Related Party Transactions

6 Months Ended

Jun. 30, 2022

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

7. RELATED PARTY TRANSACTIONS

Management Agreement

Pursuant to the Management Agreement, the Manager manages the loans and day-to-day operations of the Company, subject at all times to the further terms and conditions set forth in the Management Agreement and such further limitations or parameters as may be imposed from time to time by the Company’s Board.

The Manager is entitled to receive base management fees (the “Base Management Fee”) that are calculated and payable quarterly in arrears, in an amount equal to 0.375% of the Company’s Equity, determined as of the last day of each such quarter; reduced by an amount equal to 50% of the pro rata amount of origination fees earned and paid to the Manager during the applicable quarter for loans that were originated on the Company’s behalf by the Manager or affiliates of the Manager (“Outside Fees”). For the six months ended June 30, 2022, the Base Management Fee payable was reduced by Outside Fees in the amount of $1,082,251.

In addition to the Base Management Fee, the Manager is entitled to receive incentive compensation (the “Incentive Compensation” or “Incentive Fees”) under the Management Agreement. Under the Management Agreement, the Company will pay Incentive Fees to the Manager based upon the Company’s achievement of targeted levels of Core Earnings. “Core Earnings” is defined in the Management Agreement as, for a given period means the net income (loss) for such period, computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) the Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between the Manager and the Independent Directors and approved by a majority of the Independent Directors. Incentive compensation for the six months ended June 30, 2022 was $980,906.

The Company shall pay all of its costs and expenses and shall reimburse the Manager or its affiliates for expenses of the Manager and its affiliates paid or incurred on behalf of the Company, excepting only those expenses that are specifically the responsibility of the Manager pursuant to the Management Agreement. We reimburse our Manager or its affiliates, as applicable, for the Company’s fair and equitable allocable share of the compensation, including annual base salary, bonus, any related withholding taxes and employee benefits, paid to (i) subject to review by the Compensation Committee of the Board, the Manager’s personnel serving as an officer of the Company, based on the percentage of his or her time spent devoted to the Company’s affairs and (ii) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and its affiliates who spend all or a portion of their time managing the Company’s affairs, with the allocable share of the compensation of such personnel described in this clause (ii) being as reasonably determined by the Manager to appropriately reflect the amount of time spent devoted by such personnel to our affairs.

The following table summarizes the related party costs incurred by the Company and amounts payable to the Manager for the periods ended June 30, 2022 and December 31, 2021.

	Three months ended June 30, 2022			Three months ended June 30, 2021		Six months ended June 30, 2022			Period from March 30, 2021 (inception) to June 30, 2021
Affiliate Payments
Management fees earned	$	1,013,298		$	-	$	2,020,411		$	-
Less: Outside Fees earned		(364,500	)		-		(1,082,251	)		-
Base management fees, net		648,798			-		938,160			-
Incentive fees		598,763			-		980,906			-
Management and incentive fees earned		1,247,561			-		1,919,066			-
General and administrative expenses reimbursable to Manager		686,981			-		1,151,471			-
Total	$	1,934,542		$	-	$	3,070,537		$	-

General administrative expenses reimbursable to the Manager are included in the related party payable line item of the consolidated balance sheets as of June 30, 2022 and December 31, 2021. Amounts payable to the Manager as of June 30, 2022 and December 31, 2021 were approximately $2.0 million and $2.7 million, respectively, which included bonuses accrued for the year which are not reimbursed to the Manager until paid.

Investments in Loans

From time to time, the Company may co-invest with other investment vehicles managed by its affiliates, in accordance with the Manager’s co-investment allocation policies. The Company is not obligated to provide, nor has it provided, any financial support to the other managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment in any such loan. As of and for the six months ended June 30, 2022, 14 of the Company’s loans were co-invested by affiliates of the Company.