COMMERCIAL LOANS AND INVESTMENTS

12 Months Ended

Dec. 31, 2024

COMMERCIAL LOANS AND INVESTMENTS

COMMERCIAL LOANS AND INVESTMENTS

NOTE 4.       COMMERCIAL LOANS AND INVESTMENTS

Our investments in commercial loans or similarly structured investments, such as preferred equity, mezzanine loans or other subordinated debt, have been and are expected to continue to be secured by real estate or the borrower’s pledge of its ownership interest in the entity that owns the real estate. The investments are associated with commercial real estate located in the United States and its territories, and are current or performing with either a fixed or floating rate. Some of these loans may be syndicated in either a pari-passu or senior/subordinated structure. Commercial first mortgage loans generally provide for a higher recovery rate due to their senior position in the underlying collateral. Commercial mezzanine loans are typically secured by a pledge of the borrower’s equity ownership in the underlying commercial real estate. Unlike a mortgage, a mezzanine loan is not secured by a lien on the property. An investor’s rights in a mezzanine loan are usually governed by an intercreditor agreement that provides holders with the rights to cure defaults and exercise control on certain decisions of any senior debt secured by the same commercial property.

2024 Activity. On February 2, 2024, the borrower under the construction loan originated in January 2022 and secured by the property and improvements constructed thereon for the second phase of The Exchange at Gwinnett project located in Buford, Georgia repaid the principal balance of $1.9 million, leaving no remaining balance outstanding as of December 31, 2024. There is no remaining commitment to the borrower as of December 31, 2024.

On March 26, 2024, the Company originated a construction loan secured by the property and improvements to be constructed thereon consisting of seven outparcel locations, known as the Hypoluxo Project, located in Lake Worth, Florida for $10.0 million. On September 25, 2024, the Company signed an amendment with the borrower of the Hypoluxo project, reducing the total funding obligation to $5.6 million and adjusting the maturity date to June 1, 2025. The construction loan continues to bear a fixed interest rate of 11.0% and requires interest only payments prior to maturity. As of December 31, 2024, the Company has fully funded this obligation.

On April 18, 2024, the borrower on the mortgage loan secured by the Sabal Pavilion property, as described below, repaid the mortgage loan, at a $0.2 million discount, for proceeds to the Company of $15.2 million.

On July 11, 2024, the Company funded $10.0 million into an escrow account, which escrow closed on August 1, 2024 in exchange for 10,000 shares of 14.000% Series A preferred stock, with a $0.01 par value per share, of a subsidiary of a publicly-traded hospitality, entertainment and real-estate company (the “Series A Preferred Investment”). In connection with the investment, the Company received an origination fee of 1.0% or $0.1 million. The investment is not redeemable prior to July 11, 2029, except upon the occurrence of certain specified events. The Company determined, pursuant to FASB ASC Topic 810, Consolidation, that we do not have a variable interest in the entity underlying the Series A Preferred Investment; accordingly, FASB Topic ASC 320, Investments-Debt Securities, was applied and the investment was recorded in the consolidated balance sheets as a commercial loan investment at the time of acquisition.

On September 27, 2024, the Company originated a $43.8 million first mortgage loan secured by the Rivana at Innovation Station property located in Herndon, Virginia. The loan is interest-only with a term of two years with a fixed interest rate of 11.0%. The Company received an origination fee of 1.25% or $0.5 million. On October 25, 2024, the Company received a principal payment, as required by the loan agreement, in the amount of $1.8 million, thereby reducing the principal outstanding to $42.0 million as of December 31, 2024.

On November 7, 2024, the Company originated a $40.2 million construction loan secured by a Whole Foods Market anchored development in Forsyth County, Georgia. The loan is interest-only with a term of 2.5 years with an interest rate of 12.15%. As of December 31, 2024, the Company had funded $4.1 million to the borrower, leaving a remaining commitment of $36.1 million to the borrower.

2023 Activity. On February 21, 2023, the borrower of the 4311 Maple Avenue mortgage note repaid the principal balance of $0.4 million, leaving no remaining balance outstanding as of December 31, 2023.

On March 1, 2023, the Company originated a $15.0 million first mortgage loan secured by the Founders Square property located in Dallas, Texas. The loan is interest-only with a term of three years with a fixed interest rate of 8.75%.

On December 20, 2023, simultaneous with the sale of the property, the Company originated a $15.4 million first mortgage loan secured by the Sabal Pavilion property located in Tampa, Florida. The loan is interest-only with a term of six months with a fixed interest rate of 7.50%.

During the year ended December 31, 2023, the Company funded $2.2 million to the borrower and received $0.6 million in principal repayments under the construction loan originated in January 2022 and secured by the property and improvements to be constructed thereon for the second phase of The Exchange at Gwinnett project located in Buford, Georgia. As of December 31, 2023, there was no remaining commitment to the borrower.

2022 Activity. On April 7, 2022, the Company entered into a preferred equity agreement to provide $30.0 million of funding towards the total investment in Watters Creek at Montgomery Farm, a grocery-anchored, mixed-use property located in Allen, Texas (the “Watters Creek Investment”). Pursuant to FASB ASC Topic 810, Consolidation, and as further described in Note 7. “Investment in Joint Ventures,” the Company determined it is not the primary beneficiary of the entity underlying the Watters Creek Investment; accordingly, the $30.0 million was recorded in the consolidated balance sheets as a commercial loan investment at the time of acquisition. The Watters Creek Investment matures on April 6, 2025, has two one-year extension options, bears a fixed interest rate of 8.50% at the time of acquisition with increases during the initial term as well as the option terms, and requires payments of interest only prior to maturity. At closing, an origination fee of $0.15 million was received by the Company. 

The Company’s commercial loans and investments were comprised of the following at December 31, 2024 (in thousands):  

Description	Date of Investment	Maturity Date	Original Face Amount		Current Face Amount		Carrying Value		Coupon Rate
Preferred Investment – Watters Creek – Allen, TX	April 2022	April 2025	$	30,000	$	30,000	$	29,987	9.00%
Mortgage Note – Founders Square – Dallas, TX	March 2023	March 2026		15,000		15,000		14,942	8.75%
Promissory Note – Main Street – Daytona Beach, FL	June 2023	May 2033		400		400		400	7.00%
Construction Loan - Hypoluxo - Lake Worth, FL	March 2024	June 2025		5,638		5,638		5,598	11.00%
Series A Preferred Investment	July 2024	July 2029		10,000		10,000		9,910	14.00%
Mortgage Note - Rivana - Herndon, VA	September 2024	September 2026		42,000		42,000		41,530	11.00%
Construction Loan - Whole Foods - Forsyth, GA	November 2024	May 2027		40,200		4,125		3,748	12.15%
			$	143,238	$	107,163	$	106,115
CECL Reserve								(1,072)
Total Commercial Loans and Investments							$	105,043

The Company’s commercial loans and investments were comprised of the following at December 31, 2023 (in thousands):

Description	Date of Investment	Maturity Date	Original Face Amount		Current Face Amount		Carrying Value		Coupon Rate
Construction Loan – The Exchange At Gwinnett – Buford, GA	January 2022	January 2024	$	8,700	$	1,857	$	1,854	7.25%
Preferred Investment – Watters Creek – Allen, TX	April 2022	April 2025		30,000		30,000		29,937	8.75%
Mortgage Note – Founders Square – Dallas, TX	March 2023	March 2026		15,000		15,000		14,892	8.75%
Promissory Note – Main Street – Daytona Beach, FL	June 2023	May 2033		400		400		400	7.00%
Mortgage Note – Sabal Pavilion – Tampa, FL	December 2023	June 2024		15,400		15,400		15,393	7.50%
			$	69,500	$	62,657	$	62,476
CECL Reserve								(627)
Total Commercial Loans and Investments							$	61,849

The carrying value of the commercial loans and investment portfolio at December 31, 2024 and 2023 consisted of the following (in thousands):

	As of
	December 31, 2024		December 31, 2023
Current Face Amount	$	107,163	$	62,657
Unaccreted Origination Fees		(1,048)		(181)
CECL Reserve		(1,072)		(627)
Total Commercial Loans and Investments	$	105,043	$	61,849