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Loans Held For Investment, Net (Tables)

9 Months Ended

Sep. 30, 2024

Loans Held For Investment, Net [Abstract]

The following tables summarize the Company’s loans held for investment as of September 30, 2024 and December 31, 2023:


	As of September 30, 2024
	Outstanding Principal (1)		Original Issue Discount			Carrying Value (1)			Weighted Average Remaining Life (Years) (2)
Senior Term Loans	$	356,285,780	$	(1,613,270	)	$	354,672,510			2.1
Current expected credit loss reserve		-		-			(4,090,950	)
Total loans held at carrying value, net	$	356,285,780	$	(1,613,270	)	$	350,581,560


	As of December 31, 2023
	Outstanding Principal (1)		Original Issue Discount			Carrying Value (1)			Weighted Average Remaining Life (Years) (2)
Senior Term Loans	$	355,745,305	$	(2,104,695	)	$	353,640,610			2.1
Current expected credit loss reserve		-		-			(4,972,647	)
Total loans held at carrying value, net	$	355,745,305	$	(2,104,695	)	$	348,667,963

(1)

The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized paid-in-kind ("PIK") interest, if applicable.

(2)

Weighted average remaining life is calculated based on the carrying value of the loans as of September 30, 2024 and December 31, 2023, respectively.

Schedule of Activity Related to the CECL Reserve for Outstanding Balances

The following tables present changes in loans held at carrying value as of and for the nine months ended September 30, 2024 and 2023.


	Principal			Original Issue Discount			Current Expected Credit Loss Reserve			Carrying Value (1)
Balance at December 31, 2023	$	355,745,305		$	(2,104,695	)	$	(4,972,647	)	$	348,667,963
New fundings		76,051,190			(820,335	)		-			75,230,855
Principal repayment of loans		(64,198,999	)		-			-			(64,198,999	)
Accretion of original issue discount		-			1,311,760			-			1,311,760
Transfer of loan held for investment to loan held for sale (2)(3)		(19,000,000	)					213,913			(18,786,087	)
PIK Interest		7,688,284			-			-			7,688,284
Decrease in provision for current expected credit losses		-			-			667,784			667,784
Balance at September 30, 2024	$	356,285,780		$	(1,613,270	)	$	(4,090,950	)	$	350,581,560

(1)

(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. Upon the change in management's intent to hold this portion of Loan #11 to maturity or payoff, 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 approximately $6.0 million (Note 4) (Note 8). As a result of the expected repayment of this loan at the contractual maturity date of October 4, 2024, there was no decrease to the current expected credit loss ("CECL") reserve as a result of this transfer.

(3)

On September 27, 2024, the Company transferred $13.0 million of principal of Loan #2 from loans held for investment to loans held for sale upon receipt of an offer from a third party to purchase such loan (Note 4). 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. In connection with the transfer to held for sale classification, the Company reversed approximately $0.2 million of the CECL reserve.


	Principal			Original Issue Discount			Current Expected Credit Loss Reserve			Carrying Value (1)
Balance at December 31, 2022	$	343,029,334		$	(3,755,796	)	$	(3,940,939	)	$	335,332,599
New fundings		68,677,238			(1,254,590	)		-			67,422,648
Principal repayment of loans		(62,837,108	)		-			-			(62,837,108	)
Accretion of original issue discount		-			1,989,374			-			1,989,374
Sale of loan (2)		(13,399,712	)		-			-			(13,399,712	)
PIK Interest		6,343,749			-			-			6,343,749
Increase in provision for current expected credit losses		-			-			(1,171,256	)		(1,171,256	)
Balance at September 30, 2023	$	341,813,501		$	(3,021,012	)	$	(5,112,195	)	$	333,680,294

(1)

(2)

One loan was reclassified as held for sale from loans held for investment as the decision was made to sell the loan during the nine months ended September 30, 2023 to a syndicate of co-lenders which includes a third party and two affiliates under common control with the Manager. The sale was executed on March 31, 2023 (Note 8).

Schedule of Loans Held at Carrying Value Based on Information

A more detailed listing of the Company’s loans held at carrying value based on information available as of September 30, 2024, is as follows:


Loan (1)	Location(s)	Initial Funding Date (1)	Maturity Date (2)	Principal Balance		Original Issue Discount			Carrying Value		Percentage of Our Loan Portfolio			Future Fundings		Interest Rate (3)	Periodic Payment (4)	YTM IRR (5)
1	Various	10/27/2022	10/30/2026	$	25,354,286	$	(467,213	)	$	24,887,073		7.0	%		-	P+6.5% Cash(8)	I/O	17.2%
2	Michigan	1/13/2022	12/31/2024		27,030,728		(13,737	)		27,016,991		7.6	%		-	P+6.65% Cash, 4.25% PIK(6)(14)(21)	P&I	18.0%
3	Various	3/25/2021	1/29/2027		21,066,738		(593,996	)		20,472,742		5.8	%		-	P+9.69% Cash, 2.6% PIK(11)(15)	P&I	23.2%
4	Arizona	4/19/2021	6/17/2026		6,626,809		-			6,626,809		1.9	%		-	11.91% Cash	I/O	17.0%
5	Massachusetts	4/19/2021	4/30/2025		2,721,680		-			2,721,680		0.8	%		-	P+12.25% Cash(6)	P&I	22.7%
6	Michigan	8/20/2021	1/30/2026		4,818,354		-			4,818,354		1.4	%		-	15% Cash	P&I	17.7%
7	Illinois, Arizona	8/24/2021	6/30/2025		20,579,082		(64,158	)		20,514,924		5.8	%		-	P+6% Cash, 2% PIK(9)	P&I	19.4%
8	West Virginia	9/1/2021	12/31/2025		8,491,943		-			8,491,943		2.4	%		-	10% Cash	P&I	15.0%
9	Pennsylvania	9/3/2021	6/30/2024		16,402,488		-			16,402,488		4.6	%		-	P+10.75% Cash, 3% PIK(6)(16)	P&I	16.3%
11	Maryland	9/30/2021	10/4/2024		27,824,509		-			27,824,509		7.8	%		-	P+8.75% Cash, 2% PIK(6)(17)	I/O	22.0%
12	Various	11/8/2021	4/30/2025		8,676,876		(16,447	)		8,660,429		2.4	%		-	P+7% Cash(10)	P&I	19.6%
16	Florida	12/30/2021	8/31/2025		6,557,500		(34,791	)		6,522,709		1.8	%		-	16.75% Cash	I/O	33.1%
18	Ohio	2/3/2022	12/31/2025		23,639,667		(51,891	)		23,587,776		6.7	%		-	P+1.75% Cash, 5% PIK(9)(18)	P&I	16.6%
19	Florida	3/11/2022	12/31/2025		19,029,907		(29,862	)		19,000,045		5.4	%		-	11% Cash, 5% PIK	P&I	16.5%
20	Missouri	5/9/2022	5/30/2025		17,111,787		(36,831	)		17,074,956		4.8	%		-	11% Cash, 2% PIK	P&I	14.7%
21	Illinois	7/1/2022	7/29/2026		6,718,164		(40,316	)		6,677,848		1.9	%		-	P+7% Cash, 2% PIK(9)	P&I	23.4%
23	Arizona	3/27/2023	3/31/2026		1,680,000		(24,864	)		1,655,136		0.5	%		-	P+7.5% Cash(12)	P&I	18.7%
24	Oregon	3/31/2023	9/27/2026		660,000		-			660,000		0.2	%		-	P+10.5% Cash(7)	P&I	21.5%
25	New York	8/1/2023	6/29/2036		25,849,894		-			25,849,894		7.3	%		-	15% Cash	P&I	16.6%
26	Connecticut	8/31/2023	4/30/2026		6,450,000		(77,024	)		6,372,976		1.8	%		-	14% Cash	P&I	19.0%
27	Nebraska	8/15/2023	6/30/2027		13,000,000		-			13,000,000		3.7	%		-	P+6.5% Cash(19)	P&I	16.1%
28	Ohio	9/13/2023	3/13/2025		2,466,705		-			2,466,705		0.7	%		-	15% Cash	P&I	17.4%
29	Illinois	10/11/2023	10/9/2026		2,025,634		-			2,025,634		0.6	%		-	11.4% Cash, 1.5% PIK	P&I	14.7%
30	Missouri, Arizona	12/20/2023	12/31/2026		19,600,000		(156,863	)		19,443,137		5.5	%		-	P+7.75% Cash(13)	I/O	18.7%
31	California, Arizona	1/3/2024	5/3/2026		6,680,000		-			6,680,000		1.9	%		-	P+8.75% Cash(10)	I/O	18.6%
32	Nevada	4/15/2024	8/15/2027		-		-			-		0.0	%		6,000,000	P+6.5% Cash(12)(20)	I/O	17.7%
33	Minnesota	5/20/2024	5/28/2027		1,152,000		(5,277	)		1,146,723		0.3	%		-	12% Cash	P&I	12.9%
34	Arizona	6/17/2024	5/29/2026		10,000,000		-			10,000,000		2.8	%		-	11.91% Cash	I/O	12.8%
35	California	8/23/2024	8/23/2027		24,071,029		-			24,071,029		6.8	%		-	12% Cash, 3% PIK	P&I	16.3%
			Total	$	356,285,780	$	(1,613,270	)	$	354,672,510		100	%	$	6,000,000		Wtd Average	18.2%

(1)

All loans originated prior to April 1, 2021 were purchased from affiliated entities at fair value plus accrued interest on or subsequent to April 1, 2021. Loan numbering in the table above is maintained from origination for purposes of comparability and may not be sequential due to maturities, payoffs, or refinancings.

(2)

Certain loans are subject to contractual extension options and may be subject to performance based on other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein and certain borrowers may have the right to prepay with or without a contractual prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.

(3)

"P" = prime rate and depicts floating rate loans that pay interest at the prime rate plus a specific percentage; "PIK" = paid-in-kind interest.

(4)

P&I = principal and interest. I/O = interest only. P&I loans may include interest only periods for a portion of the loan term.

(5)

Estimated YTM, calculated on a weighted average principal basis, includes a variety of fees and features that affect the total yield, which may include, but is not limited to, OID, exit fees, prepayment fees, unused fees and contingent features. OID is recognized as a discount to the funded loan principal and is accreted to income over the term of the loan. The estimated YTM calculations require management to make estimates and assumptions, including, but not limited to, the timing and amounts of loan draws on delayed draw loans, the timing and collectability of exit fees, the probability and timing of prepayments and the probability of contingent features occurring. For example, certain credit agreements contain provisions pursuant to which certain PIK interest rates and fees earned by us under such credit agreements will decrease upon the satisfaction of certain specified criteria which we believe may improve the risk profile of the applicable borrower. To be conservative, we have not assumed any prepayment penalties or early payoffs in our estimated YTM calculation. Estimated YTM is based on current management estimates and assumptions, which may change. Actual results could differ from those estimates and assumptions.

(6)

This Loan is subject to a prime rate floor of 3.25%

(7)

This Loan is subject to a prime rate floor of 5.50%

(8)

This Loan is subject to a prime rate floor of 6.25%

(9)

This Loan is subject to a prime rate floor of 7.00%

(10)

This Loan is subject to a prime rate floor of 7.50%

(11)

This Loan is subject to a prime rate floor of 7.75%

(12)

This Loan is subject to a prime rate floor of 8.00%

(13)

This Loan is subject to a prime rate floor of 8.50%

(14)

This Loan is subject to a prime rate cap of 5.85%

(15)

The aggregate principal balance outstanding of Loan #3 is comprised of two tranches. The first tranche has a principal balance $16.8 million, a floating interest rate of prime plus 7.75% cash and 2.75% PIK and a maturity date of January 29, 2027. The second tranche has a principal balance of $4.3 million, and bears an interest rate of 15.00% and 2.00% PIK, and a maturity date of November 29, 2024. The statistics presented reflect the weighted average of the rate terms under both tranches for the total aggregate loan commitment.

(16)

As of May 1, 2023, Loan #9 was placed on non-accrual status and remains on non-accrual as of September 30, 2024. Loan #9 is included on the consolidated balance sheet as a loan held for investment – related party (Note 8). This loan had an original maturity date of June 30, 2024 and is included in amounts past due in the tables below.

(17)

This loan was repaid in full in October 2024 and carried a zero CECL reserve as of September 30, 2024. The maturity date presented reflects the date of repayment. During the quarter ended September 30, 2024, $6.0 million of principal of Loan #11 was reclassified as held for sale, at fair value (Note 4).

(18)

An affiliate under common control holds a controlling equity investment in this portfolio company (Note 8).

(19)

This loan has floating grid pricing based on the Prime Rate plus a spread of 5.00% to 8.75% based on monthly annualized EBITDA performance. As of September 30, 2024, the applied interest rate is Prime Rate + 6.50%.

(20)

This loan earns an unused fee on the unfunded commitment at an annual rate of 1.2%. The unfunded commitment of $6.0 million was advanced in October 2024 (Note 15).

(21)

On September 27, 2024, $13.0 million of principal of Loan #2 was reclassified to held for sale, and was subsequently sold to a third party at a price of $13.0 million on September 30, 2024. The remaining balance presented is held for investment as of September 30, 2024.

Schedule of Presents Aging Analyses of Past Due Loans by Amortized Cost

The following table presents aging analyses of past due loans by amortized cost, excluding the CECL reserve, as of September 30, 2024 and December 31, 2023. As of September 30, 2024 and December 31, 2023, there was one loan with principal greater than 90 days past due.


	As of September 30, 2024
	Current Loans (1)		31-60 Days Past Due		61-90 Days Past Due		90+ Days Past Due (2)		Total Past Due		Total Loans		Non- Accrual(2)
Senior Term Loans	$	338,270,022	$	-	$	-	$	16,402,488	$	16,402,488	$	354,672,510	$	16,402,488
Total	$	338,270,022	$	-	$	-	$	16,402,488	$	16,402,488	$	354,672,510	$	16,402,488

(1)

Loans 1-30 days past due are included in the current loans.

(2)

On May 1, 2023, Loan #9 was placed on non-accrual status. On June 20, 2023, the Administrative Agent to Loan #9 issued an acceleration notice requesting immediate payment of all amounts outstanding and therefore is greater than 90 days past due as of September 30, 2024. . On December 1, 2023 Loan #6 was placed on non-accrual status. In March 2024, the Company entered into an amendment to Loan #6, which extended the maturity date to April 15, 2024. In the second quarter, the Company entered into an additional amendment to Loan #6, which extended the maturity date from April 15, 2024 to January 30, 2026 and restored Loan #6 to accrual status.


	As of December 31, 2023
	Current Loans (1)		31-60 Days Past Due		61-90 Days Past Due		90+ Days Past Due		Total Past Due		Total Loans		Non- Accrual(2)
Senior Term Loans	$	337,238,122	$	-	$	-	$	16,402,488	$	16,402,488	$	353,640,610	$	20,666,374
Total	$	337,238,122	$	-	$	-	$	16,402,488	$	16,402,488	$	353,640,610	$	20,666,374

(1)

Loans 1-30 days past due are included in the current loans.

(2)

Schedule of Risk Rating

Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:


Rating		Definition
1		Very low risk
2		Low risk
3		Moderate/average risk
4		High risk/potential for loss: a loan that has a risk of realizing a principal loss


5		Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded

Schedule of Carrying Value of Loans Held for Investment

As of September 30, 2024 and December 31, 2023, the carrying value, excluding the CECL reserve, of the Company’s loans held for investment within each risk rating category by year of origination is as follows:


Risk	As of September 30, 2024(1)(2)										As of December 31, 2023(1)(2)
Rating	2024		2023		2022		2021		Total		2023		2022		2021		Total
1	$	-	$	660,000	$	36,075,001	$	27,824,512	$	64,559,513	$	820,000	$	37,644,911	$	-	$	38,464,911
2		41,394,426		68,346,777		59,448,763		20,514,924		189,704,890		51,320,161		107,007,422		46,792,941		205,120,524
3		21,694,652		2,466,705		27,016,991		11,382,108		62,560,456		2,466,705		5,296,308		58,829,717		66,592,730
4		10,000,000		-		-		27,847,651		37,847,651		-		-		43,462,445		43,462,445
5		-		-		-		-		-		-		-		-		-
Total	$	73,089,078	$	71,473,482	$	122,540,755	$	87,569,195	$	354,672,510	$	54,606,866	$	149,948,641	$	149,085,103	$	353,640,610

(1)

Amounts are presented by loan origination year with subsequent advances shown in the original year of origination.

(2)

Loan #9 placed on non-accrual status is included in risk rating category “4” and has a reserve for current expected credit losses of approximately $1.4 million as of September 30, 2024 and $1.5 million as of December 31, 2023.

Schedule of Real Estate Collateral Coverage

Real estate collateral coverage is also a significant credit quality indicator, and real estate collateral coverage, excluding the CECL Reserve, was as follows as of September 30, 2024 and December 31, 2023:


As of September 30, 2024(1)
	< 1.0x		1.0x – 1.25x		1.25x – 1.5x		1.50x – 1.75x		1.75x – 2.0x		> 2.0x		Total
Fixed-rate	$	25,522,754	$	69,462,584	$	17,773,533	$	-	$	-	$	8,398,610	$	121,157,481
Floating-rate		112,344,705		36,917,412		6,677,848		32,079,719		27,016,991		18,478,354		233,515,029
	$	137,867,459	$	106,379,996	$	24,451,381	$	32,079,719	$	27,016,991	$	26,876,964	$	354,672,510


As of December 31, 2023(1)
	< 1.0x		1.0x – 1.25x		1.25x – 1.5x		1.50x – 1.75x		1.75x – 2.0x		> 2.0x		Total
Fixed-rate	$	2,466,706	$	-	$	49,041,867	$	17,613,043	$	-	$	-	$	69,121,616
Floating-rate		104,322,083		35,491,887		38,729,046		15,396,370		5,296,308		85,283,300		284,518,994
	$	106,788,789	$	35,491,887	$	87,770,913	$	33,009,413	$	5,296,308	$	85,283,300	$	353,640,610

(1)

Real estate collateral coverage is calculated based upon most recent third party appraised values. The Company generally obtains a new appraisal of all material real estate collateral at least once annually.

Summary of Geography Concentration of Loans Held for Investment

Geography concentration of our loans held for investment is also a significant credit quality indicator. As of September 30, 2024 and December 31, 2023, our borrowers have operations in the jurisdictions in the table below:


As of September 30, 2024						As of December 31, 2023
Jurisdiction	Outstanding Principal (1)		Percentage of Our Loan Portfolio			Jurisdiction	Outstanding Principal (1)		Percentage of Our Loan Portfolio
Maryland	$	48,829,536		14	%	Maryland	$	53,907,352		15	%
Pennsylvania		41,756,774		12	%	Pennsylvania		21,674,160		6	%
Ohio		34,783,248		10	%	Ohio		27,902,362		8	%
Missouri		34,327,575		10	%	Missouri		25,191,575		7	%
Michigan		31,849,084		9	%	Michigan		56,466,635		16	%
Illinois		28,625,165		8	%	Illinois		25,599,133		7	%
California		26,739,191		8	%	California		-		-	%
New York		25,849,894		7	%	New York		22,611,938		6	%
Florida		25,587,407		7	%	Florida		48,815,066		14	%
Arizona		25,400,574		7	%	Arizona		24,466,609		7	%
Nebraska		13,000,000		4	%	Nebraska		13,061,667		4	%
West Virginia		8,491,943		2	%	West Virginia		11,706,059		3	%
Connecticut		6,450,000		2	%	Connecticut		5,450,000		2	%
Massachusetts		2,783,391		1	%	Massachusetts		12,308,310		3	%
Minnesota		1,152,000		0	%	Minnesota		-		-	%
Oregon		660,000		0	%	Oregon		820,000		-	%
Nevada		-		-	%	Nevada		5,764,439		2	%
Total	$	356,285,780		100	%	Total	$	355,745,305		100	%

(1)

The principal balance of the loans not secured by real estate collateral are included in the jurisdiction representing the principal place of business.

Schedule of Activity Related to the CECL Reserve for Outstanding Balances

Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value and loans receivable at carrying value as of and for the nine months ended September 30, 2024 and 2023 is presented in the table below.


	Outstanding			Unfunded			Total
Balance at December 31, 2023	$	4,972,647		$	3,092		$	4,975,739
Decrease in provision for current expected credit losses		(881,697	)		(3,092	)		(884,789	)
Balance at September 30, 2024	$	4,090,950		$	-		$	4,090,950


	Outstanding		Unfunded		Total
Balance at December 31, 2022	$	3,940,939	$	94,415	$	4,035,354
Increase in provision for current expected credit losses		1,171,256		22,623		1,193,880
Balance at September 30, 2023	$	5,112,195	$	117,038	$	5,229,234