
	Outstanding loan amount												Interest compounding
Development Project	June 30, 2023			December 31, 2022			Maximum principal commitment			Interest rate
Solis City Park II	$	22,828	(a)	$	19,062	(a)	$	20,594		13.0	%		Annually
Solis Gainesville II	19,327		(a)	6,638		(a)	19,595			14.0	%	(b)	Annually
Solis Kennesaw	7,330		(a)	—			37,870			14.0	%	(b)	Annually
The Interlock(c)	—			86,584		(a)	107,000		(d)	15.0	%		None
Total mezzanine & preferred equity	49,485			112,284			$	185,059
Constellation Energy Building note receivable	—			12,834
Other notes receivable	11,849		(a)	11,512		(a)
Notes receivable guarantee premium	—			701
Allowance for credit losses(e)	(1,239)			(1,292)

Total notes receivable	$	60,095		$	136,039

(e) The amounts as of June 30, 2023 and December 31, 2022 exclude $0.6 million and $0.3 million of Current Expected Credit Losses (“CECL”) allowance that relates to the unfunded commitments, which were recorded as a liability under Other liabilities in the consolidated balance sheets.

Interest on the notes receivable is accrued and funded utilizing the interest reserves for each loan, which are components of the respective maximum loan commitments, and such accrued interest is generally added to the loan receivable balances. The Company recognized interest income for the three and six months ended June 30, 2023 and 2022 as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
Development Project	2023			2022			2023			2022




Solis City Park II	$	732	(a)	$	206	(a)	$	1,402	(a)	$	224	(a)
Solis Gainesville II	654		(a)(b)	—			1,247		(a)(b)	—
Solis Kennesaw	465		(a)	—			465		(a)	—
The Interlock	1,374		(a)	2,361		(a)	3,647		(a)	5,187		(a)
Nexton Multifamily	—			672			—			1,286
Total mezzanine	3,225			3,239			6,761			6,697
Other interest income	189			113			372			223
Total interest income	$	3,414		$	3,352		$	7,133		$	6,920

On March 29, 2023, the Solis Gainesville II preferred equity investment agreement was modified to adjust the interest rate. The interest rate of 14% remains effective through the first 24 months of the investment. Beginning on October 3, 2024, the investment will bear interest at a rate of 10% for 12 months. On October 3, 2025, the investment will again bear interest at

a rate of 14% per annum through maturity. Additionally, the amendment introduced an unused commitment fee of 10% on the unfunded portion of the investment's maximum loan commitment, which is effective January 1, 2023. Both the interest and unused commitment fee compound annually.

On May 19, 2023, the Company acquired The Interlock. The consideration for such acquisition included the redemption of the Company's outstanding $90.2 million mezzanine loan on the project. Refer to Note 5 for further information regarding the acquisition.

On May 25, 2023, the Company entered into a $37.9 million preferred equity investment for the development of a multifamily property located in Marietta, Georgia ("Solis Kennesaw"). The investment has economic terms consistent with a note receivable, including a mandatory redemption or maturity on May 25, 2027, and it is accounted for as a note receivable. The Company's investment bears interest at a rate of 14.0% for the first 24 months. Beginning on May 25, 2025, the investment will bear interest at a rate of 9.0% for 12 months. On May 25, 2026, the investment will again bear interest at a rate of 14.0% through maturity. The interest compounds annually. The Company also earns an unused commitment fee of 11.0% on the unfunded portion of the investment's maximum loan commitment, which does not compound, and an equity fee on its commitment of $0.6 million to be amortized through redemption. The preferred equity investment is subject to a minimum interest guarantee of $13.1 million over the life of the investment.

Management has concluded that this entity is a VIE. Because the other investor in the project, TP Kennesaw D LLC, is the developer and managing member of Solis Kennesaw, the Company does not have the power to direct the activities of the project that most significantly impact its performance. Accordingly, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements.

The Company is exposed to credit losses primarily through its real estate financing investments. As of June 30, 2023, the Company had three real estate financing investments, each of which are financing development projects in various stages of completion or lease-up. Each of these projects is subject to a loan that is senior to the Company’s loan. Interest on these loans is paid in kind and is generally not expected to be paid until a sale of the project after completion of the development.

•Special Mention: loans in this category show signs that the economic performance of the project may suffer as a result of slower-than-expected leasing activity or an extended development or marketing timeline. Loans in this category warrant increased monitoring by management.

•Substandard: loans in this category may not be fully collected by the Company unless remediation actions are taken. Remediation actions may include obtaining additional collateral or assisting the borrower with asset management activities to prepare the project for sale. The Company will also consider placing the loan on non-accrual status if it does not believe that additional interest accruals will ultimately be collected.

The Company updated the risk ratings for each of its notes receivable as of June 30, 2023 and obtained industry loan loss data relative to these risk ratings. Each of the outstanding loans as of June 30, 2023 was "Pass" rated. The Company's analysis resulted in an allowance for loan losses of approximately $1.8 million as of June 30, 2023. An allowance related to unfunded commitments of approximately $0.6 million as of June 30, 2023 was recorded as Other liabilities on the consolidated balance sheet.

At June 30, 2023, the Company reported $60.1 million of notes receivable, net of allowances of $1.2 million. At December 31, 2022, the Company reported $136.0 million of notes receivable, net of allowances of $1.3 million. Changes in the allowance for the six months ended June 30, 2023 and 2022 were as follows (in thousands):


	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	Funded		Unfunded		Total		Funded		Unfunded		Total
Beginning balance	$	1,292	$	338	$	1,630	$	994	$	10	$	1,004

Unrealized credit loss provision (release)	412		231		643		458		442		900
Release due to redemption	(465)		—		(465)		—		—		—

Ending balance	$	1,239	$	569	$	1,808	$	1,452	$	452	$	1,904

The Company places loans on non-accrual status when the loan balance, together with the balance of any senior loan, approximately equals the estimated realizable value of the underlying development project. As of December 31, 2022, the Company had the Constellation Energy Building note, which bore interest at 3% per annum, on non-accrual status. The principal balance of the note receivable was adequately secured by the seller's partnership interest. On January 14, 2023, the Company acquired an additional 11% membership interest in the Constellation Energy Building, increasing its ownership interest to 90%, in exchange for full satisfaction of the note. As of June 30, 2023, there were no loans on non-accrual status.