Note 3 - Investment in Eagles Sub-OP

6 Months Ended

Jun. 30, 2025

Note 3 – Investment in Eagles Sub-OP

As previously disclosed, on April 8, 2025, the Fortress Member provided the Rescission and Removal Notice, which rescinded the Temporary Waiver and removed the Operating Partnership as the managing member of the Eagles Sub-OP in accordance with the terms of the Eagles Sub-OP Operating Agreement. The Eagles Sub-OP meets the criteria of a variable interest entity (“VIE”), however, the Company has determined that it is no longer the primary beneficiary of the Eagles Sub-OP as the Company no longer has a controlling financial interest in the Eagles Sub-OP and does not have the power to direct the activities that most significantly impact the economic performance of the Eagles Sub-OP. As a result, the Company deconsolidated the Eagles Sub-OP in the second quarter of 2025 and accounted for its investment in the Eagles Sub-OP using the equity method of accounting in accordance with ASC 323 at the time of deconsolidation. The Operating Partnership owns 100% of the common membership interests in the Eagles Sub-OP. The deconsolidation of the Eagles Sub-OP materially impacted the Company’s financial condition and operating results beginning in the second quarter of 2025 since the Eagles Sub-OP owns all of the income-producing real estate assets that the Company historically consolidated in its financial statements. The Company deconsolidated the Eagles Sub-OP as of April 1, 2025 because the impact of consolidation during the period from April 1, 2025 to April 8, 2025 was determined to be immaterial for purposes of financial reporting. The Company recognized an approximately $56.9 million gain on deconsolidation of Eagles Sub-OP in its condensed consolidated statements of operations for the three and six months ended June 30, 2025, which is the difference measured as the aggregate of (i) the fair value of the Company’s retained investment in the Eagles Sub-OP and (ii) the carrying amount of the redeemable noncontrolling interest that was derecognized, less the carrying amount of the Eagles Sub-OP’s net assets derecognized. Amounts recorded directly to additional paid-in capital in connection with the deconsolidation are excluded from this gain. See the reconciliation in Note 19 “Deconsolidation of Eagles Sub-OP”. At June 30, 2025, the carrying value of the Company's investment in Eagles Sub-OP was $34.6 million. At June 30, 2025, the Company’s maximum exposure to loss was $34.6 million, which is the carrying amount of its investment in the Eagles Sub-OP.

The following table summarizes the Company’s investment in Eagles Sub-OP activities for the three and six months ended June 30, 2025.


(thousands)	Eagles Sub-OP
Balance at December 31, 2024 and March 31, 2025	$	—
Investment in Eagles Sub-OP due to deconsolidation		45,918
Loss from investment in Eagles Sub-OP		(9,280	)
Distributions		(2,062	)
Balance at June 30, 2025	$	34,576

The following table provides the Eagles Sub-OP condensed consolidated balance sheets as of June 30, 2025.


	June 30, 2025
(in thousands)
Assets
Real estate properties
Land	$	40,121
Building and improvements		214,124
Intangible lease assets		18,650
Construction in progress		3,147
Furniture and equipment		1,831
Less accumulated depreciation and amortization		(44,981	)
Total real estate properties held for investment, net		232,892
Real estate held for sale, net		74,796
Total real estate properties, net		307,688

Cash and cash equivalents		8,915
Restricted cash		5,018
Tenant and accounts receivable		536
Derivative assets		202
Receivable from related party		992
Other assets, net		3,612
Assets related to real estate held for sale		4,691
Total Assets	$	331,654

Liabilities and Equity
Liabilities
Mortgage and other indebtedness, net (includes $17,351 and $16,911, respectively, at fair value under the fair value option)	$	184,966
Mortgage and other indebtedness related to real estate held for sale, net		62,262
Total mortgage and other indebtedness, net		247,228
Accounts payable and accrued liabilities		8,852
Unamortized intangible lease liabilities, net		84
Deferred revenue		710
Liabilities related to real estate held for sale		1,776
Total liabilities		258,650

Commitments and contingencies

Temporary Equity
Redeemable noncontrolling Fortress preferred interest		105,895

Permanent Member's Deficit
Additional paid in capital		(47,159	)
Member's equity		12,593
Accumulated other comprehensive income		1,675
Total permanent deficit		(32,891	)
Total Liabilities, Temporary Equity and Permanent Equity	$	331,654

The table below details the Eagle Sub-OP’s debt balance at June 30, 2025 and December 31, 2024. Prior to the deconsolidation of the Eagles Sub-OP, the Company consolidated the December 31, 2024 debt balance in its condensed consolidated balance sheet.


(dollars in thousands)	Maturity Date	Rate Type	Interest Rate (1)	June 30, 2025				December 31, 2024
Hollinswood Shopping Center Loan (2)	September 1, 2025	SOFR + 2.36%	4.06%	$	12,014			$	12,104
Avondale Shops Loan	December 1, 2025 (3)	Fixed	4.00%		2,682				2,745
Vista Shops at Golden Mile Loan (net of discount of $72 and $82, respectively) (4)	February 8, 2029	Fixed	6.90%		15,879				15,985
Brookhill Azalea Shopping Center Loan (5)	July 29, 2025	SOFR + 3.09%	7.41%		9,181				9,198
Crestview Shopping Center Loan (net of discount of $23 and $33, respectively)	September 29, 2026	Fixed	7.83%		11,782				11,856
Lamar Station Plaza West Loan (net of discount of $44 and $54, respectively)	December 10, 2027	Fixed	5.67%		18,404				18,585
Highlandtown Village Shopping Center Loan (net of discount of $25 and $29, respectively)	May 10, 2028	SOFR + 2.5% (6)	6.09%		8,714				8,721
Midtown Colonial and Midtown Lamonticello Shopping Center Loan (net of discount of $132 and $168, respectively) (7)	May 1, 2027	Fixed	7.92%		19,028				18,992
Midtown Row Loan (net of discount of $12 and $14, respectively)	December 1, 2027	Fixed	6.48%		75,988				75,986
Midtown Row/Fortress Mezzanine Loan (8)	December 1, 2027	Fixed	18% (9)		17,351				16,911
Cromwell Field Shopping Center Loan (net of discount of $37 and $45, respectively)	December 22, 2027	Fixed	6.71%		12,939		(10)		12,508		(10)
Coral Hills Shopping Center Loan (net of discount of $160 and $169, respectively)	October 31, 2033	Fixed	6.95%		12,287				12,385
West Broad Shopping Center Loan (net of discount of $75 and $79, respectively)	December 21, 2033	Fixed	7.00%		11,454				11,545
The Shops at Greenwood Village (net of discount of $55 and $63, respectively)	October 10, 2028	SOFR + 2.85% (11)	5.85%		21,344				21,643
				$	249,047			$	249,164
Unamortized deferred financing costs, net					(1,819	)			(2,114	)
Total Mortgage and Other Indebtedness				$	247,228			$	247,050

(1)

Interest rates are as of June 30, 2025.

(2)

The Company entered into an interest rate swap which fixed the interest rate of this loan at 4.06% until December 1, 2024. On October 28, 2024, the Company entered into an agreement to extend the maturity date of this loan to March 1, 2025. On March 27, 2025, the Company entered into another agreement to further extend the maturity date of this loan to June 1, 2025. On May 6, 2025, the maturity date of this loan was further extended to September 1, 2025.

(3)

On May 6, 2025, the maturity date of this loan was extended to December 1, 2025.

(4)

On February 8, 2024, the Company refinanced the Vista Shops at Golden Mile Loan. The maturity date of the new loan is February 8, 2029. The Company entered into an interest rate swap which fixes the interest rate of the new loan at 6.90% for the term of the loan.

(5)

On January 31, 2025, the Company entered into an agreement to extend the maturity date of this loan to April 30, 2025. On May 20, 2025, the lender further extend the maturity date of this loan to July 29, 2025 and amended the interest rate to SOFR plus 3.09%. This loan was paid off on July 25, 2025 with proceeds from the sale of the underlying property.

(6)

The Company has entered into an interest rate swap which fixes the interest rate of this loan at 6.09%.

(7)

This loan was originated on April 30, 2024.

(8)

The outstanding balance reflects the fair value of the debt.

(9)

A portion of the interest on this loan is paid in cash (the “Current Interest”) and a portion of the interest is capitalized and added to the principal amount of the loan each month (the “Capitalized Interest”) and, together with the Current Interest, the “Mezzanine Loan Interest”). The initial Mezzanine Loan Interest rate was 12% per annum, comprised of a 5% Current Interest rate and a 7% Capitalized Interest rate. The Capitalized Interest rate increases each year by 1% and effective April 8, 2025, the interest rate was increased by 4% as a result of the Trigger Event. As of June 30, 2025, the Capitalized Interest rate was 13%.

(10)

At June 30, 2025 and December 31, 2024, there was additional borrowing capacity of $2.0 million and $2.4 million, respectively, available for the Company to fund leasing costs and for the performance earnout.

(11)

The Company has entered into an interest rate swap which fixes the interest rate of this loan at 5.85%.

The following table provides the Eagles Sub-OP condensed consolidated statements of operations for the three and six months ended June 30, 2025.


(in thousands)	Three Months Ended June 30, 2025			Six Months Ended June 30, 2025
Revenues
Rental income	$	10,011		$	19,853
Operating Expenses
Property operating		3,278			6,852
Depreciation and amortization		3,163			6,721
Impairment of real estate assets		—			43
General and administrative		391			751
Total operating expenses		6,832			14,367
Operating income		3,179			5,486

Other income (expense)
Net interest and other income		357			522
Derivative fair value adjustment		(324	)		(906	)
Net loss on fair value change on debt held under the fair value option		(1,995	)		(2,235	)
Interest expense		(4,885	)		(9,650	)
Other expense		(31	)		(32	)
Total other expense		(6,878	)		(12,301	)

Net loss	$	(3,699	)	$	(6,815	)
Less: Preferred equity return on Fortress preferred equity		(4,584	)		(8,081	)
Less: Preferred equity accretion to redemption value		(997	)		(1,994	)
Net loss attributable to member	$	(9,280	)	$	(16,890	)

At the close of business on June 30, 2025, the Fortress Member terminated all of the Company’s property management and servicing agreements with subsidiaries of the Eagles Sub-OP and, as a result, the Company no longer has significant influence on the Eagles Sub-OP and its subsidiaries. Therefore, effective July 1, 2025, the Company will account for its investment in the Eagles Sub-OP using the measurement alternative model (at cost less impairment, adjusted for observable price changes) under ASC 321 as the Company no longer has significant influence on the Eagles Sub-OP and its subsidiaries. The carrying value of the investment at the date of the change will become the new cost basis for subsequent accounting.