Subsequent Events

6 Months Ended

Jun. 30, 2023

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company has evaluated subsequent events through the date on which this Quarterly Report on Form 10-Q was filed, the date on which these financial statements were issued, and identified the items below for discussion.

Notes Receivable

On July 26, 2023, the Company entered into a $28.4 million preferred equity investment for the development of a multifamily property located in Peachtree Corners, Georgia (Solis Peachtree Corners). The preferred equity investment has economic and other terms consistent with a note receivable, including a mandatory redemption feature. The Company's investment bears interest at a rate of 15.0% for the first 27 months. Beginning on November 1, 2025, the investment will bear interest at a rate of 9.0% for 12 months. On November 1, 2026, the investment will again bear interest at a rate of 15.0% through maturity. The interest compounds annually. The Company also earns an unused commitment fee of 10.0% on the unfunded portion of the investment's maximum loan commitment, which also compounds annually, and an equity fee on its commitment of $0.4 million to be amortized through redemption. The preferred equity investment is subject to a minimum interest guarantee of $12.0 million over the life of the investment.

On July 26, 2023, the Company entered into a $9.2 million preferred equity investment for the development of a multifamily property located in Chesapeake, Virginia ("The Allure at Edinburgh"). The preferred equity investment has economic and other terms consistent with a note receivable, including a mandatory redemption feature. The Company's investment bears interest at a rate of 15.0%, which does not compound. Upon The Allure at Edinburgh obtaining a certificate of occupancy, the investment will bear interest at a rate of 10.0%. The common equity partner in the development property holds an option to sell the property to the Company at a predetermined amount if certain conditions are met. The Company also holds an option to purchase the property at any time prior to maturity of the preferred equity investment, and at the same predetermined amount as the common equity partner's option to sell.

Indebtedness

In July 2023, the Company had net borrowings of $37.0 million on the revolving credit facility.

Derivative Financial Instruments

On July 5, 2023, the Company terminated the SOFR corridor of 1.00%-3.00% with a notional amount of $200.0 million, and entered into an interest rate swap agreement with a notional amount of $200.0 million and a SOFR rate of 3.39%. The interest rate swap will expire on March 1, 2024, which reflects the same maturity date as the terminated corridor. The Company paid a net zero premium for this transaction.

On July 6, 2023, the Company terminated the SOFR corridor of 1.00%-3.00% with a notional amount of $50.0 million, and entered into an interest rate swap agreement with a notional amount of $50.0 million and a SOFR rate of 3.40%. The interest rate swap will expire on January 1, 2024, which reflects the same maturity date as the terminated corridor. The Company paid a net zero premium for this transaction.

Equity

On July 14, 2023, due to a holder of Class A Units tendering 10,146 Class A Units for redemption by the Operating Partnership, the Company elected to satisfy the redemption request with a cash payment of $0.1 million.