Notes Receivable and Current Expected Credit Losses

6 Months Ended

Jun. 30, 2025

Notes Receivable and Current Expected Credit Losses

Notes Receivable

The Company had the following notes receivable outstanding as of June 30, 2025 and December 31, 2024 ($ in thousands):


		Outstanding loan amount
		June 30, 2025						December 31, 2024
Real Estate Financing Project(a)	Maturity Date	Principal		Accrued interest and fees(b)		Total loan amount(c)		Total loan amount(c)		Maximum principal commitment		Interest rate			Interest compounding
Solis Gainesville II	10/3/2026	$	19,595	$	6,480	$	26,075	$	25,291	$	19,595	6.0	%	(d)	Annually
Solis Kennesaw	5/25/2027	37,870		10,414		48,284		45,562		37,870		9.0	%	(d)	Annually
Solis Peachtree Corners	10/31/2027	28,440		7,562		36,002		33,549		28,440		15.0	%	(d)	Annually
The Allure at Edinburgh	1/16/2028	9,228		2,486		11,714		11,215		9,228		10.0	%	(e)	None

Solis North Creek	8/8/2030	18,045		1,633		19,678		5,816		26,767		12.0	%	(d)	Annually
Total mezzanine & preferred equity		$	113,178	$	28,575	$	141,753	$	121,433	$	121,900
Other notes receivable						—		12,984

Allowance for credit losses(f)						(1,980)		(1,852)

Total notes receivable						$	139,773	$	132,565

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(a) The Company does not intend to sell the real estate financing investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.

(b) Reflects accrued interest and unused commitment fees, net of discounts due to unamortized equity fees.

(d) The interest rate varies over the life of the loans and the Company also earns an unused commitment fee on amounts not drawn on the loans.

(e) The interest rate varies over the life of the loan.

(f) The amounts as of June 30, 2025 and December 31, 2024 exclude $0.2 million and $0.5 million, respectively, 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 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, 2025 and 2024 as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
Real Estate Financing Project	2025			2024			2025			2024
Solis Gainesville II	$	394	(a)(b)	$	786	(a)(b)	$	784	(a)(b)	$	1,572	(a)(b)
Solis Kennesaw	1,291		(a)(b)	1,315		(a)(b)	2,721		(a)(b)	2,551		(a)(b)
Solis Peachtree Corners	1,233		(a)(b)	913		(a)(b)	2,453		(a)(b)	1,800		(a)(b)
The Allure at Edinburgh	230			344			499			688
Solis City Park II(c)	—		(c)	608		(a)	—		(c)	1,355		(a)
Solis North Creek	524		(b)	—			951		(b)	—
Total mezzanine & preferred equity	3,672			3,966			7,408			7,966
Other interest income	468			666			960			1,292
Total interest income	$	4,140		$	4,632		$	8,368		$	9,258

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(a) Includes recognition of interest income related to fee amortization.

(b) Includes recognition of unused commitment fees.

Allowance for Loan Losses

The Company is exposed to credit losses primarily through its real estate financing investments. As of June 30, 2025, the Company had five real estate financing investments, which are secured by 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.

The Company's management performs a quarterly analysis of the loan portfolio to determine the risk of credit loss based on

the progress of development activities, including leasing activities, projected development costs, and current and projected

subordinated and senior loan balances. The Company estimates future losses on its notes receivable using risk

ratings that correspond to probabilities of default and loss given default. The Company's risk ratings are as follows:

•Pass: loans in this category are adequately collateralized by a development project with conditions materially consistent with the Company's underwriting assumptions.

•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, 2025 and obtained industry loan loss data relative to these risk ratings. Each of the outstanding loans as of June 30, 2025 was "Pass" rated. The Company's analysis resulted in an allowance for loan losses of approximately $2.2 million as of June 30, 2025, of which an allowance related to unfunded commitments of approximately $0.2 million as of June 30, 2025 was recorded as other liabilities on the consolidated balance sheet.

At June 30, 2025, the Company reported $139.8 million of notes receivable, net of allowances of $2.0 million. At December 31, 2024, the Company reported $132.6 million of notes receivable, net of allowances of $1.9 million. Changes in the allowance for the six months ended June 30, 2025 and 2024 were as follows (in thousands):


	Six Months Ended June 30, 2025						Six Months Ended June 30, 2024
	Funded		Unfunded		Total		Funded		Unfunded		Total
Beginning balance	$	1,852	$	509	$	2,361	$	1,472	$	732	$	2,204

Unrealized credit loss provision (release)	338		(284)		54		210		(355)		(145)
Release due to redemption	(210)		(32)		(242)		—		—		—




Ending balance	$	1,980	$	193	$	2,173	$	1,682	$	377	$	2,059

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 June 30, 2025, no loans were placed on non-accrual status.