
	Outstanding loan amount												Interest compounding
Development Project	September 30, 2023			December 31, 2022			Maximum principal commitment			Interest rate
Solis City Park II	$	23,567	(a)	$	19,062	(a)	$	20,594		13.0	%		Annually
Solis Gainesville II	21,471		(a)	6,638		(a)	19,595			14.0	%	(b)	Annually
Solis Kennesaw	11,003		(a)	—			37,870			14.0	%	(b)	Annually
Solis Peachtree Corners	7,798		(a)	—			28,440			15.0	%	(b)	Annually
The Allure at Edinburgh	9,485		(a)	—			9,228			15.0	%	(c)	None
The Interlock(d)	—			86,584		(a)	107,000		(e)	15.0	%		None
Total mezzanine & preferred equity	73,324			112,284			$	222,727
Constellation Energy Building note receivable	—			12,834
Other notes receivable	12,033		(a)	11,512		(a)
Notes receivable guarantee premium	—			701
Allowance for credit losses(f)	(1,644)			(1,292)

Total notes receivable	$	83,713		$	136,039

(b) The interest rate varies over the life of the loans, and the Company also earns an unused commitment fee. Refer below under “Solis Gainesville II,” “Solis Kennesaw,” and “Solis Peachtree Corners” for further details.

(f) The amounts as of September 30, 2023 and December 31, 2022 exclude $0.9 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 nine months ended September 30, 2023 and 2022 as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
Development Project	2023			2022			2023			2022




Nexton Multifamily	$	—		$	680		$	—		$	1,966
Solis City Park II	740		(a)	329		(a)	2,142		(a)	554		(a)
Solis Gainesville II	717		(a)(b)	—			1,964		(a)(b)	—
Solis Kennesaw	1,164		(a)(b)	—			1,629		(a)(b)	—
Solis Peachtree Corners	617		(a)(b)	—			617		(a)(b)	—
The Allure at Edinburgh	258			—			258			—
The Interlock	—			2,363		(a)	3,647		(a)	7,550		(a)
Total mezzanine & preferred equity	3,496			3,372			10,257			10,070
Other interest income	194			118			566			340
Total interest income	$	3,690		$	3,490		$	10,823		$	10,410

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 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.

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 effective on October 27, 2027. 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.

Management has concluded that this entity is a VIE. Because the other investor in the project is the developer and managing member of Solis Peachtree Corners, 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.

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 effective on January 16, 2028. 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.

Management has concluded that this entity is a VIE. Because the other investor in the project is the developer and managing member of The Allure at Edinburgh, 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 September 30, 2023, the Company had five real estate financing investments, 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 September 30, 2023 and obtained industry loan loss data relative to these risk ratings. Each of the outstanding loans as of September 30, 2023 was "Pass" rated. The Company's analysis resulted in an allowance for loan losses of approximately $2.5 million as of September 30, 2023. An allowance related to unfunded commitments of approximately $0.9 million as of September 30, 2023 was recorded as Other liabilities on the consolidated balance sheet.

At September 30, 2023, the Company reported $83.7 million of notes receivable, net of allowances of $1.6 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 nine months ended September 30, 2023 and 2022 were as follows (in thousands):


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

Unrealized credit loss provision (release)	817		519		1,336		514		344		858
Release due to redemption	(465)		—		(465)		—		—		—

Ending balance	$	1,644	$	857	$	2,501	$	1,508	$	354	$	1,862

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,