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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2024

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include our financial statements and the financial statements of our wholly-owned subsidiaries.

The accompanying unaudited consolidated interim financial information also conform to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. Management believes that the disclosures presented in these unaudited consolidated financial statements are adequate to make the information presented not misleading. In management’s opinion, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the reported periods have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The accompanying unaudited consolidated interim financial information should be read in conjunction with our December 31, 2023 audited consolidated financial statements filed on Form 10-K (as amended, the “2023 Annual Report”).

a. Principles of Consolidation - The consolidated financial statements include our accounts and those of our subsidiaries which are or were wholly-owned or controlled by us. Entities which we do not control through our voting interest and entities which are variable interest entities, but where we are not the primary beneficiary, are accounted for under the equity method. Accordingly, our share of the earnings or losses of our unconsolidated joint ventures, namely TPHGreenwich, which began on February 14, 2024, and 250 North 10^th, which was sold in February 2023, are included in our consolidated statements of operations and comprehensive (loss) income (see Note 3 – Investments in Unconsolidated Joint Ventures for further information). All significant intercompany balances and transactions have been eliminated.

We are required to consolidate a variable interest entity (the “VIE”) in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

Investments in Unconsolidated Joint Ventures - We accounted for our investments in unconsolidated joint ventures, namely, 250 North 10^th, which was sold in February 2023, and TPHGreenwich under the equity method of accounting (see Note 3 - Investments in Unconsolidated Joint Ventures for further information).

Under the equity method, investments in real estate ventures are recorded initially at the fair value of the assets contributed and subsequently adjusted for equity in earnings, contributions, distributions, and impairments. The Company generally allocates income and losses from the unconsolidated real estate ventures based on the venture's distribution priorities, which may be different from its stated ownership percentage.

We are applying the hypothetical-liquidation-at-book-value (“HLBV”) method to account for our investment in the TPHGreenwich given the non-pro rata distribution provision in the JV Operating Agreement in favor of Investor. As such, we will not recognize losses from the joint venture in excess of our investment basis. Our investment in this joint venture is zero as of June 30, 2024 in accordance with the HLBV method (see Note 4 - Revision of Previously Issued Consolidated Financial Statements for further information).

At least quarterly, management assesses whether there are any other than temporary impairment indicators of the Company’s investments in real estate ventures. If any indicators of impairment are present, we calculate the fair value of the investment in the unconsolidated real estate venture. An investment is other than temporarily impaired only if the fair value of the investment in a real estate venture, as estimated by management, is less than the carrying value and the decline is other than temporary. To the extent that an other than temporary impairment has occurred, an impairment charge is recorded in the amount of the excess of the carrying amount of the investment over the estimated fair value. Management is required to make significant judgments about the estimated fair value of its investments to determine if an impairment exists. Fair value is generally determined through income valuation approaches, including discounted cash flows and direct capitalization models or a sales comparison approach.

When the Company acquires an interest in or contributes assets to a real estate venture project, the difference between the Company’s cost basis in the investment and the value of the real estate venture or asset contributed is amortized over the life of the related assets, intangibles, and liabilities and such adjustment is included in the Company’s share of equity in income of unconsolidated real estate ventures.

In connection with the Recapitalization Transaction, all assets and liabilities contributed to TPHGreenwich were transferred at fair value. This resulted in a gain on contribution to joint venture of approximately $21.0 million.

c. Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

d. Reportable Segments - We operate in one reportable segment, commercial real estate.

e. Concentrations of Credit Risk - Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. We hold substantially all of our cash and cash equivalents in banks. Such cash balances at times exceed federally insured limits.

Fair Value Measurements - We determine fair value in accordance with Accounting Standards Codification (“ASC”)-820, “Fair Value Measurement,” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.

Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity. Assets and liabilities disclosed at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels, which are defined by ASC-820-10-35, are directly related to the amount of subjectivity associated with the inputs to the fair valuation of these assets and liabilities. Determining which category an asset or liability falls within the hierarchy requires significant judgment and we evaluate our hierarchy disclosures each quarter.

Level 1 - Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 - Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Valuations based on unobservable inputs reflecting management’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

g. Cash and Cash Equivalents - Cash and cash equivalents include securities with original maturities of three months or less when purchased.

h. Restricted Cash - Restricted cash represents amounts required to be restricted under our stock purchase agreement.

Revenue Recognition – We earn a management fee in accordance with the asset Management Agreement. These fees are recognized in earnings over time in accordance with ASC-606.

Stock-Based Compensation – We have granted stock-based compensation, which is described below in Note 14 – Stock-Based Compensation. Stock-based compensation cost is measured at the grant date, based on the fair value of the award on that date, and is expensed at the grant date (for the portion that vests immediately) or ratably over the related vesting periods. Shares that are forfeited are added back into the pool of shares available under the Stock Incentive Plan, and any recorded expense related to forfeited shares are reversed in the year of forfeiture.

Income Taxes - We account for income taxes under the asset and liability method as required by the provisions of ASC-740, “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not.

ASC-740-10-65 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC-740-10-65, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC-740-10-65 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and increased other disclosures. As of both June 30, 2024 and December 31, 2023, we had determined that no liabilities are required in connection with unrecognized tax positions. As of June 30, 2024, our tax returns for the years ended December 31, 2019 through December 31, 2023 are subject to review by the Internal Revenue Service. Our state returns are open to examination for the years December 31, 2018 through December 31, 2023, depending on the jurisdiction.

We are subject to certain federal, state and local income and franchise taxes.

l. Earnings (loss) Per Share - We present both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower per share amount. There were no shares issuable at June 30, 2024 that had vested but not yet settled that were excluded from the

computation of diluted loss per share because the awards would have been antidilutive for the three and six months ended June 30, 2024. Shares issuable at June 30, 2023 comprising 52,015 restricted stock units that had vested but not yet settled were excluded from the computation of diluted loss per share because the awards would have been antidilutive for the three and six months ended June 30, 2023.

Any references to square footage, property count or occupancy percentages, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm’s review.