Loans Held for Sale, at Fair Value

9 Months Ended

Sep. 30, 2024

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

4. LOANS HELD FOR SALE, AT FAIR VALUE

The Company's loans are generally classified as held for investment; however, once the Company decides to sell all or a portion of a loan, it is transferred from held for investment to held for sale and carried at fair value. As of September 30, 2024, the Company's portfolio included one loan that the Company has designated as held for sale. There were no loans classified as held for sale as of December 31, 2023. The Company's loans held for sale is reported on the consolidated balance sheets, at fair value, as of September 30, 2024.

The following table presents the changes in loans held for sale as of and for the nine months ended September 30, 2024. There were no loans held for sale as of and for the nine months ended September 30, 2023.


	Principal			Original Issue Discount		Unrealized Gains (Losses)		Fair Value (1)
Balance at December 31, 2023	$	-			-	$	-	$	-
Transfer of loans held for investment to loans held for sale (2)(3)		19,000,000			-		-		19,000,000
Principal repayment of loans		-			-		-		-
Accretion of original issue discount		-			-		-		-
Sale of loan (3)		(13,000,000	)		-		-		(13,000,000	)
Balance at September 30, 2024	$	6,000,000		$	-	$	-	$	6,000,000

(1)

Refer to Note 13.

(2)

During the three months ended September 30, 2024, the Company entered into a conditional assignment agreement with an affiliate under common control to sell $6.0 million of principal of Loan #11 (Note 3). Upon the change in management's intent to hold this portion of Loan #11 to maturity or payoff, this portion of the loan was transferred from loans held for investment to loans held for sale on the consolidated balance sheets, and was recorded at fair value of $6.0 million (Note 8). The terms of this portion of Loan #11 held for sale are consistent with those presented for this loan in Note 3. The remaining $27.8 million principal balance of Loan #11 is included in loans held for investment as of September 30, 2024.

(3)

On September 27, 2024, the Company transferred $13.0 million of principal of Loan #2 from held for investment to held for sale upon receipt of an offer from a third party to purchase such loan. On September 30, 2024, the Company sold $13.0 million of Loan #2 to a third party for a selling price of $13.0 million, and therefore this loan is not included in loans held for sale as of September 30, 2024. In connection with the transfer to held for sale classification, the Company reversed approximately $0.2 million of the CECL reserve (Note 3).

As of September 30, 2024, the balance of $6.0 million of loans held for sale constitutes a portion of Loan #11. This loan was sold on October 1, 2024, at a selling price of $6.0 million (Note 15).