RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2025

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Management and Incentive Fee

The Company is externally managed and advised by the Manager. Pursuant to the terms of the management agreement, the Company pays the manager a management fee equal to 1.5% of stockholders' equity per annum, calculated and payable quarterly (0.375% per quarter) in arrears. For purposes of calculating the management fee, the Company's stockholders' equity includes the sum of the net proceeds from all issuances of the Company's equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus the Company's retained earnings at the end of the most recently completed calendar quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less any amount that the Company paid for repurchases of the Company's common stock since inception, and excluding any unrealized gains, losses or other items that did not affect realized net income (regardless of whether such items were included in other comprehensive income or loss, or in net income). This amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain non-cash items after discussions between the Manager and the

Company's independent directors and approval by a majority of the Company's independent directors. To the extent asset impairment reduces the Company's retained earnings at the end of any completed calendar quarter, it will reduce the management fee for such quarter. The Company's stockholders' equity for the purposes of calculating the management fee could be greater than the amount of stockholders' equity shown on the consolidated financial statements. Additionally, starting in the first full calendar quarter following January 3, 2020, the Company was also required to pay the Manager a quarterly incentive fee equal to 20% of the excess of Core Earnings (as defined in the management agreement) over the product of (i) stockholders' equity as of the end of such fiscal quarter, and (ii) 8% per annum. The initial term of our management agreement expired on January 3, 2023, with automatic, one-year renewals thereafter.

For the three months ended March 31, 2025, the Company incurred management fees of $1,113,314 (March 31, 2024: $1,088,207), recorded as "Management and incentive fees" in the consolidated statements of operations, of which $1,110,000 (March 31, 2024: $1,080,000) was accrued but had not been paid, included in "Fees and expenses payable to Manager" in the consolidated balance sheets.

For the three months ended March 31, 2025, the Company incurred incentive fees of $453,222 (March 31, 2024: $1,480,000), recorded as "Management and incentive fees" in the consolidated statement of operations, of which $0 (March 31, 2024: $1,480,000) was accrued but had not been paid, included in "Fees and expenses payable to Manager" in the consolidated balance sheets. The Manager agreed to waive $453,222 in incentive fees that otherwise would have been incurred with respect to the quarter ended March 31, 2025.

Expense Reimbursement

Pursuant to the management agreement, the Company is required to reimburse the Manager for operating expenses related to the Company incurred by the Manager, including accounting, auditing and tax services, technology and office facilities, operations, compliance, legal and filing fees, loan servicing fees and miscellaneous general and administrative costs, including the cost of non-investment management personnel of the Manager who spend all or a portion of their time managing the Company's affairs. The Manager has agreed to certain limitations on manager expense reimbursement from the Company.

For the three months ended March 31, 2025, the Company incurred reimbursable expenses of $404,620 (March 31, 2024: $470,167), recorded as "operating expenses reimbursable to Manager" in the consolidated statements of operations, of which $459,151 (March 31, 2024: $512,500) was accrued but had not yet been paid, included in "fees and expenses payable to Manager" in the consolidated balance sheets. Per the management agreement, any exit fees waived by the Company as a result of permanent financing by the Manager or any of its affiliates shall result in a reduction to reimbursed expenses by an amount equal to 50% of the amount of any such waived exit fee capped at a waived exit fee of 1%. For the three months ended March 31, 2025, the Company waived $71,698 in gross exit fees, reducing reimbursed expenses by $35,849 and for the three months ended March 31, 2024, the Company waived $175,000 in gross exit fees, reducing reimbursed expenses by $87,500.

Manager Equity Plan

The Company had in place a Manager Equity Plan, which expired December 18, 2022, under which the Company had the ability to provide equity compensation to the Manager and the Company's independent directors, consultants, or officers. The Manager, in its sole discretion, could allocate any awards it received under the Manager Equity Plan to its directors, officers, employees or consultants. The Company was able to issue under the Manager Equity Plan up to 3.0% of the total number of issued and outstanding shares of common stock (on a fully diluted basis) at the time of each award.

Lument Real Estate Capital, LLC

Lument Real Estate Capital, LLC ("LREC"), an affiliate of our Manager, was appointed the servicer and special servicer with respect to mortgage assets for the 2021-FL1 CLO in June 2021 and LMF 2023-1 Financing in July 2023 and continues to serve in this role.

In connection with its role as servicer and special servicer with respect to mortgage assets held in the 2021-FL1 CLO and the LMF 2023-1 Financing, LREC is paid certain fees by the 2021-FL1 CLO and the LMF 2023-1 Financing depending upon the specific services rendered, including servicing fees, special servicing fees, workout fees and liquidation fees. In addition, LREC, as servicer and/or special servicer may be entitled to retain certain fees or portions thereof paid by borrowers, including modification, waiver, assumption, transfer, processing, consent, review and similar fees, defeasance fees, late fees and application fees.

LREC was also appointed as servicer with respect to mortgage assets held by the Company and its other subsidiaries in August 2022. The Company pays LREC's servicing fees, if any.

Lument IM

Lument IM was appointed as the collateral manager with respect to the 2021-FL1 CLO in June 2021 and LMF 2023-1 Financing in July 2023, and continues to serve in this role. Lument IM has agreed to waive all its entitlements to collateral management fees for so long as Lument IM or an affiliate is the collateral manager and also the manager of the Company.

In connection with the LMF 2023-1 Financing, Lument IM absorbed approximately $1.1 million in debt issuance costs for which it did not seek reimbursement from the Company.

Hunt Companies, Inc.

One of the Company's directors is also Chief Executive Officer and President of Hunt Companies, Inc. ("Hunt") and is a member of the Hunt Board of Directors, with which affiliates of the Manager have a commercial business relationship. The Manager's affiliates provide servicing with respect to mortgage assets of Hunt and may from time to time sell commercial mortgage loans to Hunt or various of its subsidiaries and affiliates.