||||
Loans held for investment | ||||||||
Equity investment in unconsolidated investment | ||||||||
Interest receivable | ||||||||
Other assets | ||||||||
$ | ||||||||
Net Assets Acquired | ||||||||
Cash and cash equivalents | $ | |||||||
Other assets | ||||||||
Land | ||||||||
Buildings and Improvements | ||||||||
Intangible assets and liabilities: | ||||||||
In-place lease (weighted-average expected life of | ||||||||
Below-market rent (weighted-average expected life of | ( | |||||||
Accounts payable and accrued expenses | ( | |||||||
$ |
June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
Cost | Accumulated Depreciation/Amortization | Net | Cost | Accumulated Depreciation/Amortization | Net | ||||||||||||||||||||||||||||||
Real estate: | |||||||||||||||||||||||||||||||||||
Land | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Building and building improvements | ( | ( | |||||||||||||||||||||||||||||||||
Tenant improvements | ( | ( | |||||||||||||||||||||||||||||||||
Total real estate | ( | ( | |||||||||||||||||||||||||||||||||
Lease intangible assets: | |||||||||||||||||||||||||||||||||||
In-place lease | ( | ( | |||||||||||||||||||||||||||||||||
Total intangible assets | ( | ( | |||||||||||||||||||||||||||||||||
Lease intangible liabilities: | |||||||||||||||||||||||||||||||||||
Below-market rent | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Total intangible liabilities | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Total real estate | $ | $ | ( | $ | $ | $ | ( | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Real estate operating revenues: | |||||||||||||||||||||||
Lease revenue | $ | $ | $ | $ | |||||||||||||||||||
Other operating income | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Real estate operating expenses: | |||||||||||||||||||||||
Utilities | $ | $ | $ | $ | |||||||||||||||||||
Real estate taxes | |||||||||||||||||||||||
Repairs and maintenances | |||||||||||||||||||||||
Management fees | |||||||||||||||||||||||
Lease expense, including amortization of above- market ground lease | |||||||||||||||||||||||
Other operating expenses | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Net amortization of above- and below-market rent intangibles (1) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Amortization of in-place lease intangibles (2) | $ | $ | $ | $ |
Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | ||||||||||
Operating lease cost | $ | $ |
Six Months Ended June 30, 2023 | |||||
Amounts included in the measurement of lease liability: | |||||
Operating cash flows from an operating lease | $ | ||||
Right-of-use asset obtained in exchange for lease obligations: | |||||
Operating lease | $ |
June 30, 2024 | ||||||||||||||||||||||||||
Fair Value Measurements | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Money market fund (1) | $ | $ | $ | $ | ||||||||||||||||||||||
Marketable securities - debt securities | ||||||||||||||||||||||||||
Derivative - interest rate cap (2) | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
December 31, 2023 | ||||||||||||||||||||||||||
Fair Value Measurements | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Money market fund (1) | $ | $ | $ | $ | ||||||||||||||||||||||
Marketable securities - debt securities | ||||||||||||||||||||||||||
Marketable securities - equity securities | ||||||||||||||||||||||||||
Derivative - interest rate cap (2) | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
Six Months Ended June 30, | ||||||||||||||||||||||||||
2024 | 2023 | |||||||||||||||||||||||||
Marketable Securities | Derivatives | Marketable Securities | Derivatives | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | ||||||||||||||||||||||
Purchases | ||||||||||||||||||||||||||
Proceeds from sale | ( | |||||||||||||||||||||||||
Reclassification of net realized loss on marketable securities into earnings | ( | |||||||||||||||||||||||||
Unrealized gain (loss) on marketable securities and derivatives | ( | |||||||||||||||||||||||||
Ending balance | $ | $ | $ | $ |
June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
Level | Principal Amount | Carrying Value | Fair Value | Principal Amount | Carrying Value | Fair Value | |||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Loans | |||||||||||||||||||||||||||||||||||||||||
Loans held for investment | 3 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Loans held for investment acquired through participation | 3 | ||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | — | ( | — | — | ( | — | |||||||||||||||||||||||||||||||||||
Total loans | |||||||||||||||||||||||||||||||||||||||||
Equity securities (1) | 3 | ||||||||||||||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Unsecured notes payable | 1 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Secured financing agreements | 3 | ||||||||||||||||||||||||||||||||||||||||
Obligations under participation agreements | 3 | ||||||||||||||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | $ | $ |
Three Months Ended June 30, | ||||||||||||||||||||||||||
2024 | 2023 | |||||||||||||||||||||||||
Fair Value | Impairment Charges | Fair Value | Impairment Charges | |||||||||||||||||||||||
Impairment Charges | ||||||||||||||||||||||||||
Real estate and intangibles | $ | $ | $ | $ | ||||||||||||||||||||||
$ | $ |
Six Months Ended June 30, | ||||||||||||||||||||||||||
2024 | 2023 | |||||||||||||||||||||||||
Fair Value | Impairment Charges | Fair Value | Impairment Charges | |||||||||||||||||||||||
Impairment Charges | ||||||||||||||||||||||||||
Real estate and intangibles | $ | $ | $ | $ | ||||||||||||||||||||||
$ | $ |
Fair Value at June 30, 2024 | Primary Valuation Technique | Unobservable Inputs | June 30, 2024 | |||||||||||||||||||||||||||||
Asset Category | Minimum | Maximum | Weighted Average | |||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Loans held for investment, net (1) | $ | Discounted cash flow | Discount rate | % | % | % | ||||||||||||||||||||||||||
Loans held for investment acquired through participation, net | Discounted cash flow | Discount rate | % | % | % | |||||||||||||||||||||||||||
Equity securities (2) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
Total Level 3 Assets | $ | |||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Secured financing agreements | $ | Discounted cash flow | Discount rate | % | % | % | ||||||||||||||||||||||||||
Obligation under participation agreement | Discounted cash flow | Discount rate | % | % | % | |||||||||||||||||||||||||||
Total Level 3 Liabilities | $ |
Fair Value at December 31, 2023 | Primary Valuation Technique | Unobservable Inputs | December 31, 2023 | |||||||||||||||||||||||||||||
Asset Category | Minimum | Maximum | Weighted Average | |||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Loans held for investment, net (1) | $ | Discounted cash flow | Discount rate | % | % | % | ||||||||||||||||||||||||||
Loans held for investment acquired through participation, net | Discounted cash flow | Discount rate | % | % | % | |||||||||||||||||||||||||||
Total Level 3 Assets | $ | |||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Secured financing agreements | $ | Discounted cash flow | Discount rate | % | % | % | ||||||||||||||||||||||||||
Total Level 3 Liabilities | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Origination and extension fee expense (1) | $ | $ | $ | $ | |||||||||||||||||||
Asset management fee | |||||||||||||||||||||||
Asset servicing fee | |||||||||||||||||||||||
Operating expenses reimbursed to Manager | |||||||||||||||||||||||
Disposition fee (2) | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
June 30, 2024 | ||||||||||||||||||||
Participating Interests | Principal Balance | Carrying Value | ||||||||||||||||||
Mesa AZ Industrial Owner, LLC (1) | $ | $ | ||||||||||||||||||
UNJ Sole Member, LLC (1) | ||||||||||||||||||||
Allowance for credit losses | — | ( | ||||||||||||||||||
$ | $ |
December 31, 2023 | ||||||||||||||||||||
Participating Interests | Principal Balance | Carrying Value | ||||||||||||||||||
Mesa AZ Industrial Owner, LLC (1) | $ | $ | ||||||||||||||||||
UNJ Sole Member, LLC (1) | ||||||||||||||||||||
Allowance for credit losses | — | ( | ||||||||||||||||||
$ | $ |
June 30, 2024 | ||||||||||||||||||||||||||||||||
Transfers treated as obligations under participation agreements | ||||||||||||||||||||||||||||||||
Principal | Carrying Value | % Transferred | Principal | Carrying Value | ||||||||||||||||||||||||||||
Asano Bankers Hill, LLC (1) | $ | $ | % | $ | $ |
Coupon Rate | Effective Rate (1) | Maturity Date | June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||
% | % | 6/30/2026 | $ | $ | ||||||||||||||||||||||||||||
% | % | 3/31/2026 | ||||||||||||||||||||||||||||||
Total principal amount | ||||||||||||||||||||||||||||||||
Unamortized issue discount | ( | ( | ||||||||||||||||||||||||||||||
Unamortized purchase discount (2) | ( | ( | ||||||||||||||||||||||||||||||
Unamortized deferred financing costs | ( | ( | ||||||||||||||||||||||||||||||
Unsecured notes payable, net | $ | $ |
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||
Current Maturity | Extended Maturity | Weighted Average Interest Rate (1) | Pledged Asset Carrying Value | Maximum Facility Size | Principal Amount | Principal Amount | ||||||||||||||||||||||||||||||||||||||
Repurchase Agreements: | ||||||||||||||||||||||||||||||||||||||||||||
Goldman Sachs Bank facility (2)(3) | February 2025 | February 2025 | % | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
UBS AG facility (2)(4) | November 2024 | (5) | (4) | |||||||||||||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||||||||
Non-Recourse Financing: | ||||||||||||||||||||||||||||||||||||||||||||
Promissory notes payable (2)(6) | March 2025 - March 2026 | March 2026 - March 2027 | % | N/A | ||||||||||||||||||||||||||||||||||||||||
Property mortgages - fixed rate | June 2028 | June 2028 | % | N/A | ||||||||||||||||||||||||||||||||||||||||
Property mortgages - variable rate (7) | April 2027 | April 2028 | % | N/A | ||||||||||||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||||||||
Other Secured Financing: | ||||||||||||||||||||||||||||||||||||||||||||
Revolving line of credit (2)(8) | December 2024 | September 2025 | % | |||||||||||||||||||||||||||||||||||||||||
Term loan (9) | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||||||||
$ | $ | |||||||||||||||||||||||||||||||||||||||||||
Unamortized deferred financing costs and other | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Secured financing agreements, net | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
Amortization of deferred financing costs and others | $ | $ | $ | $ | ||||||||||||||||||||||
Proceeds from secured financing | $ | $ | ||||||||||||||||||||||||
Repayments of secured financing | $ | ( | $ | ( |
Years Ending December 31, | Total | |||||||
2024 (July 1 through December 31) | $ | |||||||
2025 | ||||||||
2026 | ||||||||
2027 | ||||||||
2028 | ||||||||
Thereafter | ||||||||
Unamortized deferred financing costs and other | ( | |||||||
Total | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Series A preferred stock dividend declared | ( | ||||||||||||||||||||||
Net loss allocable to common stock | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted-average shares outstanding - basic and diluted | |||||||||||||||||||||||
Loss per share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( |
June 30, 2024 | |||||||||||||||||||||||||||||
Fixed Rate | Floating Rate (1)(2)(3) | Total Gross Loans | Obligations under Participation Agreements | Total Net Loans | |||||||||||||||||||||||||
Number of loans | 3 | 14 | 17 | 1 | 17 | ||||||||||||||||||||||||
Principal balance | $ | 15,340,352 | $ | 399,941,496 | $ | 415,281,848 | $ | 15,000,000 | $ | 400,281,848 | |||||||||||||||||||
Carrying value | 15,170,142 | 369,182,052 | 384,352,194 | 15,144,974 | 369,207,220 | ||||||||||||||||||||||||
Fair value | 14,681,958 | 372,796,287 | 387,478,245 | 15,203,048 | 372,275,197 | ||||||||||||||||||||||||
Weighted average coupon rate | 10.29 | % | 13.13 | % | 13.02 | % | 20.34 | % | 12.75 | % | |||||||||||||||||||
Weighted-average remaining term (years) | 2.01 | 0.79 | 0.85 | 0.60 | 0.86 |
December 31, 2023 | |||||||||||||||||||||||||||||
Fixed Rate | Floating Rate (1)(2)(3) | Total Gross Loans | Obligations under Participation Agreements | Total Net Loans | |||||||||||||||||||||||||
Number of loans | 5 | 16 | 21 | — | 21 | ||||||||||||||||||||||||
Principal balance | $ | 53,998,648 | $ | 455,462,178 | $ | 509,460,826 | $ | — | $ | 509,460,826 | |||||||||||||||||||
Carrying value | 54,095,173 | 402,377,085 | 456,472,258 | — | 456,472,258 | ||||||||||||||||||||||||
Fair value | 53,435,742 | 403,904,207 | 457,339,949 | — | 457,339,949 | ||||||||||||||||||||||||
Weighted average coupon rate | 12.95 | % | 12.92 | % | 12.93 | % | — | % | 12.93 | % | |||||||||||||||||||
Weighted-average remaining term (years) | 1.18 | 0.70 | 0.77 | — | 0.77 |
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
Loan Structure | Principal Balance | Carrying Value | % of Total | Principal Balance | Carrying Value | % of Total | ||||||||||||||||||||||||||||||||
First mortgages | $ | 303,953,051 | $ | 307,692,865 | 83.4 | % | $ | 365,465,500 | $ | 368,918,890 | 80.9 | % | ||||||||||||||||||||||||||
Preferred equity investments | 78,884,440 | 78,983,915 | 21.4 | % | 126,550,969 | 127,105,312 | 27.8 | % | ||||||||||||||||||||||||||||||
Mezzanine loans | 17,444,357 | 17,435,749 | 4.7 | % | 17,444,357 | 17,424,081 | 3.8 | % | ||||||||||||||||||||||||||||||
Allowance for credit losses | — | (34,905,309) | (9.5) | % | — | (56,976,025) | (12.5) | % | ||||||||||||||||||||||||||||||
Total | $ | 400,281,848 | $ | 369,207,220 | 100.0 | % | $ | 509,460,826 | $ | 456,472,258 | 100.0 | % |
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
Property Type | Principal Balance | Carrying Value | % of Total | Principal Balance | Carrying Value | % of Total | ||||||||||||||||||||||||||||||||
Office | $ | 115,976,792 | $ | 116,315,046 | 31.5 | % | $ | 144,812,619 | $ | 144,853,769 | 31.7 | % | ||||||||||||||||||||||||||
Industrial | 70,022,380 | 70,022,380 | 19.0 | % | 67,579,869 | 67,612,621 | 14.8 | % | ||||||||||||||||||||||||||||||
Infill land | 53,900,000 | 55,341,248 | 15.0 | % | 52,839,509 | 54,172,663 | 11.9 | % | ||||||||||||||||||||||||||||||
Multifamily | 53,322,162 | 53,659,242 | 14.5 | % | 85,660,082 | 86,210,868 | 18.9 | % | ||||||||||||||||||||||||||||||
Hotel - full/select service | 43,222,382 | 43,832,428 | 11.9 | % | 43,222,382 | 43,801,303 | 9.6 | % | ||||||||||||||||||||||||||||||
Mixed-use | 32,838,132 | 33,087,413 | 9.0 | % | 63,096,365 | 63,531,806 | 13.9 | % | ||||||||||||||||||||||||||||||
Student housing | 31,000,000 | 31,854,772 | 8.6 | % | 31,000,000 | 31,821,832 | 7.0 | % | ||||||||||||||||||||||||||||||
Infrastructure | — | — | — | % | 21,250,000 | 21,443,421 | 4.7 | % | ||||||||||||||||||||||||||||||
Allowance for credit losses | — | (34,905,309) | (9.5) | % | — | (56,976,025) | (12.5) | % | ||||||||||||||||||||||||||||||
Total | $ | 400,281,848 | $ | 369,207,220 | 100.0 | % | $ | 509,460,826 | $ | 456,472,258 | 100.0 | % |
June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
Geographic Location | Principal Balance | Carrying Value | % of Total | Principal Balance | Carrying Value | % of Total | ||||||||||||||||||||||||||||||||
United States | ||||||||||||||||||||||||||||||||||||||
California | $ | 102,279,912 | $ | 103,308,437 | 28.1 | % | $ | 119,093,246 | $ | 120,296,944 | 26.4 | % | ||||||||||||||||||||||||||
New York | 75,317,144 | 75,317,144 | 20.4 | % | 90,483,672 | 90,483,672 | 19.8 | % | ||||||||||||||||||||||||||||||
New Jersey | 85,922,380 | 87,067,380 | 23.6 | % | 82,419,378 | 83,489,049 | 18.3 | % | ||||||||||||||||||||||||||||||
Georgia | 30,000,000 | 30,300,000 | 8.2 | % | 74,335,828 | 74,602,328 | 16.3 | % | ||||||||||||||||||||||||||||||
Utah | 28,000,000 | 28,910,000 | 7.8 | % | 49,250,000 | 50,329,949 | 11.0 | % | ||||||||||||||||||||||||||||||
Washington | 18,935,933 | 18,983,655 | 5.1 | % | 34,052,223 | 34,020,449 | 7.5 | % | ||||||||||||||||||||||||||||||
Arizona | 31,000,000 | 31,296,248 | 8.5 | % | 31,000,000 | 31,296,235 | 6.9 | % | ||||||||||||||||||||||||||||||
North Carolina | 21,826,479 | 21,929,665 | 5.9 | % | 21,826,479 | 21,929,657 | 4.8 | % | ||||||||||||||||||||||||||||||
Massachusetts | 7,000,000 | 7,000,000 | 1.9 | % | 7,000,000 | 7,000,000 | 1.5 | % | ||||||||||||||||||||||||||||||
Allowance for credit losses | — | (34,905,309) | (9.5) | % | — | (56,976,025) | (12.5) | % | ||||||||||||||||||||||||||||||
Total | $ | 400,281,848 | $ | 369,207,220 | 100.0 | % | $ | 509,460,826 | $ | 456,472,258 | 100.0 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||||||||
Interest income | $ | 8,435,024 | $ | 15,878,453 | $ | (7,443,429) | $ | 20,583,759 | $ | 31,494,260 | $ | (10,910,501) | |||||||||||||||||||||||
Real estate operating revenue | 2,718,625 | 2,803,934 | (85,309) | 5,438,326 | 4,136,903 | 1,301,423 | |||||||||||||||||||||||||||||
Other operating income | 19,871 | 100,068 | (80,197) | 160,780 | 153,463 | 7,317 | |||||||||||||||||||||||||||||
11,173,520 | 18,782,455 | (7,608,935) | 26,182,865 | 35,784,626 | (9,601,761) | ||||||||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||||||||||
Operating expenses reimbursed to Manager | 2,332,771 | 2,120,029 | 212,742 | 4,510,935 | 4,297,033 | 213,902 | |||||||||||||||||||||||||||||
Asset management fee | 1,619,971 | 2,105,049 | (485,078) | 3,335,013 | 4,102,476 | (767,463) | |||||||||||||||||||||||||||||
Asset servicing fee | 394,995 | 496,374 | (101,379) | 801,520 | 966,899 | (165,379) | |||||||||||||||||||||||||||||
Provision for credit losses | 2,576,325 | 4,652,644 | (2,076,319) | 4,449,436 | 3,802,593 | 646,843 | |||||||||||||||||||||||||||||
Real estate operating expenses | 782,271 | 1,864,212 | (1,081,941) | 1,473,277 | 3,074,124 | (1,600,847) | |||||||||||||||||||||||||||||
Depreciation and amortization | 1,747,119 | 1,756,664 | (9,545) | 3,863,801 | 2,438,477 | 1,425,324 | |||||||||||||||||||||||||||||
Professional fees | 826,080 | 787,427 | 38,653 | 1,711,649 | 1,767,322 | (55,673) | |||||||||||||||||||||||||||||
Directors’ fees | 91,560 | 83,750 | 7,810 | 175,310 | 180,214 | (4,904) | |||||||||||||||||||||||||||||
Other | 100,594 | 188,631 | (88,037) | 363,505 | 403,875 | (40,370) | |||||||||||||||||||||||||||||
Impairment charge | — | 11,765,540 | (11,765,540) | — | 11,765,540 | (11,765,540) | |||||||||||||||||||||||||||||
10,471,686 | 25,820,320 | (15,348,634) | 20,684,446 | 32,798,553 | (12,114,107) | ||||||||||||||||||||||||||||||
Operating income (loss) | 701,834 | (7,037,865) | 7,739,699 | 5,498,419 | 2,986,073 | 2,512,346 | |||||||||||||||||||||||||||||
Other income and expenses | |||||||||||||||||||||||||||||||||||
Interest expense on secured financing | (6,580,840) | (7,483,284) | 902,444 | (13,870,752) | (13,603,015) | (267,737) | |||||||||||||||||||||||||||||
Interest expense on unsecured notes payable | (2,452,577) | (2,405,267) | (47,310) | (4,892,952) | (4,799,573) | (93,379) | |||||||||||||||||||||||||||||
Interest expense on obligations under participation agreements | (770,648) | (576,915) | (193,733) | (1,389,143) | (1,109,061) | (280,082) | |||||||||||||||||||||||||||||
Unrealized gain on investments, net | 201,501 | 51,224 | 150,277 | 178,570 | 57,808 | 120,762 | |||||||||||||||||||||||||||||
Income (loss) from equity investment in unconsolidated investments | 1,671,970 | (1,759,934) | 3,431,904 | 1,198,583 | (2,196,794) | 3,395,377 | |||||||||||||||||||||||||||||
Realized loss on investments, net | (310,550) | (25,024) | (285,526) | (446,009) | (25,024) | (420,985) | |||||||||||||||||||||||||||||
(8,241,144) | (12,199,200) | 3,958,056 | (19,221,703) | (21,675,659) | 2,453,956 | ||||||||||||||||||||||||||||||
Net loss | $ | (7,539,310) | $ | (19,237,065) | $ | 11,697,755 | $ | (13,723,284) | $ | (18,689,586) | $ | 4,966,302 |
Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |||||||||||||||||||||||||
Weighted Average Principal Amount (1) | Weighted Average Coupon Rate (2) | Weighted Average Principal Amount (1) | Weighted Average Coupon Rate (2) | |||||||||||||||||||||||
Total portfolio | ||||||||||||||||||||||||||
Gross loans | $ | 460,924,737 | 13.1 | % | $ | 606,761,243 | 12.4 | % | ||||||||||||||||||
Obligations under participation agreements | (15,000,000) | 20.3 | % | (13,459,586) | 17.1 | % | ||||||||||||||||||||
Promissory notes payable | (80,585,255) | 10.9 | % | — | — | % | ||||||||||||||||||||
Repurchase agreements payable | (74,175,716) | 8.6 | % | (147,054,763) | 7.0 | % | ||||||||||||||||||||
Revolving line of credit payable | (34,761,111) | 8.7 | % | (117,050,294) | 8.5 | % | ||||||||||||||||||||
Net loans (3) | $ | 256,402,655 | 15.3 | % | $ | 329,196,600 | 16.0 | % | ||||||||||||||||||
Senior loans | ||||||||||||||||||||||||||
Gross loans | $ | 353,025,921 | 12.9 | % | $ | 481,108,382 | 11.8 | % | ||||||||||||||||||
Promissory notes payable | (80,585,255) | 10.9 | % | — | — | % | ||||||||||||||||||||
Repurchase agreements payable | (74,175,716) | 8.6 | % | (147,054,763) | 7.0 | % | ||||||||||||||||||||
Revolving line of credit payable | (34,761,111) | 8.7 | % | (117,050,294) | 8.5 | % | ||||||||||||||||||||
Net loans (3) | $ | 163,503,839 | 16.7 | % | $ | 217,003,325 | 16.8 | % | ||||||||||||||||||
Subordinated loans (4) | ||||||||||||||||||||||||||
Gross loans | $ | 107,898,816 | 14.0 | % | $ | 125,652,861 | 14.3 | % | ||||||||||||||||||
Obligations under participation agreements | (15,000,000) | 20.3 | % | (13,459,586) | 17.1 | % | ||||||||||||||||||||
Net loans (3) | $ | 92,898,816 | 13.0 | % | $ | 112,193,275 | 14.0 | % |
Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||||||||||||||||||||
Weighted Average Principal Amount (1) | Weighted Average Coupon Rate (2) | Weighted Average Principal Amount (1) | Weighted Average Coupon Rate (2) | |||||||||||||||||||||||
Total portfolio | ||||||||||||||||||||||||||
Gross loans | $ | 473,466,860 | 13.1 | % | $ | 620,485,639 | 12.3 | % | ||||||||||||||||||
Obligations under participation agreements | (13,516,484) | 18.3 | % | (13,181,738) | 17.1 | % | ||||||||||||||||||||
Promissory notes payable | (73,572,677) | 10.9 | % | — | — | % | ||||||||||||||||||||
Repurchase agreements payable | (77,498,307) | 8.6 | % | (157,207,602) | 7.0 | % | ||||||||||||||||||||
Revolving line of credit payable | (40,821,119) | 8.7 | % | (107,111,725) | 8.5 | % | ||||||||||||||||||||
Net loans (3) | $ | 268,058,273 | 15.4 | % | $ | 342,984,574 | 15.7 | % | ||||||||||||||||||
Senior loans | ||||||||||||||||||||||||||
Gross loans | $ | 365,553,392 | 12.9 | % | $ | 489,904,811 | 11.7 | % | ||||||||||||||||||
Promissory notes payable | (73,572,677) | 10.9 | % | — | — | % | ||||||||||||||||||||
Repurchase agreements payable | (77,498,307) | 8.6 | % | (157,207,602) | 7.0 | % | ||||||||||||||||||||
Revolving line of credit payable | (40,821,119) | 8.7 | % | (107,111,725) | 8.5 | % | ||||||||||||||||||||
Net loans (3) | $ | 173,661,289 | 16.7 | % | $ | 225,585,484 | 16.5 | % | ||||||||||||||||||
Subordinated loans (4) | ||||||||||||||||||||||||||
Gross loans | $ | 107,913,468 | 14.0 | % | $ | 130,580,828 | 14.3 | % | ||||||||||||||||||
Obligations under participation agreements | (13,516,484) | 18.3 | % | (13,181,738) | 17.1 | % | ||||||||||||||||||||
Net loans (3) | $ | 94,396,984 | 13.4 | % | $ | 117,399,090 | 14.0 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Income (loss) from equity investment in RESOF | $ | 1,775,929 | $ | (1,159,388) | $ | 2,774,268 | $ | (855,788) | |||||||||||||||
Loss from equity investment in the joint ventures | (179,937) | (600,546) | (1,651,663) | (1,341,006) | |||||||||||||||||||
Income from other equity investments | 75,978 | — | 75,978 | — | |||||||||||||||||||
$ | 1,671,970 | $ | (1,759,934) | $ | 1,198,583 | $ | (2,196,794) |
Type of Financing | Maximum Amount Available | Outstanding Balance | Amount Remaining Available | Interest Rate | Maturity Date | |||||||||||||||||||||||||||
Fixed Rate: | ||||||||||||||||||||||||||||||||
Unsecured notes payable | N/A | $ | 85,125,000 | N/A | 6.00% | June 2026 | ||||||||||||||||||||||||||
Unsecured notes payable | N/A | 38,375,000 | N/A | 7.00% | March 2026 | |||||||||||||||||||||||||||
Property mortgages | N/A | 40,250,000 | N/A | 6.25% | June 2028 | |||||||||||||||||||||||||||
$ | 163,750,000 | |||||||||||||||||||||||||||||||
Variable Rate: | ||||||||||||||||||||||||||||||||
Property mortgages | N/A | $ | 34,100,000 | N/A | Term SOFR +3.5% (Term SOFR Floor of 3.75%) | April 2027 | ||||||||||||||||||||||||||
Promissory notes payable | N/A | 81,485,545 | N/A | Term SOFR plus a spread ranging from 4.75% to 5.98% with a combined floor rate ranging from 9.0% to 11.28% | March 2025 - March 2026 | |||||||||||||||||||||||||||
Revolving line of credit | $ | 34,761,111 | 34,761,111 | $ | — | Term SOFR + 3.5% (combined floor rate of 7.0%) | December 2024 | |||||||||||||||||||||||||
Goldman Sachs Bank repurchase agreement | 200,000,000 | 76,282,989 | 123,717,011 | Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 2.0% to 5.00%) | February 2025 | |||||||||||||||||||||||||||
$ | 234,761,111 | $ | 226,629,645 | $ | 123,717,011 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Origination and extension fee expense (1) | $ | 369,392 | $ | 343,159 | $ | 632,164 | $ | 1,294,607 | |||||||||||||||
Asset management fee | 1,619,971 | 2,105,049 | 3,335,013 | 4,102,476 | |||||||||||||||||||
Asset servicing fee | 394,995 | 496,374 | 801,520 | 966,899 | |||||||||||||||||||
Operating expenses reimbursed to Manager | 2,332,771 | 2,120,029 | 4,510,935 | 4,297,033 | |||||||||||||||||||
Disposition fee (2) | 135,000 | 917,750 | 475,000 | 1,208,563 | |||||||||||||||||||
Total | $ | 4,852,129 | $ | 5,982,361 | $ | 9,754,632 | $ | 11,869,578 |
June 30, 2024 | ||||||||
Variable rate investments | $ | 383,576,552 | ||||||
Variable rate debt | $ | 226,629,645 |
1.00% Decrease | 1.00% Increase | |||||||||||||
Increase (decrease) in investment income from variable rate investments | $ | (3,962,820) | $ | 4,000,997 | ||||||||||
Decrease (increase) in interest expense from variable rate debt | 1,616,258 | (2,266,296) | ||||||||||||
Net increase (decrease) in investment income from variable rate instruments | $ | (2,346,562) | $ | 1,734,701 |
Exhibit No. | Description and Method of Filing | |||||||
3.1 | ||||||||
3.2 | ||||||||
3.3 |
4.1 | ||||||||
4.2 | ||||||||
4.3 | ||||||||
4.4 | ||||||||
4.5 | ||||||||
4.6 | ||||||||
4.7 | ||||||||
10.1* | ||||||||
10.2* | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32** | ||||||||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
104 | Cover Page Interactive Data File Included as Exhibit 101 (embedded within the Inline XBRL document) |
TERRA PROPERTY TRUST, INC. | ||||||||
By: | /s/ Vikram S. Uppal | |||||||
Vikram S. Uppal | ||||||||
Chief Executive Officer and Chief Investment Officer | ||||||||
(Principal Executive Officer) | ||||||||
By: | /s/ Gregory M. Pinkus | |||||||
Gregory M. Pinkus | ||||||||
Chief Financial Officer, Treasurer and Secretary | ||||||||
(Principal Financial and Accounting Officer) |
BORROWER: | Terra Mortgage Portfolio II, LLC | ||||
LENDER: | Western Alliance Bank, an Arizona corporation | ||||
TODAY’S DATE: | ____/____/20__ | ||||
REPORTING PERIOD ENDED: | ____/____/20__ |
Terra Mortgage Portfolio II, LLC | |||||
By: | |||||
Name: | |||||
Title: |
The Total Net Worth for Terra Property Trust, Inc. is: | |||||
Total Assets | $ | ||||
Minus: Intangible Assets & Loans to Stakeholders | $ | ||||
Minus: Prepaid Taxes and/or Expenses | $ | ||||
Minus: Total Liabilities | $ | ||||
TOTAL NET WORTH | $ | ||||
REQUIRED MINIMUM | $150,000,000.00 | ||||
In compliance? | ☐Yes ☐No |
Minimum Liquidity for Terra Property Trust, Inc.: | |||||
Cash & Cash Equivalents | $ | ||||
REQUIRED MINIMUM CASH | (10% of outstanding balance) | ||||
In compliance? | ☐Yes ☐No |
Total Other Indebtedness except Trade Obligations: | $ | ||||
MAXIMUM PERMITTED | $0.00 | ||||
In compliance? | ☐Yes ☐No |
Financial Reporting Requirements Current? | ☐Yes ☐No |
Date: | August 9, 2024 | |||||||
/s/ Vikram S. Uppal | ||||||||
Vikram S. Uppal | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
Date: | August 9, 2024 | |||||||
/s/ Gregory M. Pinkus | ||||||||
Gregory M. Pinkus | ||||||||
Chief Financial Officer and Chief Operating Officer | ||||||||
(Principal Financial and Principal Accounting Officer) |
Date: | August 9, 2024 | ||||||||||
/s/ Vikram S. Uppal | |||||||||||
Vikram S. Uppal | |||||||||||
Chief Executive Officer | |||||||||||
(Principal Executive Officer) | |||||||||||
/s/ Gregory M. Pinkus | |||||||||||
Gregory M. Pinkus | |||||||||||
Chief Financial Officer and Chief Operating Officer | |||||||||||
(Principal Financial and Principal Accounting Officer) |
Consolidated Statements of Operations and Comprehensive (Loss) Income - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Revenues | ||||
Interest income | $ 8,435,024 | $ 15,878,453 | $ 20,583,759 | $ 31,494,260 |
Real estate operating revenue | 2,718,625 | 2,803,934 | 5,438,326 | 4,136,903 |
Other operating income | 19,871 | 100,068 | 160,780 | 153,463 |
Total revenues | 11,173,520 | 18,782,455 | 26,182,865 | 35,784,626 |
Operating expenses | ||||
Operating expenses reimbursed to Manager | 2,332,771 | 2,120,029 | 4,510,935 | 4,297,033 |
Asset management fee | 1,619,971 | 2,105,049 | 3,335,013 | 4,102,476 |
Asset servicing fee | 394,995 | 496,374 | 801,520 | 966,899 |
Provision for credit losses | 2,576,325 | 4,652,644 | 4,449,436 | 3,802,593 |
Real estate operating expenses | 782,271 | 1,864,212 | 1,473,277 | 3,074,124 |
Depreciation and amortization | 1,747,119 | 1,756,664 | 3,863,801 | 2,438,477 |
Professional fees | 826,080 | 787,427 | 1,711,649 | 1,767,322 |
Directors’ fees | 91,560 | 83,750 | 175,310 | 180,214 |
Other | 100,594 | 188,631 | 363,505 | 403,875 |
Impairment charge | 0 | 11,765,540 | 0 | 11,765,540 |
Operating expenses | 10,471,686 | 25,820,320 | 20,684,446 | 32,798,553 |
Operating income (loss) | 701,834 | (7,037,865) | 5,498,419 | 2,986,073 |
Other income and expenses | ||||
Interest expense on secured financing | (6,580,840) | (7,483,284) | (13,870,752) | (13,603,015) |
Interest expense on unsecured notes payable | (2,452,577) | (2,405,267) | (4,892,952) | (4,799,573) |
Interest expense on obligations under participation agreements | (770,648) | (576,915) | (1,389,143) | (1,109,061) |
Unrealized gain on investments, net | 201,501 | 51,224 | 178,570 | 57,808 |
Income (loss) from equity investment in unconsolidated investments | 1,671,970 | (1,759,934) | 1,198,583 | (2,196,794) |
Realized loss on investments, net | (310,550) | (25,024) | (446,009) | (25,024) |
Total other income and expense | (8,241,144) | (12,199,200) | (19,221,703) | (21,675,659) |
Net income (loss) | (7,539,310) | (19,237,065) | (13,723,284) | (18,689,586) |
Series A preferred stock dividend declared | 0 | 0 | 0 | (3,907) |
Net loss allocable to common stock | (7,539,310) | (19,237,065) | (13,723,284) | (18,693,493) |
Other comprehensive income (loss) | ||||
Available-for-sale debt securities | 316,392 | 0 | (19,390) | 0 |
Other comprehensive loss | 316,392 | 0 | (19,390) | 0 |
Comprehensive loss | $ (7,222,918) | $ (19,237,065) | $ (13,742,674) | $ (18,693,493) |
Loss per share — basic (in usd per share) | $ (0.31) | $ (0.79) | $ (0.56) | $ (0.77) |
Loss per share — diluted (in usd per share) | $ (0.31) | $ (0.79) | $ (0.56) | $ (0.77) |
Weighted-average shares — basic (in shares) | 24,336,577 | 24,335,430 | 24,336,368 | 24,335,402 |
Weighted-average shares — diluted (in shares) | 24,336,577 | 24,335,430 | 24,336,368 | 24,335,402 |
Distributions declared per common share (in usd per share) | $ 0.19 | $ 0.19 | $ 0.38 | $ 0.38 |
Consolidated Statements of Changes in Equity (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2024 |
Mar. 31, 2024 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Dec. 31, 2023 |
Oct. 01, 2022 |
|
Distributions declared per common share (in usd per share) | $ 0.19 | $ 0.19 | $ 0.19 | $ 0.19 | $ 0.38 | $ 0.38 | ||
Class A Common Stock | ||||||||
Common stock, par or stated value per share (in usd per share) | 0.01 | 0.01 | 0.01 | 0.01 | $ 0.01 | $ 0.01 | ||
Class B Common Stock | ||||||||
Common stock, par or stated value per share (in usd per share) | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | |||
$12.5% Series A Cumulative Non-Voting Preferred Stock | ||||||||
Preferred stock, dividend rate, percentage | 12.50% |
Consolidated Statement of Cash Flows (Parenthetical) |
1 Months Ended |
---|---|
May 31, 2023
USD ($)
loan
building
| |
Industrial Buildings | |
Number of industrial buildings | building | 5 |
Cash payment for industrial buildings | $ 3,500,000 |
Number of loans | loan | 5 |
Total Capitalized Costs: | |
Cash and cash equivalents | $ 3,515,466 |
Total, net of allowance for credit losses | 68,737,877 |
Equity investment in unconsolidated investments | 10,149,642 |
Interest receivable | 456,650 |
Other assets | 429,326 |
Total assets | 83,288,961 |
Net Assets Acquired | |
Cash and cash equivalents | 712,608 |
Other assets | 33,802 |
In-please lease | 8,403,667 |
Below-market rent | (4,770,870) |
Accounts payable and accrued expenses | (912,771) |
Net assets acquired | 83,288,961 |
Industrial Buildings | Land | |
Net Assets Acquired | |
Land, building and building improvements, net | 14,457,149 |
Industrial Buildings | Building and building improvements | |
Net Assets Acquired | |
Land, building and building improvements, net | $ 65,365,376 |
Business |
6 Months Ended |
---|---|
Jun. 30, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business | Business Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) is a real estate investment trust (“REIT”) that originates, invests in and manages a diverse portfolio of real estate and real estate-related assets. The Company was incorporated under the Maryland General Corporation Law on December 31, 2015. The Company focuses primarily on commercial real estate credit investments, including first mortgage loans, subordinated loans (including B-notes, mezzanine and preferred equity) and credit facilities throughout the United States. The Company’s loans finance the acquisition, development or recapitalization of high-quality commercial real estate in the United States. The Company focuses on middle market loans in the approximately $10 million to $50 million range, which in the Company’s experience have been subject to less competition, offer higher risk-adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. The Company may also make strategic real estate equity and non-real estate-related investments that align with its investment objectives and criteria. On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by the Company, cash of $25.5 million and other working capital. The Company has elected to be taxed, and to qualify annually thereafter, as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2016. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. The Company also operates its business in a manner that permits it to maintain its exemption from registration as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC (“Terra Capital Partners”), pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (the “Board”) (Note 7). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement. On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc. (“Terra BDC”), merged with and into Terra Income Fund 6, LLC (“Terra LLC”), a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as a wholly owned subsidiary of the Company. Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of the Company’s Class B Common Stock, $0.01 par value per share (“Class B Common Stock”), were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of October 1, 2022. On December 20, 2023, Terra Fund 5 announced that effective December 29, 2023 (the “Distribution Date”), Terra Fund 5 would distribute all of its shares of the Company’s Class B Common Stock to its members as part of the winding up of Terra Fund 5. On the Distribution Date, each member of Terra Fund 5 received 2,252.02 shares of the Company’s Class B Common Stock for each unit of membership interest in Terra Fund 5 held by such member. Because Terra Fund 5 previously owned its interests in the shares of Class B Common Stock indirectly through its ownership of interests in Terra JV, LLC (“Terra JV”), prior to the Distribution Date, Terra JV first distributed the shares of Class B Common Stock to Terra Fund 5 and Terra Secured Income Fund 7, LLC (“Terra Fund 7”), and Terra Fund 5 then distributed those shares to its members on the Distribution Date and Terra Fund 7 became a direct stockholder of the Company’s Class B Common Stock. As of June 30, 2024, Terra Fund 7 and Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”) held 8.7% and 10.1%, respectively, of the issued and outstanding shares of the Company’s common stock.
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Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity. The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see Note 4). VIE Model An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Under the VIE model, limited partnerships are considered VIEs unless a limited partner holds substantive kick-out or participating rights over a general partner. The Company consolidates entities that are VIEs when the Company determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Loans Held for Investment The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company’s preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment. Loans are carried at amortized cost less allowance for credit losses. Amortized cost is the amount at which a financing receivable or a loan is originated or acquired, adjusted for accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash and write-offs. Allowance for Credit Losses On January 1, 2023, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses. ASC 326 mandates the use of a current expected credit loss (“CECL”) methodology for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” methodology previously required under United States generally accepted accounting principles (“U.S. GAAP”). The CECL methodology requires the consideration of possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible. The Company’s adoption of the ASC 326 resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to member’s capital as of January 1, 2023. Subsequent to the adoption of the CECL methodology, any increase or decrease to the allowance for credit losses is recorded in earnings on the consolidated statement of operations. Performing Loans The Company uses a model-based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which the Company does not have the unconditional right to cancel, as these loans share similar risk characteristics. The Company utilizes information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company utilizes a commercial mortgage-based, third-party loan loss model and because the Company does not have a meaningful history of realized credit losses on its loan portfolio, it subscribes to a database service to provide historical proxy loan loss information. The Company employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company has chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into its allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. The Company selects certain economics variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends. The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan. The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. A significant amount of judgment is applied in selecting inputs and analyzing results produced by the models to determine the allowance for credit losses on performing loans. Changes in such estimates can significantly affect the expected credit losses. Beyond the Company’s reasonable and supportable forecast period, the Company reverts to historical loss information on a straight-line basis over the remaining contractual loan term, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The determination of the performing loans credit loss estimate considers historical loss information and current economic conditions for each loan, reversion period and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed. The Company also performs a qualitative assessment and applies qualitative adjustments as necessary, usually due to limitations of the loan loss model. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for certain contractual extension options, renewals, modifications, and prepayments. Unfunded Commitments Some of the Company’s performing loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL methodology because the Company does not have an unconditional right to cancel such commitments. The allowance for credit losses related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This allowance for credit losses is estimated using the same method outlined above for the Company’s outstanding performing loan balances and increases or decreases are also recorded in earnings on the consolidated statements of operations. Non-Performing Loans During the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, the Company considers that loan non-performing. For all non-performing loans, such as those in default, collateral-dependent or modified loans, including historical troubled debt restructurings, the Company removes these loans from the industry loss rate approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral. Loans Not Secured by Real Estate The Company has two loans that are not secured by real estate. These loans, which are included in other assets on the consolidated balance sheets, are recorded at amortized cost. The Company performs a separate analysis based on recoverability to determine the allowance for credit losses on these loans. As of June 30, 2024, the Company did not record any allowance for credit losses on these two loans because the Company believes that it will be able to collect all outstanding interest and principal on or before the maturity date of each loan. Equity Investment in Unconsolidated Investments The Company accounts for its equity interests in unconsolidated investments under the equity method of accounting, i.e., at cost, increased or decreased by its share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting. The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceed cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities. The Company evaluates its equity investment unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements. Equity Securities Without Readily Determinable Fair Value The Company accounts for its equity security without readily determinable fair value at cost, which is included in other assets on the consolidated balance sheets. The Company has elected the measurement alternative and therefore will evaluate whether the security continues to qualify for the alternative at each reporting period. The Company evaluates its equity security without readily determinable fair value on a periodic basis to determine if there is an observable price change in an orderly transaction for similar investments or if there are any indicators that the value of its equity security may be impaired. The Company will make fair value adjustments, if any, or reductions for any impairment to derive the carrying value of the investment.. Marketable Securities From time to time, the Company may invest in short-term debt. These securities are classified as available-for-sale securities and are carried at fair value. Changes in the fair value of debt securities are reported in other comprehensive income until a gain or loss on the securities is realized. The Company may also invest in short-term equity securities. Changes in the fair value of equity securities are recognized in earnings. Real Estate Owned, Net Real estate acquired is recorded at its estimated fair value at acquisition and is shown net of accumulated depreciation and impairment charges. Acquisition of properties generally are accounted for as asset acquisitions. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs, are accumulated and then allocated to individual assets and liabilities acquired based upon their relative fair value. The Company allocates the purchase price of its real estate acquisitions to land, building, tenant improvements, acquired in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities. The Company amortizes the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on its consolidated statements of operations. The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income. Real estate assets are depreciated using the straight-line method over their estimated useful lives: buildings and improvements - not to exceed 40 years, and tenant improvements - shorter of the lease term or life of the asset. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life. Management reviews the Company’s real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate assets. If impaired, the real estate asset will be written down to its estimated fair value. Leases The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s lease typically does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made in advance and excludes lease incentives if there were any. The Company’s lease term may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. As of October 19, 2023, in connection with the deed in lieu of foreclosure discussed in Note 5, the Company is no longer a party to the ground lease and the related ROU assets and liabilities were written off. Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest Income: Interest income is accrued based upon the outstanding principal amount and contractual terms of the loans and preferred equity investments that the Company expects to collect, and it is accrued and recorded on a daily basis. Discounts and premiums on investments purchased are accreted or amortized over the expected life of the respective loan using the effective yield method, and are included in interest income in the consolidated statements of operations. Loan origination fees and exit fees, net of portions attributable to obligations under participation agreements, are capitalized and amortized or accreted to interest income over the life of the investment using the effective yield method. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of interest and principal becomes not probable. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. The Company holds loans in its portfolio that may contain paid-in-kind (“PIK”) interest provisions. The PIK interest, which represents contractually deferred interest that is added to the principal balance that is due at maturity, is recorded on the accrual basis. Real Estate Operating Revenues: Real estate operating revenue is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rent increases and expense reimbursements to be paid in monthly installments. Lease revenue, or rental income from leases, is recognized on a straight-line basis over the term of the respective leases. Additionally, the Company recorded above- and below-market lease intangibles, which are included in real estate owned, net, in connection with the acquisition of the real estate properties. These intangible assets and liabilities are amortized to lease revenue over the remaining contractual lease term. Other Revenues: Prepayment fee income is recognized as prepayments occur. All other income is recognized when earned. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. Restricted cash represents cash held as additional collateral by the Company on behalf of the borrowers related to the investments in loans or preferred equity instruments for the purpose of such borrowers making interest and property-related operating payments. Restricted cash is not available for general corporate purposes. The related liability is recorded in “Interest reserve and other deposits held on investments” on the consolidated balance sheets. Cash held in escrow by lender represents amounts funded to an escrow account for debt services and tenant improvements. Cash held in escrow is restricted and is not available for general corporate purposes. The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows as of:
Participation Interests Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes not probable. See “Obligations Under Participation Agreements” in Note 8 for additional information. Secured Financing Agreements, Net The Company's secured financing agreements include two master repurchase agreements, a revolving line of credit, non-recourse property mortgages, note-on-note financing arrangements and a term loan. The Company accounts for borrowings under these financing arrangements as secured transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “Secured Financing Arrangements” in Note 8 for additional information. Fair Value Measurements U.S. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment and revolving line of credit. Such financial instruments are carried at amortized cost, less impairment, where applicable. Marketable securities are financial instruments that are reported at fair value. Deferred Financing Costs Deferred financing costs represent fees and expenses incurred in connection with obtaining financing for investments. These costs are presented in the consolidated balance sheets as a direct deduction of the debt liability to which the costs pertain. These costs are amortized using the effective interest method and are included in interest expense on the applicable borrowings in the consolidated statements of operations over the life of the borrowings. Income Taxes The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates. As of June 30, 2024, the Company has satisfied all the requirements for a REIT. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes, nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. For the three and six months ended June 30, 2024 and 2023, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s 2020-2023 federal tax returns remain subject to examination by the Internal Revenue Service. Earnings Per Share The Company has a simple equity capital structure with only common stock outstanding as of June 30, 2024 and December 31, 2023, and common stock and preferred stock outstanding prior to March 31, 2023. As a result, earnings per share, as presented, represents both basic and dilutive per-share amounts for the periods presented in the consolidated financial statements. Income per basic share of common stock is calculated by dividing net income allocable to common stock by the weighted-average number of shares of common stock issued and outstanding during such period. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates, and those differences could be material. Segment Information The Company’s primary business is originating, acquiring and structuring real estate-related loans related to high quality commercial real estate. From time to time, the Company may acquire real estate encumbering the senior loans through foreclosure, may invest in real estate related joint ventures and may directly acquire real estate properties. The Company operates in a single segment focused on mezzanine loans, other loans and preferred equity investments, and to a lesser extent, owning and managing real estate.
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Loans Held for Investment |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans Held for Investment | Loans Held for Investment The Company elected the practical expedient under ASC 326 to exclude accrued interest from amortized cost. As of June 30, 2024 and December 31, 2023, accrued of $8.1 million and $6.5 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment. Portfolio Summary The following table provides a summary of the Company’s loan portfolio as of:
_______________ (1)These loans pay a coupon rate of Secured Overnight Financing Rate (“SOFR”) or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread. Coupon rates shown were determined using the London Interbank Offered Rate (“LIBOR”) of 5.45%, average SOFR of 5.34% and Term SOFR of 5.34% as of June 30, 2024 and average SOFR of 5.34% and Term SOFR of 5.35% as of December 31, 2023. (2)As of June 30, 2024 and December 31, 2023, amount included $302.6 million and $342.9 million of senior mortgages used as collateral for $192.5 million and $204.9 million of borrowings under secured financing arrangements, respectively (Note 9). (3)As of June 30, 2024 and December 31, 2023, 13 and 14 loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable. Lending Activities The following tables present the activities of the Company’s loan portfolio:
Portfolio Information The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of:
Allowance for Credit Losses As described in Note 2, on January 1, 2023, the Company adopted the provisions of ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses. The adoption of ASU 2016-13 resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficits as of January 1, 2023. The following table presents the activity in allowance for credit loss for funded loans:
Certain of the Company’s performing loans contain provisions for future funding commitments, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These unfunded commitments amounted to approximately $27.8 million and $35.7 million as of June 30, 2024 and December 31, 2023, respectively. The liability for credit losses on unfunded commitments is included in other liabilities on the consolidated balance sheets. The following table presents the activity in the liability for credit losses on unfunded commitments:
Accrued Interest Receivable The Company elected not to measure a CECL reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. If the Company determines it has uncollectible accrued interest receivable, it generally would reverse the accrued and unpaid interest against interest income and no longer accrue for interest. For the three and six months ended June 30, 2024, the Company reversed $0.7 million of accrued interest income because such income was deemed uncollectible. For the three and six months ended June 30, 2023, the Company did not reverse any interest income accrual because all accrued interest income was deemed collectible. For the three months ended June 30, 2024 and 2023, the Company suspended interest income accrual of $6.8 million and $3.7 million on five and three loans, respectively, because recovery of such income was not probable. For the six months ended June 30, 2024 and 2023, the Company suspended interest income accrual of $12.6 million and $7.2 million on five and three loans, respectively, because recovery of such income was not probable. As of June 30, 2024 and December 31, 2023, interest receivable recognized on these loans was $4.8 million and $3.4 million, respectively. Non-Performing Loans As discussed in Note 2, for loans that are considered non-performing, the Company removes them from the industry loss rate approach and analyzes them separately for recoverability. As of June 30, 2024 and December 31, 2023, the Company had six non-performing loans with total carrying value of $192.7 million and $209.3 million, respectively. Accordingly, the Company utilized the estimated fair value of the loan collateral or sponsor’s guarantee to estimate the total allowance for credit losses of $31.0 million and $54.6 million as of June 30, 2024 and December 31, 2023, respectively. Please see “Note 6. Fair Value Measurements – Significant Unobservable Inputs” for information on how the fair values of these loans were determined. Loan Risk Rating The Company assesses the risk factors of each loan and assigns each loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial condition; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, as follows:
The following tables present the amortized cost of the Company’s loan portfolio by year of origination and loan risk rating:
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Investment in Unconsolidated Investments | Equity Investment in Unconsolidated Investments The Company owns interests in a limited partnership, joint ventures and a preferred equity investment with profit-sharing feature. The Company accounts for its interests in these investments under the equity method of accounting (Note 2). Equity Investment in a Limited Partnership On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“RESOF”) whereby the Company committed to fund up to $50.0 million to purchase a limited partnership interest in RESOF. RESOF’s primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of RESOF is Mavik Real Estate Special Opportunities Fund GP, LLC, which is a subsidiary of the Company’s sponsor, Terra Capital Partners. The Company evaluated its equity interest in RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in RESOF is accounted for as an equity method investment. The following tables present a summary of information regarding the Company’ equity investment in RESOF:
The following tables present summarized financial information of the Company’s equity investment in RESOF. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:
Equity Investment in Joint Ventures The Company beneficially owns equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities, and indirectly, together with other non-affiliated entities, a non-real estate operating company. The Company evaluated its equity interests in these entities and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interests in the joint ventures are accounted for as equity method investments. The following tables present a summary of the Company’s equity investment in the joint ventures:
_______________ (1)In June 2024, this joint venture sold its underlying real estate property and distributed proceeds to the members. The Company’s portion of the distribution was $2.6 million. (2)In May 2024, the Company contributed $50,000 to this entity for the purpose of investing in opportunistic equity and debt securities. This entity is jointly owned with two related parties managed by the Manager. (3)In June 2024, the Company made a $20.0 million capital commitment to this fund that has indirectly invested, together with other non-affiliated entities, in a non-real estate operating company. As of June 30, 2024, the total amount contributed was $5.0 million. The Company determined it is not a primary beneficiary of the fund and therefore accounts for the investment using the equity method of accounting.
The following tables present estimated combined summarized financial information of the Company’s equity investment in the joint ventures. Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share:
Other Equity Investments In June 2024, the Company entered into a preferred equity agreement with TCC Boundary Partners LLC. The investment carries interest at an annual rate of 15.0% and matures on June 30, 2029. Additionally, the Company will receive distributions in the event that net proceeds from the sale of underlying property exceed certain internal rate of return thresholds. Because the Company shares residual profit from the sale of underlying property with the borrower, the Company accounts for the investment using the equity method of accounting. As of June 30, 2024, the Company's investment had a carrying value of $14.7 million. For both the three and six months ended June 30, 2024, the Company recorded $0.1 million in equity income from TCC Boundary Partners LLC and did not receive any distributions.
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Real Estate Owned, Net |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Owned, Net | Real Estate Owned, Net Real Estate Activities 2024 — In January 2024, a lease for a space in one of the industrial properties was terminated and the Company received a termination fee of $0.03 million. In connection with the lease termination, the Company wrote off the related unamortized in-place lease of $0.3 million and unamortized below-market rent of $0.1 million. Subsequent to the lease termination, the Company entered into a new lease with another tenant for the same space. 2023 — During the three and six months ended June 30, 2023, the Company recorded an impairment charge of $11.8 million on the multi-tenant office building located in California in order to reduce the carrying value of the building to its estimated fair value. Additionally, during the six months ended June 30, 2023, the Company entered into the following investments:
These acquisitions were deemed to be real estate asset acquisitions, and therefore total transaction costs were capitalized to the cost basis of the assets. The following table presents an allocation of the total capitalized costs:
Real Estate Owned, Net Real estate owned is comprised of eight industrial buildings located in Texas with lease intangible assets and liabilities. The following table presents the components of real estate owned, net as of:
Real Estate Operating Revenues and Expenses The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations:
The following table presents the amortization of intangibles that is included in the consolidated statements of operations:
(1)Net amortization of above- and below-market rent intangibles is recorded as an adjustment to real estate operating revenue on the consolidated statements of operations. (2)Amortization of in-place lease intangibles is included in depreciation and amortization expense on the consolidated statements of operations. Supplemental Ground Lease Disclosures The Company previously owned an office building that was subject to a ground lease whereby the Company was the lessee (or a tenant) to the ground lease. On October 19, 2023, the Company conveyed its interest in the office building to a subsidiary of Centennial Bank by deed in lieu of foreclosure. Accordingly, the Company is no longer a party to the ground lease. The component of lease expense for the ground lease was as follows:
Supplemental non-cash information related to the ground lease was as follows:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows: Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access. Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, rate of prepayment, loss severities, credit risks and default rates) or other market corroborated inputs. Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. As of June 30, 2024 and December 31, 2023, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, equity securities, secured financing agreements, unsecured notes payable and obligations under participation agreements. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives are financial instruments that are reported at fair value. Financial Instruments Carried at Fair Value on a Recurring Basis From time to time, the Company may invest in short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value and included in Other assets in the consolidated balance sheet. Changes in the fair value of equity securities are recognized in earnings. Changes in the fair value of debt securities are reported in other comprehensive income until the securities are realized. As discussed in Note 8, in March 2023, the Company entered into a loan agreement with a lender to provide financing for the acquisition of real estate properties (Note 5). In connection with the financing, the Company purchased an interest rate cap for $258,500 to effectively cap the related index rate at 5.0%. The interest rate cap met all the criteria of a derivative under ASC 815, but it did not meet the criteria under ASC 815-20-25 to qualify for hedging accounting. As such, the interest rate cap is reported at fair value and is included in other assets in the consolidated balance sheet, and the change in the fair value of the interest rate cap is reported in the consolidated statements of operations. The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of:
(1)Amount is included in cash and cash equivalents on the consolidated balance sheets. (2)Amount is included in other assets on the consolidated balance sheets. The following table presents the activities of the marketable securities and derivatives:
Financial Instruments Not Carried at Fair Value The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:
______________ (1)Amount is included in Other assets on the consolidated balance sheets. The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both June 30, 2024 and December 31, 2023 due to their short-term nature. Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges) The Company periodically assesses whether there are any indicators that the value of its real estate investments may be impaired or that their carrying value may not be recoverable (Note 2). The following tables present information about assets for which the Company recorded an impairment charge and that were measured at fair value on a non-recurring basis:
There were no impairment charges for the three and six months ended June 30, 2024. Impairment charges, and their related triggering events and fair value measurements, recognized during the three and six months ended June 30, 2023 were as follows: Real Estate and Intangibles The impairment charges described below are reflected within Impairment charges in the consolidated statements of operations. During the three and six months ended June 30, 2023, the Company recorded an impairment charge of $11.8 million on the multi-tenant office building located in California in order to reduce the carrying value of the building to its estimated fair value. The fair value measurement was determined by estimating discounted cash flows using two significant unobservable inputs, which were the cash flow discount rate (8.50%) and terminal capitalization rate (7.50%). Valuation Process for Fair Value Measurement The fair value of the Company’s investment in equity securities, held-to-maturity debt securities and its unsecured notes payable is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy. Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e., a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, which may include available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment provisions; the ability of our borrowers and investees to make payments and their net operating income and debt-service coverage ratio; construction progress reports and construction budget analysis; the nature, quality and realizable value of any collateral (and loan-to-value ratio); the forces that influence the local markets in which the asset (the collateral) is purchased and sold, such as capitalization rates, occupancy rates, rental rates and replacement costs; and the anticipated duration of each real estate-related loan investment. The Manager designates a valuation committee to oversee the entire valuation process of the Company’s Level 3 investments. The valuation committee is comprised of members of the Manager’s senior management, deal and portfolio management teams, who meet on a quarterly basis, or more frequently as needed, to review the Company investments being valued as well as the inputs used in the proprietary valuation model. Valuations determined by the valuation committee are supported by pertinent data and, in addition to a proprietary valuation model, are based on market data, industry accepted third-party valuation models and discount rates or other methods the valuation committee deems to be appropriate. Because there is no readily available market for these investments, the fair values of these investments are approved in good faith by the Company’s board of directors (which is made up exclusively of independent directors). The fair values of the Company’s mortgage loan payable, secured borrowing, term loan payable and revolving line of credit are determined by discounting the contractual cash flows at the interest rate the Company estimates such arrangements would bear if executed in the current market. The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of June 30, 2024 and December 31, 2023. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.
(1)Amount includes $161.7 million and $154.6 million of non-performing loans (Note 3) as of June 30, 2024 and December 31, 2023, respectively. The fair market value estimates were determined primarily using discounted cash flow models and Level 3 inputs, which include estimates of property-specific cash flows over a specific holding period, a discount rate range of 6.75% to 7.00% and a terminal capitalization rate range of 5.75% to 6.00% as of both June 30, 2024 and December 31, 2023. These inputs are based on the location, type and nature of the property, current sales and lease comparables, anticipated real estate and capital market conditions, and management’s knowledge, experience and judgment. Additionally, the Company may use sales comparables, purchase price and appraisals to corroborate the estimated value of a loan’s collateral or may use sponsor’s guarantee to estimate the value of a non-performing loan. (2)Fair market value is based on purchase price.
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Related Party Transactions |
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | Related Party Transactions Management Agreement The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations:
(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan. (2)Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations. Origination and Extension Fee Expense Pursuant to the Management Agreement, the Manager or its affiliates receives an origination fee in the amount of 1% of the amount used to originate, fund, acquire or structure real estate-related investments, including any third-party expenses related to such loans. In the event that the term of any real estate-related loan held by the Company is extended, the Manager also receives an extension fee equal to the lesser of (i) 1% of the principal amount of the loan being extended or (ii) the amount of fee paid to the Company by the borrower in connection with such extension. Asset Management Fee Under the terms of the Management Agreement, the Manager or its affiliates provides the Company with certain investment management services in return for a management fee. The Company pays a monthly asset management fee at an annual rate of 1% of the aggregate funds under management, which includes the loan origination price or aggregate gross acquisition price, as defined in the Management Agreement, for each real estate related loan and cash held by the Company. Asset Servicing Fee The Manager or its affiliates receives from the Company a monthly servicing fee at an annual rate of 0.25% of the aggregate gross origination price or acquisition price, as defined in the Management Agreement, for each real estate-related loan held by the Company. Transaction Breakup Fee In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of June 30, 2024 and December 31, 2023, the Company had not received any breakup fees. Operating Expenses The Company reimburses the Manager for operating expenses incurred in connection with services provided to the operations of the Company, including the Company’s allocable share of the Manager’s overhead, such as rent, employee costs, utilities, and technology costs. Disposition Fee Pursuant to the Management Agreement, the Manager or its affiliates receives a disposition fee in the amount of 1% of the gross sale price received by the Company from the disposition of any real estate-related loan, or any portion of, or interest in, any real estate-related loan. The disposition fee is paid concurrently with the closing of any such disposition of all or any portion of any real estate-related loan or any interest therein, which is the lesser of (i) 1% of the principal amount of the loan or debt-related loan prior to such transaction or (ii) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property equal to 1% of the sales price. Due From Affiliate On December 1, 2022, the Company entered into a revolving promissory note receivable with Mavik Special Opps Co-Investments, LP, an affiliate of the Company. The promissory note receivable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. In January 2024, the promissory note was amended to (i) extend the maturity date from June 30, 2024 to April 30, 2025 and to (ii) modify the interest rate from Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days, to 15.0%. During the six months ended June 30, 2024 and 2023, the Company provided funding under the promissory note receivable of $5.0 million and $0.8 million, respectively, and received repayments of $8.5 million and zero, respectively. As of June 30, 2024 and December 31, 2023, amount outstanding under the promissory note receivable was $0.3 million and $3.8 million, respectively, which is included in Other assets on the consolidated balance sheets. Due from Related Parties As of June 30, 2024 and December 31, 2023, amount due from related parties was $0.8 million and $0.7 million, primarily related to operational cash requirements the Company paid on behalf of its affiliates. Promissory Note Payable On January 24, 2024, the Company, as borrower, entered into a revolving promissory note payable with Terra LLC. The promissory note payable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. The promissory note matures on March 31, 2027. As of June 30, 2024, amount outstanding under this promissory note payable was $34.3 million. The activity associated with this agreement is eliminated in consolidation and therefore has no impact on the Company’s consolidated financial statements. Cost Sharing and Reimbursement Agreement The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the Company to the Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on the Company’s consolidated financial statements. Distributions Paid For the three months ended June 30, 2024 and 2023, the Company made distributions to investors totaling $4.7 million and $4.7 million, respectively, all of which were returns of capital. For the six months ended June 30, 2024 and 2023, the Company made distributions to investors totaling $9.3 million and $9.3 million, respectively, of which $9.3 million and $8.8 million were returns of capital, respectively (Note 10). Due to Manager As of June 30, 2024 and December 31, 2023, approximately $2.0 million and $4.2 million, respectively, was due to the Manager, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager. Mavik Real Estate Special Opportunities Fund, LP On August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. For more information on this investment, please see Note 4. Participation Agreements In the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity. ASC 860, Transfers and Servicing (“ASC 860”), establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (see “Participation Interests” in Note 2 and “Obligations Under Participation Agreements” in Note 8). Participation Interests Purchased by the Company From time to time, the Company may purchase investments from affiliates pursuant to participation agreements. In accordance with the terms of each participation agreement, each Participant’s rights and obligations, as well as the proceeds received from the related borrower/issuer of the loan, are based upon their respective pro rata participation interest in the loan. The table below lists the participation interests purchased by the Company pursuant to participation agreements as of:
________________ (1)The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager. Transfers of Participation Interests by the Company The following table summarizes the investment that was subject to a PA with an investment partnership affiliated with the Manager as of June 30, 2024. There was no such investment as of December 31, 2023.
________________ (1)Participant is a certain separately managed account, an investment partnership managed by the Manager. This investment is held in the name of the Company, but the Participant’s rights and obligations, including interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon its pro rata participation interest in such participated investment, as specified in the participation agreement. The Participant’s share of the investment is repayable only from the proceeds received from the related borrower/issuer of the investment and, therefore, the Participant also is subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreement with this entity, the Company receives and allocates the interest income and other related investment income to the Participant based on its pro rata participation interest. The Participant pays any expenses, including any fees to the Manager, only on its pro rata participation interest, subject to the terms of the governing fee arrangements.
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Unsecured Notes Payable The following table presents a summary of the Company’s unsecured notes payable outstanding as of:
_______________ (1)Includes issue discount, purchase discount and deferred financing costs that are amortized to interest expense over the life of the notes. (2)In connection with the BDC Merger, Terra LLC assumed all the obligations under the 7.00% Senior Notes and recorded a purchase discount of $4.6 million, representing the difference between the carrying value and the fair value of the notes on the date of the merger. The 6.00% Senior Notes Due 2026 On June 10, 2021, the Company issued $78.5 million in aggregate principal amount of its 6.00% notes due 2026, and on June 25, 2021, the underwriters partially exercised their option to purchase an additional $6.6 million of the notes (collectively the “6.00% Senior Notes Due 2026”). The 6.00% Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 10, 2023, at a redemption price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest. The 7.00% Senior Notes Due 2026 On February 10, 2021, Terra BDC issued $34.8 million in aggregate principal amount of 7.00% fixed-rate notes due 2026, and on February 26, 2021, the underwriters exercised the option to purchase an additional $3.6 million of the notes (collectively the “7.00% Senior Notes Due 2026”). The 7.00% Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at Terra BDC’s option on or after February 10, 2023, at a redemption price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest. In connection with the BDC Merger, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the outstanding 7.00% Senior Notes Due 2026. Covenant Compliance The Company’s unsecured notes payable contain certain financial covenants. As of June 30, 2024, the Company was in compliance with such covenants. Secured Financing Arrangements The following table is a summary of the Company’s secured financing agreements in place as of:
(1)Amount is calculated using the applicable index rate as of June 30, 2024. (2)These facilities were used to finance the Company’s senior loan investments. (3)Interest rate is based on Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 2.0% to 5.00%. In March 2024, the Company amended the Goldman Sachs Bank facility agreement to extend the maturity date to February 18, 2025 and to reduce the minimum interest coverage ratio covenant. (4)Interest rate is based on Term SOFR plus a spread of 1.965%. In February 2024, the outstanding balance was repaid. In March 2024, the Company amended the side letter to the UBS AG facility agreement to reduce the maximum amount available under this facility to zero. In connection with this amendment, UBS AG waived the payment of any fees and the meeting of any representations, warranties or covenants for the period commencing on December 31, 2023 until such time as there are amounts outstanding under the UBS AG facility agreement. (5)The maturity of this facility can be extended annually on mutually agreeable terms. (6)Interest rate is based on Term SOFR plus a spread ranging from 4.75% to 5.98% with a combined floor rate ranging from 9.0% to 11.28%. (7)Interest rate is based on Term SOFR plus a spread of 3.5% with a Term SOFR floor of 3.75%. (8)Interest rate is based on Term SOFR + 3.5% with a combined floor of 7.0%. In March 2024, the Company amended the facility agreement to extend the maturity date to September 12, 2024 with an option to extend the facility term for an additional 12-month period, reduce the credit limit to $75.0 million, increase the coupon rate and revise the minimum profitability and net worth covenants. In June 2024, the Company amended the facility agreement to extend the maturity date of the facility agreement to December 31, 2024, eliminate the ability to make additional revolving borrowings under the facility agreement, decrease the minimum net worth covenant of the Company for future quarterly measurement dates, introduce a minimum liquidity covenant of the Company, establish an interest reserve account and remove the minimum profitability and maximum global leverage covenants of the Company. (9)In March 2024, the term loan was repaid in full. In the normal course of business, the Company is in discussions with its lenders to extend, amend, or replace any financing facilities which contain near term expirations. The following table presents certain information about the Company’s secured financing arrangements:
Repurchase Agreements The Company seeks to mitigate risks associated with its repurchase agreements by managing risk related to the credit quality of its assets, interest rates, liquidity, the rate of prepayment and market value. The margin call provisions under the repurchase facilities provide the lender with certain rights in the event of a decline in the credit of the underlying assets purchased. To monitor credit risk associated with the performance and value of its loans and investments, the Company’s asset management team regularly reviews its investment portfolios and is in regular contact with its borrowers, monitoring performance of the collateral and enforcing its rights as necessary. The Company further seeks to manage risks associated with the repurchase agreements by matching the maturities and interest rate characteristics of its loans with the related repurchase agreement. Covenant Compliance The Company’s secured financing agreements contain certain financial tests and covenants. In the event of a default or any breach of covenant of a related agreement, the lender has the right to accelerate all amounts due, charge interest at a default rate, retain all cash flow from the loans originated and/or sell such loans in a private sale on terms possibly unfavorable to the Company. As of June 30, 2024, the Company was in compliance with all such covenants, as amended or waived. Scheduled Debt Principal Payments Scheduled debt principal payments for each of the five calendar years following June 30, 2024 are as follows:
Obligations Under Participation Agreements As discussed in Note 2, the Company follows the guidance in ASC 860 when accounting for loan participations. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. As of June 30, 2024, obligations under participation agreements were $15.1 million (see “Participation Agreements” in Note 7). The interest rate on the obligations under participation agreements was 20.34%. There were no such obligations under participation agreements as of December 31, 2023.
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Commitments and Contingencies |
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Jun. 30, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Unfunded Commitments on Loans Held for Investment Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These fundings amounted to approximately $27.8 million and $35.7 million as of June 30, 2024 and December 31, 2023, respectively. The Company expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities. Unfunded Investment Commitment As discussed in Note 4, on August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. As of June 30, 2024 and December 31, 2023, the unfunded investment commitment was $23.3 million and $37.4 million, respectively. Additionally, in June 2024, the Company made a $20.0 million capital commitment to an entity that will invest, indirectly, together with other non-affiliated entities, in a non-real estate operating company. As of June 30, 2024, the unfunded commitment was $15.0 million. Other The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Manager has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote. Additionally, from time to time, we and individuals employed by us and our Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our borrowers and investees. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that such proceedings will have a material effect upon our financial condition or results of operations.
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Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | Equity Earnings Per Share The following table presents earnings per share:
Preferred Stock Classes Preferred Stock The Company’s charter gives it authority to issue 50,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock. As of June 30, 2024, there were no shares of Preferred Stock issued or outstanding. As of December 31, 2023 there were no shares of Series A Preferred Stock (as defined below) issued and outstanding. Series A Preferred Stock On November 30, 2016, the Board classified and designated 125 shares of Preferred Stock as a separate class of Preferred Stock to be known as the 12.5% Series A Redeemable Cumulative Preferred Stock, $1,000 liquidation value per share (“Series A Preferred Stock”). In December 2016, the Company sold 125 shares of the Series A Preferred Stock for $125,000. The Series A Preferred Stock paid dividends at an annual rate of 12.5% of the liquidation preference. In March 2023, the Series A Preferred Stock was fully redeemed at par for a total of $125,000 plus accrued dividends. Common Stock On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000, consisting of 450,000,000 shares of Class A Common Stock, $0.01 par value per share (“Class A Common Stock”), 450,000,000 shares of Class B Common Stock, and 50,000,000 shares of Preferred Stock. Concurrently, 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders and each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the BDC Merger was automatically changed into one issued and outstanding share of Class B Common Stock. As of June 30, 2024, Terra Fund 7 and Terra Offshore REIT held 8.7% and 10.1%, respectively, of the issued and outstanding shares of the Company’s common stock. The Class B Common Stock rank equally with and have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as each other share of the Company’s common stock, except as set forth below with respect to conversion. In connection with the potential liquidity transactions discussed in Note 1, on December 1, 2023, the Company amended its articles of amendment and restatement (the “A&R Articles”) to provide the Board with greater flexibility to pursue a direct listing. In connection with a listing of shares of Class A Common Stock on a national securities exchange, the outstanding shares of Class B Common Stock will be convertible on a one-for-one basis into listed shares of Class A Common Stock, subject to certain conversion terms and holding periods. Currently, there are no outstanding shares of Class A Common Stock. The A&R Articles also incorporate the provisions generally required by state regulators in order to become a non-traded REIT and publicly sell shares of the Company’s stock not listed on an exchange. These non-traded REIT provisions will spring into effect and become operative if the Company ultimately decides to register and sell shares in a non-traded REIT format. Distributions The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with U.S. GAAP, to its stockholders each year to comply with the REIT provisions of the Internal Revenue Code. All distributions will be made at the discretion of the Board and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as the Board deems relevant. For both the three months ended June 30, 2024 and 2023, the Company made distributions to investors totaling $4.7 million, all of which were returns of capital. For both the six months ended June 30, 2024 and 2023, the Company made distributions to investors totaling $9.3 million, of which $9.3 million and $8.8 million were returns of capital, respectively. Additionally, for the three and six months ended June 30, 2023, the Company made distributions to preferred stockholders of none and $3,907, respectively. There were no such distributions for the three and six months ended June 30, 2024. Dividend Reinvestment Plan On January 20, 2023, the Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which the Company’s stockholders may elect to reinvest cash distributions payable by the Company in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan. For the six months ended June 30, 2024 and 2023, the Company issued 838 and 143 shares of Class B Common Stock for a total of $9,524 and $1,988 pursuant to the Plan, respectively.
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2024 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsManagement has evaluated subsequent events through the date the consolidated financial statements were available to be issued. Management has determined that there are no material events that would require adjustment to, or disclosure in, the Company’s consolidated financial statements. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2024 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity. The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see Note 4). VIE Model An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Under the VIE model, limited partnerships are considered VIEs unless a limited partner holds substantive kick-out or participating rights over a general partner. The Company consolidates entities that are VIEs when the Company determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.
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Loans Held for Investment | Loans Held for Investment The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company’s preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment. Loans are carried at amortized cost less allowance for credit losses. Amortized cost is the amount at which a financing receivable or a loan is originated or acquired, adjusted for accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash and write-offs.
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Allowance for Credit Losses | Allowance for Credit Losses On January 1, 2023, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses. ASC 326 mandates the use of a current expected credit loss (“CECL”) methodology for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” methodology previously required under United States generally accepted accounting principles (“U.S. GAAP”). The CECL methodology requires the consideration of possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible. The Company’s adoption of the ASC 326 resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to member’s capital as of January 1, 2023. Subsequent to the adoption of the CECL methodology, any increase or decrease to the allowance for credit losses is recorded in earnings on the consolidated statement of operations. Performing Loans The Company uses a model-based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which the Company does not have the unconditional right to cancel, as these loans share similar risk characteristics. The Company utilizes information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company utilizes a commercial mortgage-based, third-party loan loss model and because the Company does not have a meaningful history of realized credit losses on its loan portfolio, it subscribes to a database service to provide historical proxy loan loss information. The Company employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company has chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into its allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. The Company selects certain economics variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends. The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan. The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. A significant amount of judgment is applied in selecting inputs and analyzing results produced by the models to determine the allowance for credit losses on performing loans. Changes in such estimates can significantly affect the expected credit losses. Beyond the Company’s reasonable and supportable forecast period, the Company reverts to historical loss information on a straight-line basis over the remaining contractual loan term, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The determination of the performing loans credit loss estimate considers historical loss information and current economic conditions for each loan, reversion period and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed. The Company also performs a qualitative assessment and applies qualitative adjustments as necessary, usually due to limitations of the loan loss model. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for certain contractual extension options, renewals, modifications, and prepayments. Unfunded Commitments Some of the Company’s performing loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL methodology because the Company does not have an unconditional right to cancel such commitments. The allowance for credit losses related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This allowance for credit losses is estimated using the same method outlined above for the Company’s outstanding performing loan balances and increases or decreases are also recorded in earnings on the consolidated statements of operations. Non-Performing Loans During the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, the Company considers that loan non-performing. For all non-performing loans, such as those in default, collateral-dependent or modified loans, including historical troubled debt restructurings, the Company removes these loans from the industry loss rate approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral. Loans Not Secured by Real Estate |
Equity Investment in Unconsolidated Investments | Equity Investment in Unconsolidated Investments The Company accounts for its equity interests in unconsolidated investments under the equity method of accounting, i.e., at cost, increased or decreased by its share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting. The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceed cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities. The Company evaluates its equity investment unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements.
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Equity Securities Without Readily Determinable Fair Value | Equity Securities Without Readily Determinable Fair Value The Company accounts for its equity security without readily determinable fair value at cost, which is included in other assets on the consolidated balance sheets. The Company has elected the measurement alternative and therefore will evaluate whether the security continues to qualify for the alternative at each reporting period. The Company evaluates its equity security without readily determinable fair value on a periodic basis to determine if there is an observable price change in an orderly transaction for similar investments or if there are any indicators that the value of its equity security may be impaired. The Company will make fair value adjustments, if any, or reductions for any impairment to derive the carrying value of the investment..
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Marketable Securities | Marketable Securities From time to time, the Company may invest in short-term debt. These securities are classified as available-for-sale securities and are carried at fair value. Changes in the fair value of debt securities are reported in other comprehensive income until a gain or loss on the securities is realized. The Company may also invest in short-term equity securities. Changes in the fair value of equity securities are recognized in earnings.
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Real Estate Owned, Net | Real Estate Owned, Net Real estate acquired is recorded at its estimated fair value at acquisition and is shown net of accumulated depreciation and impairment charges. Acquisition of properties generally are accounted for as asset acquisitions. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs, are accumulated and then allocated to individual assets and liabilities acquired based upon their relative fair value. The Company allocates the purchase price of its real estate acquisitions to land, building, tenant improvements, acquired in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities. The Company amortizes the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on its consolidated statements of operations. The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income. Real estate assets are depreciated using the straight-line method over their estimated useful lives: buildings and improvements - not to exceed 40 years, and tenant improvements - shorter of the lease term or life of the asset. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life. Management reviews the Company’s real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate assets. If impaired, the real estate asset will be written down to its estimated fair value.
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Leases | Leases The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s lease typically does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made in advance and excludes lease incentives if there were any. The Company’s lease term may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.
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Revenue Recognition | Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest Income: Interest income is accrued based upon the outstanding principal amount and contractual terms of the loans and preferred equity investments that the Company expects to collect, and it is accrued and recorded on a daily basis. Discounts and premiums on investments purchased are accreted or amortized over the expected life of the respective loan using the effective yield method, and are included in interest income in the consolidated statements of operations. Loan origination fees and exit fees, net of portions attributable to obligations under participation agreements, are capitalized and amortized or accreted to interest income over the life of the investment using the effective yield method. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of interest and principal becomes not probable. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. The Company holds loans in its portfolio that may contain paid-in-kind (“PIK”) interest provisions. The PIK interest, which represents contractually deferred interest that is added to the principal balance that is due at maturity, is recorded on the accrual basis. Real Estate Operating Revenues: Real estate operating revenue is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rent increases and expense reimbursements to be paid in monthly installments. Lease revenue, or rental income from leases, is recognized on a straight-line basis over the term of the respective leases. Additionally, the Company recorded above- and below-market lease intangibles, which are included in real estate owned, net, in connection with the acquisition of the real estate properties. These intangible assets and liabilities are amortized to lease revenue over the remaining contractual lease term. Other Revenues: Prepayment fee income is recognized as prepayments occur. All other income is recognized when earned.
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Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. Restricted cash represents cash held as additional collateral by the Company on behalf of the borrowers related to the investments in loans or preferred equity instruments for the purpose of such borrowers making interest and property-related operating payments. Restricted cash is not available for general corporate purposes. The related liability is recorded in “Interest reserve and other deposits held on investments” on the consolidated balance sheets. Cash held in escrow by lender represents amounts funded to an escrow account for debt services and tenant improvements. Cash held in escrow is restricted and is not available for general corporate purposes.
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Participation Interests | Participation InterestsLoan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes not probable. |
Secured Financing Agreements, Net | Secured Financing Agreements, Net The Company's secured financing agreements include two master repurchase agreements, a revolving line of credit, non-recourse property mortgages, note-on-note financing arrangements and a term loan. The Company accounts for borrowings under these financing arrangements as secured transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees.
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Fair Value Measurements | Fair Value Measurements U.S. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment and revolving line of credit. Such financial instruments are carried at amortized cost, less impairment, where applicable. Marketable securities are financial instruments that are reported at fair value. The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access. Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, rate of prepayment, loss severities, credit risks and default rates) or other market corroborated inputs. Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. As of June 30, 2024 and December 31, 2023, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, equity securities, secured financing agreements, unsecured notes payable and obligations under participation agreements. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives are financial instruments that are reported at fair value.
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Deferred Financing Costs | Deferred Financing Costs Deferred financing costs represent fees and expenses incurred in connection with obtaining financing for investments. These costs are presented in the consolidated balance sheets as a direct deduction of the debt liability to which the costs pertain. These costs are amortized using the effective interest method and are included in interest expense on the applicable borrowings in the consolidated statements of operations over the life of the borrowings.
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Income Taxes | Income Taxes The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates. As of June 30, 2024, the Company has satisfied all the requirements for a REIT. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes, nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. For the three and six months ended June 30, 2024 and 2023, the Company did not incur any interest or penalties.
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Earnings Per Share | Earnings Per Share The Company has a simple equity capital structure with only common stock outstanding as of June 30, 2024 and December 31, 2023, and common stock and preferred stock outstanding prior to March 31, 2023. As a result, earnings per share, as presented, represents both basic and dilutive per-share amounts for the periods presented in the consolidated financial statements. Income per basic share of common stock is calculated by dividing net income allocable to common stock by the weighted-average number of shares of common stock issued and outstanding during such period.
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Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates, and those differences could be material.
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Segment Information | Segment Information The Company’s primary business is originating, acquiring and structuring real estate-related loans related to high quality commercial real estate. From time to time, the Company may acquire real estate encumbering the senior loans through foreclosure, may invest in real estate related joint ventures and may directly acquire real estate properties. The Company operates in a single segment focused on mezzanine loans, other loans and preferred equity investments, and to a lesser extent, owning and managing real estate.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financing Receivable Credit Quality Indicators | The Company assesses the risk factors of each loan and assigns each loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial condition; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, as follows:
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Schedule of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows as of:
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Schedule of Restrictions on Cash and Cash Equivalents | The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows as of:
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Loans Held for Investment (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Company's Loan Portfolio | The following table provides a summary of the Company’s loan portfolio as of:
_______________ (1)These loans pay a coupon rate of Secured Overnight Financing Rate (“SOFR”) or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread. Coupon rates shown were determined using the London Interbank Offered Rate (“LIBOR”) of 5.45%, average SOFR of 5.34% and Term SOFR of 5.34% as of June 30, 2024 and average SOFR of 5.34% and Term SOFR of 5.35% as of December 31, 2023. (2)As of June 30, 2024 and December 31, 2023, amount included $302.6 million and $342.9 million of senior mortgages used as collateral for $192.5 million and $204.9 million of borrowings under secured financing arrangements, respectively (Note 9). (3)As of June 30, 2024 and December 31, 2023, 13 and 14 loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.
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Schedule of Lending Activities | The following tables present the activities of the Company’s loan portfolio:
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Schedule of Accounts, Loans and Financing Receivable | The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of:
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Schedule of Allowance for Credit Losses | The following table presents the activity in allowance for credit loss for funded loans:
The following table presents the activity in the liability for credit losses on unfunded commitments:
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Schedule of Financing Receivable Credit Quality Indicators | The Company assesses the risk factors of each loan and assigns each loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial condition; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, as follows:
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Equity Investment in Unconsolidated Investments (Tables) |
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Equity Method Investments | The following tables present a summary of information regarding the Company’ equity investment in RESOF:
The following tables present summarized financial information of the Company’s equity investment in RESOF. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:
The following tables present estimated combined summarized financial information of the Company’s equity investment in the joint ventures. Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share:
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Schedule of Joint Venture Ownership Interests | The following tables present a summary of the Company’s equity investment in the joint ventures:
_______________ (1)In June 2024, this joint venture sold its underlying real estate property and distributed proceeds to the members. The Company’s portion of the distribution was $2.6 million. (2)In May 2024, the Company contributed $50,000 to this entity for the purpose of investing in opportunistic equity and debt securities. This entity is jointly owned with two related parties managed by the Manager. (3)In June 2024, the Company made a $20.0 million capital commitment to this fund that has indirectly invested, together with other non-affiliated entities, in a non-real estate operating company. As of June 30, 2024, the total amount contributed was $5.0 million. The Company determined it is not a primary beneficiary of the fund and therefore accounts for the investment using the equity method of accounting.
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Real Estate Owned, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Real Estate Owned, Net | Additionally, during the six months ended June 30, 2023, the Company entered into the following investments:
Real Estate Operating Revenues and Expenses The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations:
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Schedule of Amortization of Intangibles | The following table presents the amortization of intangibles that is included in the consolidated statements of operations:
(1)Net amortization of above- and below-market rent intangibles is recorded as an adjustment to real estate operating revenue on the consolidated statements of operations. (2)Amortization of in-place lease intangibles is included in depreciation and amortization expense on the consolidated statements of operations.
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Schedule of Lease Expense | The component of lease expense for the ground lease was as follows:
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Schedule of Non-cash Information | Supplemental non-cash information related to the ground lease was as follows:
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Measurements of Marketable Securities, by Major Class | The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of:
(1)Amount is included in cash and cash equivalents on the consolidated balance sheets. (2)Amount is included in other assets on the consolidated balance sheets.
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Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | The following table presents the activities of the marketable securities and derivatives:
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Schedule of Fair Value Measurements, Nonrecurring | The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:
______________ (1)Amount is included in Other assets on the consolidated balance sheets.
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Schedule of Fair Value, Assets Measured on Nonrecurring Basis and Assets Impairment Charges | The following tables present information about assets for which the Company recorded an impairment charge and that were measured at fair value on a non-recurring basis:
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Schedule of Fair Value Measurement Inputs and Valuation Techniques | The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of June 30, 2024 and December 31, 2023. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.
(1)Amount includes $161.7 million and $154.6 million of non-performing loans (Note 3) as of June 30, 2024 and December 31, 2023, respectively. The fair market value estimates were determined primarily using discounted cash flow models and Level 3 inputs, which include estimates of property-specific cash flows over a specific holding period, a discount rate range of 6.75% to 7.00% and a terminal capitalization rate range of 5.75% to 6.00% as of both June 30, 2024 and December 31, 2023. These inputs are based on the location, type and nature of the property, current sales and lease comparables, anticipated real estate and capital market conditions, and management’s knowledge, experience and judgment. Additionally, the Company may use sales comparables, purchase price and appraisals to corroborate the estimated value of a loan’s collateral or may use sponsor’s guarantee to estimate the value of a non-performing loan. (2)Fair market value is based on purchase price.
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Related Party Transactions (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations:
(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan. (2)Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations.The table below lists the participation interests purchased by the Company pursuant to participation agreements as of:
________________ (1)The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager. The following table summarizes the investment that was subject to a PA with an investment partnership affiliated with the Manager as of June 30, 2024. There was no such investment as of December 31, 2023.
________________ (1)Participant is a certain separately managed account, an investment partnership managed by the Manager.
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Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | The following table presents a summary of the Company’s unsecured notes payable outstanding as of:
_______________ (1)Includes issue discount, purchase discount and deferred financing costs that are amortized to interest expense over the life of the notes. (2)In connection with the BDC Merger, Terra LLC assumed all the obligations under the 7.00% Senior Notes and recorded a purchase discount of $4.6 million, representing the difference between the carrying value and the fair value of the notes on the date of the merger. The following table is a summary of the Company’s secured financing agreements in place as of:
(1)Amount is calculated using the applicable index rate as of June 30, 2024. (2)These facilities were used to finance the Company’s senior loan investments. (3)Interest rate is based on Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 2.0% to 5.00%. In March 2024, the Company amended the Goldman Sachs Bank facility agreement to extend the maturity date to February 18, 2025 and to reduce the minimum interest coverage ratio covenant. (4)Interest rate is based on Term SOFR plus a spread of 1.965%. In February 2024, the outstanding balance was repaid. In March 2024, the Company amended the side letter to the UBS AG facility agreement to reduce the maximum amount available under this facility to zero. In connection with this amendment, UBS AG waived the payment of any fees and the meeting of any representations, warranties or covenants for the period commencing on December 31, 2023 until such time as there are amounts outstanding under the UBS AG facility agreement. (5)The maturity of this facility can be extended annually on mutually agreeable terms. (6)Interest rate is based on Term SOFR plus a spread ranging from 4.75% to 5.98% with a combined floor rate ranging from 9.0% to 11.28%. (7)Interest rate is based on Term SOFR plus a spread of 3.5% with a Term SOFR floor of 3.75%. (8)Interest rate is based on Term SOFR + 3.5% with a combined floor of 7.0%. In March 2024, the Company amended the facility agreement to extend the maturity date to September 12, 2024 with an option to extend the facility term for an additional 12-month period, reduce the credit limit to $75.0 million, increase the coupon rate and revise the minimum profitability and net worth covenants. In June 2024, the Company amended the facility agreement to extend the maturity date of the facility agreement to December 31, 2024, eliminate the ability to make additional revolving borrowings under the facility agreement, decrease the minimum net worth covenant of the Company for future quarterly measurement dates, introduce a minimum liquidity covenant of the Company, establish an interest reserve account and remove the minimum profitability and maximum global leverage covenants of the Company. (9)In March 2024, the term loan was repaid in full. The following table presents certain information about the Company’s secured financing arrangements:
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Schedule of Long-term Debt Instruments | Scheduled debt principal payments for each of the five calendar years following June 30, 2024 are as follows:
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Equity (Tables) |
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table presents earnings per share:
|
Summary of Significant Accounting Policies - Narrative (Details) |
Jun. 30, 2024
USD ($)
loan
agreement
|
Dec. 31, 2023
USD ($)
|
Jan. 01, 2023
USD ($)
|
---|---|---|---|
Accounting Policies [Line Items] | |||
Increase to total reserve | $ 34,905,309 | $ 56,976,025 | |
Number loans not secured by real estate | loan | 2 | ||
Useful life (in years) | 40 years | ||
Number of master repurchase agreements | agreement | 2 | ||
Cumulative Effect, Period of Adoption, Adjustment | Credit Losses Reserve | |||
Accounting Policies [Line Items] | |||
Increase to total reserve | $ 4,600,000 |
Summary of Significant Accounting Policies - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 18,937,034 | $ 10,674,475 | $ 51,808,573 | |
Restricted cash | 4,617,208 | 3,954,986 | 3,201,935 | |
Cash held in escrow by lender | 6,870,038 | 4,907,316 | 3,086,398 | |
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ 30,424,280 | $ 19,536,777 | $ 58,096,906 | $ 36,469,592 |
Loans Held for Investment - Narrative (Details) - USD ($) $ in Millions |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Receivables [Abstract] | ||
Accrued interest receivable | $ 8.1 | $ 6.5 |
Financing Receivable, Accrued Interest, after Allowance for Credit Loss, Statement of Financial Position [Extensible Enumeration] | Interest receivable | Interest receivable |
Loans Held for Investment - Loan Structure (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Loans and Financing Receivable | ||
Principal Balance | $ 415,281,848 | $ 509,460,826 |
Carrying Value | 419,257,503 | 513,448,283 |
Allowance for credit losses | (34,905,309) | (56,976,025) |
Total, net of allowance for credit losses | $ 384,352,194 | $ 456,472,258 |
% of Total | 100.00% | 100.00% |
Allowance for loan losses (as a percent) | (9.10%) | (12.50%) |
Preferred equity investments | ||
Loans and Financing Receivable | ||
Principal Balance | $ 93,884,440 | $ 126,550,969 |
Carrying Value | $ 94,128,889 | $ 127,105,312 |
% of Total | 24.50% | 27.80% |
Mezzanine loans | ||
Loans and Financing Receivable | ||
Principal Balance | $ 17,444,357 | $ 17,444,357 |
Carrying Value | $ 17,435,749 | $ 17,424,081 |
% of Total | 4.50% | 3.80% |
First mortgages | ||
Loans and Financing Receivable | ||
Principal Balance | $ 303,953,051 | $ 365,465,500 |
Carrying Value | $ 307,692,865 | $ 368,918,890 |
% of Total | 80.10% | 80.90% |
Loans Held for Investment - Narratives - Past-Due Loans and Loan Risk Rating (Details) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2024
USD ($)
loan
|
Jun. 30, 2023
USD ($)
loan
|
Jun. 30, 2024
USD ($)
loan
|
Jun. 30, 2023
USD ($)
loan
|
Dec. 31, 2023
USD ($)
loan
|
|
Loans and Financing Receivable | |||||
Unfunded commitments | $ 27,800,000 | $ 27,800,000 | $ 35,700,000 | ||
Suspended interest income accrual | 700,000 | $ 0 | $ 700,000 | $ 0 | |
Number of loans with a loan risk rating | loan | 17 | 21 | |||
Interest receivable | 8,051,555 | $ 8,051,555 | $ 6,537,368 | ||
Carrying Value | 419,257,503 | 419,257,503 | 513,448,283 | ||
Loans held for investment, net of allowance for credit losses | 34,905,309 | $ 34,905,309 | $ 56,976,025 | ||
Non-performing | |||||
Loans and Financing Receivable | |||||
Number of loans with a loan risk rating | loan | 6 | 6 | |||
Carrying Value | 192,659,467 | $ 192,659,467 | $ 209,297,064 | ||
Non-performing | Suspended Interest Income Accrual | |||||
Loans and Financing Receivable | |||||
Suspended interest income accrual | $ 6,800,000 | $ 3,700,000 | $ 12,600,000 | $ 7,200,000 | |
Number of loans with a loan risk rating | loan | 5 | 3 | 5 | 3 | |
Interest receivable | $ 4,800,000 | $ 4,800,000 | 3,400,000 | ||
Other | Non-performing | |||||
Loans and Financing Receivable | |||||
Carrying Value | 192,700,000 | 192,700,000 | 209,300,000 | ||
Loans held for investment, net of allowance for credit losses | $ 31,000,000.0 | $ 31,000,000.0 | $ 54,600,000 |
Equity Investment in Unconsolidated Investments - Narratives (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|---|
Aug. 03, 2020 |
Jun. 30, 2024 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Dec. 31, 2023 |
|
Schedule of Equity Method Investments | |||||||
Equity investment in unconsolidated investments | $ 70,658,140 | $ 70,658,140 | $ 70,658,140 | $ 37,171,326 | |||
Income (loss) from equity investment in RESOF | 1,671,970 | $ (1,759,934) | 1,198,583 | $ (2,196,794) | |||
Mavik RESOF | |||||||
Schedule of Equity Method Investments | |||||||
Committed capital | $ 50,000,000 | ||||||
Equity investment in unconsolidated investments | $ 33,452,393 | 33,452,393 | 33,452,393 | $ 18,196,583 | |||
Income (loss) from equity investment in RESOF | 1,775,929 | $ (1,159,388) | 2,774,268 | $ (855,788) | |||
TCC Boundary Partners LLC | |||||||
Schedule of Equity Method Investments | |||||||
Annual interest rate | 15.00% | ||||||
Equity investment in unconsolidated investments | $ 14,700,000 | 14,700,000 | 14,700,000 | ||||
Income (loss) from equity investment in RESOF | $ 100,000 | $ 100,000 |
Equity Investment in Unconsolidated Investments - Equity Investment (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Dec. 31, 2023 |
|
Schedule of Equity Method Investments | ||||||
Equity investment in unconsolidated investments | $ 70,658,140 | $ 70,658,140 | $ 70,658,140 | $ 37,171,326 | ||
Income (loss) from equity investment in RESOF | 1,671,970 | $ (1,759,934) | 1,198,583 | $ (2,196,794) | ||
Distributions received from RESOF | 1,684,877 | 5,087,025 | ||||
Corporate Joint Venture | ||||||
Schedule of Equity Method Investments | ||||||
Equity investment in unconsolidated investments | 22,513,061 | 22,513,061 | 22,513,061 | $ 18,974,743 | ||
Income (loss) from equity investment in RESOF | (179,937) | (600,546) | (1,651,663) | (1,341,006) | ||
Distributions received from RESOF | $ 2,600,000 | $ 2,627,499 | 0 | $ 2,627,499 | 0 | |
Mavik RESOF | ||||||
Schedule of Equity Method Investments | ||||||
Beneficial Ownership Interest | 14.90% | 14.90% | 14.90% | 14.90% | ||
Equity investment in unconsolidated investments | $ 33,452,393 | $ 33,452,393 | $ 33,452,393 | $ 18,196,583 | ||
Unfunded commitment outstanding | $ 23,277,662 | 23,277,662 | 23,277,662 | $ 37,444,080 | ||
Income (loss) from equity investment in RESOF | 1,775,929 | (1,159,388) | 2,774,268 | (855,788) | ||
Distributions received from RESOF | $ 1,035,966 | $ 921,887 | $ 1,684,877 | $ 4,709,670 |
Equity Investment in Unconsolidated Investments - Equity Investment in a Limited Partnership (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Dec. 31, 2023 |
|
Schedule of Equity Method Investments | |||||
Other assets | $ 6,196,900 | $ 6,196,900 | $ 8,811,583 | ||
Total assets | 634,382,428 | 634,382,428 | 670,740,151 | ||
Obligations under participation agreement (proceeds of $48,487,413 and $38,444,357, respectively) | 15,144,974 | 15,144,974 | 0 | ||
Total liabilities | 415,763,124 | 415,763,124 | 429,086,343 | ||
Unrealized appreciation (depreciation) on investments | 201,501 | $ 51,224 | 178,570 | $ 57,808 | |
Obligations under participation agreement | 15,000,000 | 1,093,862 | |||
Mavik RESOF | |||||
Schedule of Equity Method Investments | |||||
Investments at fair value (cost of $359,640,878 and $196,129,031, respectively) | 370,126,686 | 370,126,686 | 199,032,013 | ||
Other assets | 16,076,100 | 16,076,100 | 16,502,225 | ||
Total assets | 386,202,786 | 386,202,786 | 215,534,238 | ||
Revolving line of credit, net of financing costs | 105,316,762 | 105,316,762 | 44,762,534 | ||
Obligations under participation agreement (proceeds of $48,487,413 and $38,444,357, respectively) | 48,913,985 | 48,913,985 | 38,881,032 | ||
Other liabilities | 12,731,638 | 12,731,638 | 13,641,742 | ||
Total liabilities | 166,962,385 | 166,962,385 | 97,285,308 | ||
Partners’ capital | 219,240,401 | 219,240,401 | 118,248,930 | ||
Total investment income | 14,200,717 | 8,264,132 | 25,033,864 | 16,375,911 | |
Total expenses | 5,559,608 | 3,827,584 | 9,741,937 | 6,994,379 | |
Net investment income | 8,641,109 | 4,436,548 | 15,291,927 | 9,381,532 | |
Unrealized appreciation (depreciation) on investments | 2,576,304 | (288,031) | 2,048,392 | (883,942) | |
Provision for income tax | 0 | (138,944) | 0 | (138,944) | |
Net increase in partners’ capital resulting from operations | 11,217,413 | $ 4,009,573 | 17,340,319 | $ 8,358,646 | |
Carrying Value | $ 359,640,878 | 359,640,878 | 196,129,031 | ||
Obligations under participation agreement | $ 48,487,413 | $ 38,444,357 |
Equity Investment in Unconsolidated Investments - Schedule of Equity Method Investments JV (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2024 |
Mar. 31, 2024 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Dec. 31, 2023 |
|
Schedule of Equity Method Investments | |||||||
Other assets | $ 6,196,900 | $ 6,196,900 | $ 8,811,583 | ||||
Total assets | 634,382,428 | 634,382,428 | 670,740,151 | ||||
Total liabilities | 415,763,124 | 415,763,124 | 429,086,343 | ||||
Revenues | 11,173,520 | $ 18,782,455 | 26,182,865 | $ 35,784,626 | |||
Depreciation and amortization expense | (3,863,801) | (2,438,477) | |||||
Unrealized loss | 201,501 | 51,224 | 178,570 | 57,808 | |||
Net income (loss) | (7,539,310) | $ (6,183,974) | (19,237,065) | $ 547,479 | (13,723,284) | (18,689,586) | |
Corporate Joint Venture | |||||||
Schedule of Equity Method Investments | |||||||
Net investments in real estate | 201,367,478 | 201,367,478 | 223,039,486 | ||||
Other assets | 25,415,540 | 25,415,540 | 18,362,425 | ||||
Total assets | 226,783,018 | 226,783,018 | 241,401,911 | ||||
Mortgage loans payable | 159,694,177 | 159,694,177 | 187,269,209 | ||||
Other liabilities | 14,400,636 | 14,400,636 | 4,509,167 | ||||
Total liabilities | 174,094,813 | 174,094,813 | 191,778,376 | ||||
Members’ capital | 52,688,205 | 52,688,205 | $ 49,623,535 | ||||
Revenues | 4,462,447 | 4,243,689 | 8,925,318 | 8,168,268 | |||
Operating expenses | (2,753,672) | (2,181,707) | (5,226,641) | (4,324,974) | |||
Depreciation and amortization expense | (2,005,343) | (1,728,214) | (3,960,419) | (3,693,251) | |||
Interest expense | (3,534,694) | (2,595,844) | (6,897,252) | (5,155,798) | |||
Gain on sale of real estate | 4,816,477 | 0 | 4,816,477 | 0 | |||
Unrealized loss | (731,824) | (423,481) | (1,584,077) | (1,249,982) | |||
Net income (loss) | $ 253,391 | $ (2,685,557) | $ (3,926,594) | $ (6,255,737) |
Real Estate Owned, Net - Narratives (Details) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2024
USD ($)
property
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2024
USD ($)
property
|
Jun. 30, 2023
USD ($)
|
Jan. 31, 2024
USD ($)
property
|
|
Real Estate [Line Items] | |||||
Impairment charge | $ 0 | $ 11,765,540 | $ 0 | $ 11,765,540 | |
Industrial | |||||
Real Estate [Line Items] | |||||
Number of leased buildings | property | 8 | 8 | 1 | ||
Termination fee | $ 30,000.00 | ||||
Write-off of unamortized in-place lease | 300,000 | ||||
Write-off of unamortized below-market rent | $ 100,000 | ||||
Impairment charge | $ 11,800,000 | $ 11,800,000 |
Real Estate Owned, Net - Investment Related to Real Estate Acquisition (Details) |
Jun. 30, 2023
USD ($)
|
May 25, 2023
USD ($)
property
|
Mar. 24, 2023
USD ($)
property
|
---|---|---|---|
Real Estate [Line Items] | |||
Real estate investments, net | $ 132,087,234 | ||
Industrial | Texas, United States | |||
Real Estate [Line Items] | |||
Number of Properties | property | 5 | 3 | |
Real estate investments, net | $ 83,288,961 | $ 48,798,273 |
Real Estate Owned, Net - Real Estate Operating Revenues and Expenses (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Real estate operating revenues: | ||||
Total | $ 2,718,625 | $ 2,803,934 | $ 5,438,326 | $ 4,136,903 |
Real estate operating expenses: | ||||
Management fees | 1,619,971 | 2,105,049 | 3,335,013 | 4,102,476 |
Total | 782,271 | 1,864,212 | 1,473,277 | 3,074,124 |
Total real estate | ||||
Real estate operating revenues: | ||||
Lease revenue | 2,063,600 | 2,283,272 | 4,167,822 | 3,368,731 |
Other operating income | 655,025 | 520,662 | 1,270,504 | 768,172 |
Total | 2,718,625 | 2,803,934 | 5,438,326 | 4,136,903 |
Real estate operating expenses: | ||||
Utilities | 10,620 | 69,919 | 22,340 | 106,333 |
Real estate taxes | 290,632 | 537,681 | 681,442 | 892,361 |
Repairs and maintenances | 91,528 | 256,187 | 118,500 | 463,552 |
Management fees | 64,147 | 86,880 | 126,401 | 126,298 |
Lease expense, including amortization of above- market ground lease | 0 | 487,163 | 0 | 974,326 |
Other operating expenses | 325,344 | 426,382 | 524,594 | 511,254 |
Total | $ 782,271 | $ 1,864,212 | $ 1,473,277 | $ 3,074,124 |
Real Estate Owned, Net - Schedule of Amortization of Intangibles (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Real Estate [Line Items] | ||||
Net amortization of above- and below-market rent intangibles | $ (703,872) | $ (575,219) | $ (1,528,715) | $ (609,983) |
In-place lease | ||||
Real Estate [Line Items] | ||||
Amortization of in-place lease intangibles | $ 964,516 | $ 935,285 | $ 2,299,301 | $ 1,208,755 |
Real Estate Owned, Net - Schedule of Lease Expense (Details) - USD ($) |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2023 |
|
Ground Lease | ||
Real Estate [Line Items] | ||
Operating lease cost | $ 519,750 | $ 1,039,500 |
Real Estate Owned, Net - Schedule of Non-cash Information (Details) |
6 Months Ended |
---|---|
Jun. 30, 2023
USD ($)
| |
Amounts included in the measurement of lease liability: | |
Operating cash flows from an operating lease | $ 1,039,500 |
Right-of-use asset obtained in exchange for lease obligations: | |
Operating lease | $ 1,039,500 |
Fair Value Measurements - Narrative (Details) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|---|
Mar. 31, 2023
USD ($)
|
Jun. 30, 2024
USD ($)
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2024
USD ($)
|
Jun. 30, 2023
USD ($)
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||||
Purchases | $ 0 | $ 258,500 | |||
Impairment charge | $ 0 | $ 11,765,540 | $ 0 | $ 11,765,540 | |
Discount Rate | Real estate and intangibles | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||||
Real Estate and intangibles, measurement input | 0.0850 | 0.0850 | |||
Terminal Capitalization Rate | Real estate and intangibles | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||||
Real Estate and intangibles, measurement input | 0.0750 | 0.0750 | |||
Level 3 | Derivative - interest rate cap | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||||
Purchases | $ 258,500 | ||||
Derivative, cap interest rate (as percent) | 5.00% |
Fair Value Measurements - Activity of Marketable Securities and Derivatives (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Marketable Securities | ||
Beginning balance | $ 4,961,879 | $ 147,960 |
Purchases | 0 | 1,051,754 |
Proceeds from sale | (3,551,098) | 0 |
Reclassification of net realized gains on marketable securities into earnings | (446,009) | 0 |
Unrealized gain (loss) on marketable securities and derivatives | 164,491 | 4,259 |
Ending balance | 1,129,263 | 1,203,973 |
Derivatives | ||
Beginning balance | 83,807 | 0 |
Purchases | 0 | 258,500 |
Proceeds from sale | 0 | 0 |
Reclassification of net realized gains on marketable securities into earnings | 0 | 0 |
Unrealized gain (loss) on marketable securities and derivatives | (5,311) | 22,528 |
Ending balance | $ 78,496 | $ 281,028 |
Fair Value Measurements - Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Impairment Charges | $ 0 | $ 11,765,540 | $ 0 | $ 11,765,540 |
Fair Value, Nonrecurring | Real estate and intangibles | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Fair Value | 0 | 27,603,118 | 0 | 27,603,118 |
Impairment Charges | $ 0 | $ 11,765,540 | $ 0 | $ 11,765,540 |
Related Party Transactions - Schedule of Fees Paid and Costs Reimbursed to the Manager (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Related Party Transaction [Line Items] | ||||
Asset management fee | $ 1,619,971 | $ 2,105,049 | $ 3,335,013 | $ 4,102,476 |
Asset servicing fee | 394,995 | 496,374 | 801,520 | 966,899 |
Operating expenses reimbursed to Manager | 2,332,771 | 2,120,029 | 4,510,935 | 4,297,033 |
Related Party | ||||
Related Party Transaction [Line Items] | ||||
Origination and extension fee expense | 369,392 | 343,159 | 632,164 | 1,294,607 |
Asset management fee | 1,619,971 | 2,105,049 | 3,335,013 | 4,102,476 |
Asset servicing fee | 394,995 | 496,374 | 801,520 | 966,899 |
Operating expenses reimbursed to Manager | 2,332,771 | 2,120,029 | 4,510,935 | 4,297,033 |
Disposition fee | 135,000 | 917,750 | 475,000 | 1,208,563 |
Total | $ 4,852,129 | $ 5,982,361 | $ 9,754,632 | $ 11,869,578 |
Related Party Transactions - Transfers of Participation Interest (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Related Party Transaction [Line Items] | ||
Principal Balance | $ 415,281,848 | $ 509,460,826 |
Carrying value | 384,352,194 | 456,472,258 |
Principal | 405,379,645 | 416,913,757 |
Carrying Value | 264,447,499 | $ 290,525,313 |
Participating Mortgage Loan | Affiliated Entity | Asano Bankers Hill, LLC | ||
Related Party Transaction [Line Items] | ||
Principal Balance | 18,567,296 | |
Carrying value | $ 18,811,745 | |
% Transferred | 80.80% | |
Principal | $ 15,000,000 | |
Carrying Value | $ 15,144,974 |
Debt - Narratives - Unsecured Notes Payable (Details) - USD ($) |
Jun. 25, 2021 |
Feb. 10, 2021 |
Jun. 30, 2024 |
Dec. 31, 2023 |
Jun. 10, 2021 |
Feb. 26, 2021 |
---|---|---|---|---|---|---|
Debt Instrument | ||||||
Principal | $ 405,379,645 | $ 416,913,757 | ||||
6.00% Senior Notes Due 2026 | Unsecured notes payable | ||||||
Debt Instrument | ||||||
Fixed rate (as percent) | 6.00% | 6.00% | 6.00% | |||
Principal | $ 6,600,000 | $ 78,500,000 | ||||
Debt instrument, redemption price, percentage | 100.00% | |||||
7.00% Senior Notes Due 2026 | Unsecured notes payable | ||||||
Debt Instrument | ||||||
Fixed rate (as percent) | 7.00% | 7.00% | ||||
Principal | $ 34,800,000 | $ 3,600,000 | ||||
Debt instrument, redemption price, percentage | 100.00% |
Debt - Schedule of Information of Secured Financing Arrangements (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Debt Instrument | ||||
Proceeds from secured financing | $ 58,246,507 | $ 130,951,380 | ||
Repayments of secured financing | (84,780,619) | (102,713,974) | ||
Secured financing agreements | ||||
Debt Instrument | ||||
Amortization of deferred financing costs | $ 575,236 | $ 524,492 | $ 1,521,384 | $ 1,016,470 |
Debt - Scheduled Debt Principal Payments (Details) |
Jun. 30, 2024
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2024 (July 1 through December 31) | $ 34,761,111 |
2025 | 144,782,989 |
2026 | 136,485,545 |
2027 | 34,100,000 |
2028 | 40,250,000 |
Thereafter | 0 |
Unsecured notes payable, net | 390,379,645 |
Unamortized deferred financing costs and other | (6,555,172) |
Unsecured notes payable, net | $ 383,824,473 |
Debt - Narratives - Obligations Under Participation Agreements (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Debt Instrument | ||
Obligations under participation agreements (Note 7 ) | $ 15,144,974 | $ 0 |
Participating Mortgage Loan | ||
Debt Instrument | ||
Obligations under participation agreements (Note 7 ) | $ 15,100,000 | |
Participating Mortgage Loan | Weighted Average | ||
Debt Instrument | ||
Weighted-average interest rate (as percent) | 20.34% |
Commitments and Contingencies (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Aug. 03, 2020 |
Jun. 30, 2024 |
Dec. 31, 2023 |
|
Other Commitments | |||
Unfunded commitments | $ 27,800,000 | $ 35,700,000 | |
Mavik RESOF | |||
Other Commitments | |||
Committed capital | $ 50,000,000 | ||
Unfunded commitment outstanding | 23,277,662 | $ 37,444,080 | |
Insurance Company, Structured Settlement Annuities And Term Life Insurance Policies | |||
Other Commitments | |||
Committed capital | 20,000,000.0 | ||
Unfunded commitment | $ 15,000,000.0 | ||
Mavik RESOF | |||
Other Commitments | |||
Committed capital | $ 50,000,000 |
Equity - Earnings Per Share (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2024 |
Mar. 31, 2024 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Equity [Abstract] | ||||||
Net loss | $ (7,539,310) | $ (6,183,974) | $ (19,237,065) | $ 547,479 | $ (13,723,284) | $ (18,689,586) |
Series A preferred stock dividend declared | 0 | 0 | 0 | (3,907) | ||
Net loss allocable to common stock | $ (7,539,310) | $ (19,237,065) | $ (13,723,284) | $ (18,693,493) | ||
Weighted-average shares — basic (in shares) | 24,336,577 | 24,335,430 | 24,336,368 | 24,335,402 | ||
Weighted-average shares — diluted (in shares) | 24,336,577 | 24,335,430 | 24,336,368 | 24,335,402 | ||
Loss per share — diluted (in usd per share) | $ (0.31) | $ (0.79) | $ (0.56) | $ (0.77) | ||
Loss per share — basic (in usd per share) | $ (0.31) | $ (0.79) | $ (0.56) | $ (0.77) |
Equity - Preferred Stock Classes (Details) - USD ($) |
Nov. 30, 2016 |
Jun. 30, 2024 |
Dec. 31, 2023 |
Mar. 31, 2023 |
Dec. 31, 2016 |
---|---|---|---|---|---|
Class of Stock | |||||
Preferred stock, authorized (in shares) | 50,000,000 | 50,000,000 | |||
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 | |||
Preferred stock, issued (in shares) | 0 | 0 | |||
Series A Preferred Stock | |||||
Class of Stock | |||||
Preferred stock, authorized (in shares) | 125 | ||||
Preferred stock, issued (in shares) | 0 | 0 | |||
Preferred stock outstanding (in shares) | 0 | 0 | |||
Preferred stock, dividend rate, percentage | 12.50% | ||||
Preferred stock, liquidation preference (in usd per share) | $ 1,000 | ||||
Preferred stock sold (in shares) | 125 | ||||
Preferred stock value sold | $ 125,000 | ||||
Preferred Stock redeemed | $ 125,000 |
Equity - Distributions (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2024 |
Mar. 31, 2024 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Equity [Abstract] | ||||||
Investment company, return of capital distribution | $ 4,700,000 | $ 4,700,000 | $ 9,300,000 | $ 8,800,000 | ||
Distribution to investors | 4,650,718 | $ 4,650,636 | 4,650,501 | $ 4,650,492 | 9,300,000 | 9,300,000 |
Preferred stock dividend declared | $ 0 | $ 0 | $ 0 | $ 3,907 |
Equity - Dividend Reinvestment Plan (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Equity [Abstract] | ||
Shares issued from reinvestment of shareholder distributions (in shares) | 838 | 143 |
Reinvestment of shareholder distributions | $ 9,524 | $ 1,988 |
Label | Element | Value |
---|---|---|
Accounting Standards Update [Extensible Enumeration] | us-gaap_AccountingStandardsUpdateExtensibleList | Accounting Standards Update 2016-13 [Member] |
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