Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words such as “may,” “could,” “should,” “expect,” “intend,” “plan,” “goal,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “variables,” “potential,” “continue,” “expand,” “maintain,” “create,” “strategies,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions, are intended to identify forward-looking statements.
These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors described above in Part I, Item IA in this Annual Report on Form 10-K, some of which are briefly summarized below:
We have paid past distributions from sources other than cash flows from operating activities, including from offering proceeds, which reduces the amount of cash we ultimately have to invest in assets, and some of our distributions have not been covered by net income; if we cannot generate sufficient cash flow from operations to fully fund distributions, some or all of our distributions may again be paid from these other sources, and if our net income does not cover our distributions, those distributions will dilute our stockholders’ equity;
There is no current public trading market for our common stock, and we do not expect that such a market will develop. Therefore, repurchase of shares by us will likely be the only way for stockholders to dispose of their shares, and our SRP is currently suspended;
Even if our stockholders are able to sell their shares pursuant to our SRP in the future, or otherwise, they may not be able to recover the amount of their investment in our shares;
We have in the past and may in the future foreclose on certain of the loans we originate or acquire, which could result in losses that negatively impact our results of operations and financial condition;
As an owner of real estate, we are subject to the risks inherent in the ownership and operation of real estate and the construction and development of real estate;
Our Advisor and our Sub-Advisor may face conflicts of interest in allocating personnel and resources between their affiliates;
None of our agreements with our Advisor, our Sub-Advisor or any affiliates of our Advisor or Sub-Advisor were negotiated at arm’s-length; and
If we fail to continue to qualify as a REIT, our operations and distributions to stockholders will be adversely affected.
Forward-looking statements in this Annual Report on Form 10-K reflect our management’s view only as of the date of this Annual Report on Form 10-K, and may ultimately prove to be incorrect or false. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.
The following discussion should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements, which are included in Part IV, Item 15 of this Annual Report on Form 10-K. All dollar amounts are stated in thousands unless otherwise noted, except share data.
Overview
We are a Maryland corporation formed on September 13, 2016 to originate, acquire and manage an investment portfolio of CRE investments primarily comprised of CRE debt, including primarily floating-rate first mortgage loans and fixed rate mezzanine loans. We may also invest in participations in CRE debt, floating-rate CRE securities such as CMBS, senior unsecured debt of publicly traded REITs and select equity investments in single-tenant, net leased properties. Substantially all of our business is conducted through our Operating Partnership, of which we are the sole general partner. We are externally managed by our Advisor, an indirect subsidiary of IREIC. Our Advisor has engaged the Sub-Advisor, a subsidiary of Sound Point CRE Management, LP, to perform certain services on behalf of the Advisor for us.
We have operated in a manner that allows us to qualify as a REIT for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2017. Among other requirements, REITs are required to distribute to stockholders at least 90% of their annual REIT taxable income (computed without regard to the dividends-paid deduction and excluding net capital gain).
For a discussion of the history of the Company and its Private Offering, IPO, Second Public Offering and Preferred Stock Offering, please see Part IV, Item 15, “Note 1 – Organization and Business Operations” in the notes to our consolidated financial statements below.
Recent Developments
The CRE debt market has experienced increased activity with the U.S. Federal Reserve’s recent moves to lower interest rates. During 2025, the U.S. Federal Reserve reduced rates three times with the most recent reduction occurring in December 2025, which lowered the target range to 3.50% to 3.75%. According to CBRE, CRE investment volume increased by 29% year-over-year in the fourth quarter of 2025 to $172 billion. The CBRE Lending Momentum Index, which tracks loans originated or brokered by CBRE, increased 67% year-over-year in the fourth quarter of 2025, with December marking the highest monthly level since 2021.
If the U.S. Federal Reserve continues rate-cutting during 2026, we may start to see more liquidity in the CRE debt market, with improved ability of borrowers to refinance and pay off existing loans in our portfolio, and improvement of property values. While lower market rates could mean lower lending rates for newly-originated loans, we may also see a reduction in our borrowing costs, which could help maintain spreads in the portfolio. We continue to consider all of these market factors as we assess our options for the most efficient use of the cash on our balance sheet.
We did not originate any new loans during 2025 as we focused on maintaining our liquidity with several of our loans approaching maturity. During 2025, we funded $2.0 million and received paydowns of $99.4 million on existing loans, sold one loan with an outstanding principal balance of $47.5 million and wrote off one loan with an outstanding principal balance of $5.4 million. We also foreclosed on two loans during 2025 with an aggregate outstanding principal balance of $61.8 million resulting in the acquisition of one office property and one multifamily property. In February 2026, we originated a first mortgage loan secured by a multifamily property in Texas with a principal balance of $11.4 million. The loan earns interest at SOFR+3.50%, has an all-in yield of 7.2%, and an LTV of 67.1%. During the remainder of 2026, we will focus on originating additional loans and continue working with our current borrowers on extending or restructuring our maturing loans with an emphasis on obtaining principal reductions or loan payoffs.
We continue to evaluate all loans on a quarterly basis and assign our internal risk rating with the majority of our loans continuing to perform as expected. Our primary focus continues to be on refinance risk and our CECL reserve will place emphasis on loans with maturity dates nine months forward from the reporting date.
Company Strategic Plan
The Company’s management has been analyzing the portfolio impact of liquidating the real estate owned (“REO”) in the portfolio and potentially redeploying those proceeds into newly originated first mortgage loans. The Company’s goal is to position the portfolio to pursue a future strategic transaction when capital market conditions have improved, in order to maximize stockholder value and potentially provide our investors with access to some level of liquidity. There is no assurance that the Company will be able to successfully implement any strategic plan. We are continually impacted by evolving market conditions and other complex factors such as (i) the state of the commercial real estate market and financial markets, (ii) our ability to access additional capital or leverage and (iii) changes in general economic conditions such as high interest rates, among other factors. We will provide updates as the Company considers appropriate or as required under applicable law.
2025 Highlights
Operating Results:
Net loss attributable to common stockholders was $7.6 million, or $0.75 per share during the year ended December 31, 2025, which included $1.2 million in reversal of credit losses.
We declared gross distributions of $1.25 per common share during the year ended December 31, 2025, which represents an annualized rate of 8.8% on our aggregate NAV of $14.1316 as of December 31, 2025. Holders of Class D and Class T shares of common stock received less than the gross distribution amount after the deduction of stockholder servicing fees applicable to those classes.
Loan Portfolio:
We originated no loans during the year ended December 31, 2025.
On May 1, 2025, we acquired legal title to a multifamily property located in Kansas City, MO (the “Arbor Mist property”) through a non-judicial foreclosure transaction. The Arbor Mist property previously collateralized a senior loan with an amortized cost basis of $38.9 million with a CECL reserve of $0.1 million at the time of the acquisition. The Arbor Mist property was recorded at $38.9 million based on the estimated fair value at acquisition.
On July 2, 2025, we acquired legal title to an office property located in Charlotte, NC (the “Parkview property”) through a non-judicial foreclosure transaction. The Parkview property previously collateralized a senior loan with an amortized cost basis of $22.9 million with a CECL reserve of $2.3 million at the time of the acquisition. The Parkview property was recorded at $20.1 million based on the estimated fair value at acquisition.
On September 30, 2025, we sold a $47.5 million loan secured by an office property in Houston, TX, which represented approximately 9% of the total portfolio (including real estate owned) prior to the sale, and recognized a loss of $8.4 million on the sale. The sale generated a net cash inflow of approximately $10.0 million after repayment of the related financing.
Our loan portfolio decreased $201.3 million to $347.9 million during the year ended December 31, 2025. The decrease includes $99.4 million in loan repayments, sale of a loan with an outstanding principal balance of $47.5 million, write off related to one loan of $5.4 million, and two loans transferred on foreclosure to real estate owned of $61.8 million, partially offset by $2.0 million in advances on previously originated loans, $1.2 million of reversal of credit losses and $8.9 million of CECL reserve charge-offs.
All 15 of our loans were current on their contractual interest payments with no interest deferrals during the year ended December 31, 2025.
Capital Markets and Financing Activity:
We had net repayments of $137.3 million on our repurchase agreements, and principal repayments of loan participations of $1.6 million during the year ended December 31, 2025.
During the year ended December 31, 2025, we paid a total of $18.6 million in distributions to common and preferred stockholders.
On September 30, 2025, we entered into a mortgage loan collateralized by the Arbor Mist property for an aggregate principal amount of $24.5 million. See “Repurchase Agreements, Credit Facility and Mortgage Loan Payable” section below for additional information.
Investment Portfolio
Our strategy is to originate, acquire and manage an investment portfolio of CRE debt that is primarily floating rate and diversified based on the type and location of collateral securing the underlying CRE debt.
The charts below summarize our debt investments portfolio as a percentage of par value by type of rate, our total investment portfolio by investment type, including REO, and our loan portfolio by collateral type and geographical region as of December 31, 2025 and 2024.
Floating Vs. Fixed Rate Debt Investments:
December 31, 2025
December 31, 2024
All Investments by Type:
December 31, 2025
December 31, 2024
Loans by Property Type:
December 31, 2025
December 31, 2024
Loans by Region:
December 31, 2025
December 31, 2024
An investment’s region is defined according to the below map based on the location of underlying property.
Commercial Mortgage Loans Held for Investment
As of December 31, 2025
As of December 31, 2024
Principal balance of first mortgage loans
Number of first mortgage loans
Principal balance of credit loans
Number of credit loans
Total balance of loans
Total number of loans
All-in yield (1)
Weighted average years to maximum maturity
All-in yield is the present value of all future principal and interest payments on the loan and does not include any origination fees or deferred commitment fees. All-in yield also excludes the all-in yield for loans placed on nonaccrual status. All-in yield is calculated using the spread plus the values of the indices as of December 31, 2025.
The decrease in the size of our portfolio is primarily due to loan payoffs, the sale of one loan, the write off of one loan and the foreclosure of two loans with no new loans originated during the year ended December 31, 2025. The change in the all-in yield was primarily driven by the changes in the composition of the loans in the portfolio.
The tables below present select loan information for each of our commercial mortgage loans as of:
December 31, 2025
Origination
Date
Loan
Type (1)
Principal
Balance (2)
Cash
Coupon (2)(4)
All-in
Yield (2)(4)
Maximum
Maturity (5)
State
Property
Type
LTV (6)
Risk
Rating (7)
First mortgage
SOFR+4.70%
Office
First mortgage
SOFR+3.10%
Office
First mortgage
SOFR+2.90%
Multifamily
First mortgage
SOFR+3.05%
Multifamily
First mortgage
SOFR+2.85%
Multifamily
First mortgage
SOFR+3.05%
Multifamily
First mortgage
SOFR+3.20%
Multifamily
First mortgage
SOFR+3.55%
Industrial
First mortgage
SOFR+3.30%
Multifamily
First mortgage
SOFR+3.04%
Mixed Use
First mortgage
SOFR+3.40%
Multifamily
First mortgage
SOFR+3.25%
Multifamily
First mortgage
SOFR+3.40%
Multifamily
First mortgage
SOFR+3.45%
Multifamily
Credit
Office
December 31, 2024
Origination
Date
Loan
Type (1)
Principal
Balance (3)
Cash
Coupon (3)(4)
All-in
Yield (3)(4)
Maximum
Maturity (5)
State
Property
Type
LTV (6)
Risk
Rating (7)
First mortgage
SOFR+4.70%
Office
First mortgage
SOFR+2.75%
Office
First mortgage
SOFR+4.20%
Office
First mortgage
SOFR+3.10%
Office
First mortgage
SOFR+2.90%
Office
First mortgage
SOFR+3.50%
Retail
First mortgage
SOFR+3.10%
Multifamily
First mortgage
SOFR+2.90%
Multifamily
First mortgage
SOFR+3.05%
Multifamily
First mortgage
SOFR+2.85%
Multifamily
First mortgage
SOFR+3.05%
Multifamily
First mortgage
SOFR+3.20%
Multifamily
First mortgage
SOFR+3.40%
Multifamily
First mortgage
SOFR+3.55%
Industrial
First mortgage
SOFR+3.30%
Multifamily
First mortgage
SOFR+3.04%
Mixed Use
First mortgage
SOFR+3.40%
Multifamily
First mortgage
SOFR+3.30%
Industrial
First mortgage
SOFR+3.25%
Multifamily
First mortgage
SOFR+3.40%
Multifamily
First mortgage
SOFR+3.45%
Multifamily
First mortgage
SOFR+3.90%
Multifamily
First mortgage
SOFR+3.90%
Multifamily
Credit
Office
Credit
Office
First mortgage loans are first position mortgage loans and credit loans are mezzanine and subordinated loans.
As of December 31, 2025, an 80% undivided senior interest in loan number 1, which includes the right to receive priority interest payments at a rate of one-month term USD Secured Overnight Financing Rate (“SOFR”) +2.00%, was sold by our Operating Partnership pursuant to a Loan Participation Agreement dated November 15, 2021. Our Operating Partnership has retained a 20% undivided subordinate interest in the loan.
As of December 31, 2024, an 80% undivided senior interest in each of loan numbers 1 and 5, which includes the right to receive priority interest payments at a rate of SOFR+2.00% was sold by our Operating Partnership pursuant to a Loan Participation Agreement dated November 15, 2021. Our Operating Partnership has retained a 20% undivided subordinate interest in each of these loans.
Cash coupon is the stated rate on the loan. All-in yield is the present value of all future principal and interest payments on the loan and does not include any origination fees or deferred commitment fees. Loan number 25 was on nonaccrual basis as December 31, 2024, and is excluded from the total. As of December 31, 2024, loan number 5 was paying interest at a 4.0% fixed current rate and accruing the remaining amount as payment-in-kind. The total is the weighted average of the stated yield, excluding any default interest, as of December 31, 2025 and 2024. Our first mortgage loans are all floating rate and each contains a minimum SOFR floor as of December 31, 2025 and 2024. The weighted average SOFR floor was 0.31% and 0.68%, respectively as of December 31, 2025 and 2024.
Maximum maturity assumes all extension options are exercised by the borrower, however loans may be repaid prior to such date.
Loan-to-value (“LTV”) was determined at loan origination and is not updated for subsequent property valuations or loan modifications. The total is the weighted average LTV.
Risk rating is the internal risk rating assigned by the Sub-Advisor. See Part IV, Item 15, “Note 3 – Commercial Mortgage Loans Held for Investment,” which is included in our notes to consolidated financial statements included in this Annual Report on Form 10-K.
During the quarter ended December 31, 2025, the Company reviewed the property performance and estimated the property value, noting that the valuation exceeded the outstanding loan balance. As a result, no asset-specific CECL reserve was recorded for the
loan as of December 31, 2025. The loan matured on February 9, 2026 and was not repaid or extended. The Company sent the borrower a maturity default notice and began the foreclosure process.
The loan matures on May 9, 2026. The Company has reviewed the loan and based on the estimated LTV recorded a $0.9 million asset-specific CECL reserve as of December 31, 2025.
Includes additional interest received for loan extension.
The following tables allocate the loan principal balance and the net loan exposure based on our internal risk ratings as of:
December 31, 2025
Risk Rating
Number of Loans
Principal Balance
Net Loan Exposure (1)
Total
Add: Unamortized (fees)/costs, net
Less: Allowance for credit losses
Commercial mortgage loans at cost, net
December 31, 2024
Risk Rating
Number of Loans
Principal Balance
Net Loan Exposure (1)
Total
Add: Unamortized (fees)/costs, net
Less: Allowance for credit losses
Commercial mortgage loans at cost, net
(1) Net loan exposure excludes the amount of loan participation sold. See “Note 5 – Loan Participations Sold, Net.” Further, net loan exposure is calculated net of the CECL reserve recorded on the loans. See “Note 3 – Commercial Mortgage Loans Held for Investment – Allowance for Credit Losses.”
As of December 31, 2025 and 2024, we had borrowings under purchase agreements totaling $223,397 and $360,677, respectively, and loan participations sold, net, of $47,009 and $48,524, respectively. For more information, see Part IV, Item 15, Note 4 – “Repurchase Agreements, Credit Facility and Mortgage Loan Payable.” During the years ended December 31, 2025 and 2024, we had weighted average borrowings, which include borrowings under repurchase agreements and loan participations sold, net, of $321,492 and $459,902 and weighted average borrowing costs, which also include borrowings under repurchase agreements and loan participations sold, net, of 6.6% and 7.7%, respectively. The decrease in weighted average borrowing costs was due to the decrease in SOFR.
Real Estate Owned
2025 Acquisitions
During the year ended December 31, 2025, we acquired legal title to a multifamily property located in Kansas, MO, the Arbor Mist property, and an office property located in Charlotte, NC, the Parkview property, through non-judicial foreclosure transactions. The properties previously collateralized two senior loans. The acquisitions were accounted for as asset acquisitions under applicable GAAP guidance. The properties were recorded on our consolidated balance sheet based on the estimated fair value at acquisition. The fair market value estimate was determined based on appraisals performed by independent third-party appraisers.
The following table shows additional information about the 2025 acquisitions:
Arbor Mist
Parkview
Acquisition date
May 1, 2025
July 2, 2025
Number of properties
Location
Kansas City, MO
Charlotte, NC
Property type
Multifamily
Office
Amortized cost basis of loan as of acquisition date
CECL reserve as of acquisition date
Loan risk rating as of acquisition date
CECL reserve charge-off upon acquisition
We recognized a net gain of $531 upon the foreclosure transactions, which represents total assets received, net of liabilities assumed, less carrying value of loans adjusted for interest, extension fee and CECL reserve.
On July 14, 2025, we entered into a contract for sale of the Arbor Mist property for a purchase price of $40,100 and received $780 earnest money in escrow from the buyer on July 18, 2025. The buyer subsequently determined not to proceed with the transaction, resulting in termination of the contract and return of the earnest money to the buyer.
On September 30, 2025, we entered into a mortgage loan collateralized by the Arbor Mist property for an aggregate principal amount of $24,500. See “Repurchase Agreements, Credit Facility and Mortgage Loan Payable” section below for additional information.
2024 Acquisitions
During the year ended December 31, 2024, we acquired legal title to two office properties, one located in Addison, TX (the “Belvedere property”), and the other located in Irving, TX (the “Meridian property”), and one multifamily property located in Portland, OR (the “Fitz property”) through non-judicial foreclosure transactions. The properties previously collateralized two senior loans. The acquisitions were accounted for as asset acquisitions under applicable GAAP guidance, and we intend to hold these properties as real estate held for use with the intent to eventually sell when the market improves. The properties were recorded on our consolidated balance sheet based on the estimated fair value at acquisition. The fair market value estimate was determined based on appraisals performed by independent third-party appraisers.
The following table shows additional information about the 2024 acquisitions:
Belvedere and Meridian
Fitz
Acquisition date
July 2, 2024
October 23, 2024
Number of properties
Location
Addison and Irving, TX
Portland, OR
Property type
Office
Multifamily
Amortized cost basis of loan as of acquisition date
CECL reserve as of acquisition date
Loan risk rating as of acquisition date
CECL reserve charge-off upon acquisition
The following table shows selected data for our REO in our portfolio as of December 31, 2025:
Property
Acquisition Date
Property Type
Location
Rentable Square Feet (RSF) / Number of Units
% Leased
Belvedere
July 2, 2024
Office
Addison, TX
Meridian
July 2, 2024
Office
Irving, TX
Fitz
October 23, 2024
Multifamily
Portland, OR
Arbor Mist
May 1, 2025
Multifamily
Kansas City, MO
Parkview
July 2, 2025
Office
Charlotte, NC
On September 28, 2023, we sold the Renaissance O’Hare for net proceeds of $12.0 million and recorded a gain of $0.2 million on the sale. We had recorded an impairment loss of $6.9 million on the property in the second quarter of 2023 when we entered into the sale
agreement, resulting in a total net loss of $6.7 million on the property. Upon the sale of the property, we were no longer obligated under the ground lease.
Summary of Critical Accounting Policies and Estimates
Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We consider these policies to be critical because they require our management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.
Commercial Mortgage Loans Held for Investment and Allowance for Credit Losses
Loans held-for-investment are anticipated to be held until maturity, and reported at cost, net of allowance for credit losses, any unamortized acquisition premiums or discounts, loan fees and origination costs, as applicable. In accordance with ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, we use a probability-weighted quantitative analytical model to estimate and recognize an allowance for credit losses on loans held-for-investment and their related unfunded commitments. We employed quarterly updated macroeconomic forecasts, which reflect expectations for overall economic output, interest rates, values of real estate properties and other factors, geopolitical instability and the Federal Reserve monetary policy impact on the overall U.S. economy and commercial real estate markets generally. These estimates may change in future periods based on available future macroeconomic data and might result in a material change in our future estimates of expected credit losses for our loan portfolio.
We consider loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For loans that we determine foreclosure of the collateral is probable, we measure the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that we determine foreclosure is not probable, we apply a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.
For loans assigned a risk rating of “5,” we have determined that the recovery of the loan’s principal is collateral-dependent. Accordingly, these loans are assessed individually, and we elected to apply a practical expedient in accordance with ASU 2016-13. While utilizing the practical expedient for collateral-dependent loans, we estimate the fair value of the loan’s underlying collateral using the discounted cash flow method of valuation, less the estimated cost to foreclose and sell the property when applicable. The estimation of the fair value of the collateral property also involves using various Level 3 unobservable inputs, which are inherently uncertain and subjective, and are in part developed based on discussions with various market participants and management’s best estimates, which may vary depending on the information available and market conditions as of the valuation date. Selecting the appropriate inputs and assumptions requires significant judgment and consideration of various factors that are specific to the underlying collateral property being assessed. Our estimate of the fair value of the collateral property is sensitive to both the valuation methodology selected and inputs used in the analysis. As a result, the fair value of the collateral property used in determining the expected credit losses is subject to uncertainty and any actual losses, if incurred, could differ materially from the estimated provision for credit .
Interest income on loans held-for-investment is recognized at the loan coupon rate. Any premiums or discounts, loan fees, contractual exit fees and origination costs are amortized or accreted into interest income over the lives of the loans using the effective interest method. Generally, loans held-for-investment are placed on nonaccrual status when delinquent for more than 90 days or when determined not to be probable of full collection. Interest income recognition is suspended when loans are placed on nonaccrual status. Interest accrued, but not collected, at the date loans are placed on nonaccrual is reversed and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. However, when there is doubt regarding the ultimate collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Loans held-for-investment are restored to accrual status only when contractually current or the collection of future payments is reasonably assured. We may make exceptions to placing a loan on nonaccrual status if the loan has sufficient collateral value and is in the process of collection or has been modified.
The allowance for credit losses is recorded in accordance with ASU 2016-13, and is a valuation account that is deducted from the amortized cost basis of loans held-for-investment on our consolidated balance sheets. Changes to the allowance for credit losses are recognized through net income (loss) on our consolidated statements of operations. The allowance is based on relevant information about past events, including historical loss experience, current portfolio, market conditions and reasonable and supportable forecasts for
the duration of each respective loan. All loans held-for-investment within our portfolio have some amount of expected loss to reflect the GAAP principal underlying the CECL model that all loans have some inherent risk of loss, regardless of credit quality, subordinate capital or other mitigating factors.
Our loans typically include commitments to fund incremental proceeds to our borrowers over the life of the loan. Those future funding commitments are also subject to an allowance for credit losses. The allowance for credit losses related to future loan fundings is recorded as a component of “Accrued expenses and other liabilities” on our consolidated balance sheets, and not as an offset to the related loan balance. This allowance for credit losses is estimated using the same process outlined below for our outstanding loan balances, and changes in this component of the allowance for credit losses similarly flow through our consolidated statements of operations.
The allowance for credit losses is estimated on a quarterly basis and represents management’s estimates of current expected credit losses in our investment portfolio. Pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually. Estimating an allowance for credit losses is inherently subjective, as it requires management to exercise significant judgment in establishing appropriate factors used to determine the allowance and a variety of subjective assumptions, including (i) determination of relevant historical loan loss data sets, (ii) the expected timing and amount of future loan fundings and repayments, (iii) the current credit quality of loans and operating performance of loan collateral and our expectations of performance, (iv) selecting the forecast for macroeconomic conditions and (v) determining the reasonable and supportable forecast period.
We estimate the analytical portion of our allowance for credit losses by using a probability-weighted quantitative analytical model that considers the likelihood of default and loss-given-default for each individual loan. The analytical model incorporates a third-party licensed database for over 100,000 commercial real estate loans. We license certain macroeconomic financial forecasts from a third-party to inform our view of the potential future impact that broader macroeconomic conditions may have on the performance of the loans held-for-investment. These macroeconomic factors include unemployment rates, interest rates, price indices for commercial property and other factors. We may use one or more of these forecasts in the process of estimating our allowance for credit losses. Selection of these economic forecasts requires significant judgment about future events that, while based on the information available to us as of the balance sheet date, are ultimately unknowable with certainty, and the actual economic conditions impacting our portfolio could vary significantly from the estimates we made for the periods presented. Significant inputs to our estimate of the allowance for credit losses include the reasonable and supportable forecast period and loan specific factors such as debt service coverage ratio, or DSCR, loan-to-value ratio, or LTV, remaining contractual loan term, property type and others. In addition, we also consider relevant loan-specific qualitative factors to estimate our allowance for credit .
Recent Accounting Pronouncements
For information related to recently issued accounting pronouncements, reference is made to Note 2 – “Summary of Significant Accounting Policies” which is included in our December 31, 2025 Notes to Consolidated Financial Statements in Item 15.
Results of Operations
The table below presents information from our consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023.
Year Ended December 31, 2025
Year Ended December 31, 2024
Year Ended December 31, 2023
Interest income:
Interest income
Less: Interest expense
Net interest income
Revenue from real estate
Total income
Operating expenses:
Advisory fee
Amortization of debt finance costs
Directors compensation
Professional service fees
Real estate operating expenses
Provision for asset impairment
Depreciation and amortization
Other expenses
Total operating expenses
Other income (loss):
Reversal of (provision for) credit losses
Gain on sale of real estate
Net realized (loss) gain on disposition of commercial loans
Total other loss
Net (loss) income before income taxes
Income tax provision
Net (loss) income
Series A Preferred Stock dividends
Gain on repurchase and retirement of preferred stock
Net (loss) income attributable to common stockholders
Net (loss) income per share attributable to common stockholders, basic and diluted
Weighted average number of shares of common stock
Basic
Diluted
For the years ended December 31, 2025 and 2024, our net (loss) income was $(1,574) and $12,669, respectively. The decrease in net income was primarily due to a reduction in net interest income as the loan portfolio decreased, net realized loss on disposition of commercial loans compared to a net realized gain during 2024, and an increase in real estate operating expenses and depreciation and amortization, partially offset by an increase in revenue from real estate and a decrease in the CECL reserve.
For the years ended December 31, 2024 and 2023, our net income (loss) was $12,669 and $(4,438), respectively. The increase in net income was primarily due to a decrease in reserve for credit losses during the year, partially offset by a decrease in our net interest income related to a smaller loan portfolio, and the loss related to the sale of the Renaissance O’Hare recognized in 2023 with no comparable activity in 2024.
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities. The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the periods indicated.
Year Ended December 31, 2025
Year Ended December 31, 2024
Year Ended December 31, 2023
Average
Carrying
Value (1)
Interest
Income/
Expense (2)(3)
Weighted
Average
Yield/
Financing
Cost (4)
Average
Carrying
Value (1)
Interest
Income/
Expense (2)(3)
Weighted
Average
Yield/
Financing
Cost (4)
Average
Carrying
Value (1)
Interest
Income/
Expense (2)(3)
Weighted
Average
Yield/
Financing
Cost (4)
Interest-earning assets:
Commercial mortgage loans
Total/Weighted Average
Interest-bearing liabilities:
Repurchase agreements — commercial mortgage loans
Credit facility - loans
Loan participations sold, net
Total/Weighted Average
Net interest income/spread
Average leverage % (5)
Weighted average levered yield (6)
Based on principal amount for repurchase agreements. Amounts are calculated based on the average daily balance. Loan participations sold excludes the participation interest related to the REO.
Includes the effect of amortization of premium or accretion of discount.
Interest income excludes $1,756, $2,306 and $1,005 for the years ended December 31, 2025, 2024 and 2023, respectively, related to bank deposits not included in the investment portfolio. Interest expense excludes $1,799, $695 and zero during the years ended December 31, 2025, 2024 and 2023, respectively, of participation payments related to the REO. Interest expense also excludes $530, zero and zero during the years ended December 31, 2025, 2024 and 2023, respectively, related to interest expense on the mortgage loan payable.
Calculated as annualized interest income or expense divided by average carrying value.
Calculated by dividing total average interest-bearing liabilities by total average equity (total average interest-earning assets less total average liabilities).
Calculated by taking the sum of (i) the net interest spread multiplied by the average leverage and (ii) the weighted average yield on interest-earning assets.
The change in our average interest-earning assets and interest-bearing liabilities from 2024 to 2025 was due to the paydown of the principal balance as loans matured, were sold or foreclosed on and the subsequent repayment of the amount financed for these loans. The change in the weighted average levered yield was primarily due to the change in the composition of the loans in the portfolio and the change in the composition of financing as well as a decrease in the SOFR index.
The change in our average interest-earning assets and interest-bearing liabilities from 2023 to 2024 was due to the reduction in our loan portfolio from loan payoffs and foreclosures. The change in the weighted average levered yield was primarily due to the composition of our loan portfolio and loans that were placed on nonaccrual status.
Revenue from Real Estate
Our revenue from real estate during the years ended December 31, 2025 and 2024 and 2023 was $8,966, $2,791 and $12,719, respectively. The increase in revenue from 2024 to 2025 was primarily due to the acquisition of two properties during 2025 and partial year of activity for the three properties acquired during 2024 compared to full year of activity for those properties during 2025. The decrease in revenue from 2023 to 2024 was primarily due to the sale of the Renaissance O’Hare in September 2023, partially offset by an increase in revenue due to the acquisition of three properties during the second half of 2024.
Operating Expenses
Operating expenses for the years ended December 31, 2025, 2024 and 2023 are set forth in the table below:
Year Ended December 31, 2025
Year Ended December 31, 2024
Year Ended December 31, 2023
Advisory fee
Amortization of debt finance costs
Directors compensation
Professional service fees
Real estate operating expenses (1)
Provision for asset impairment
Depreciation and amortization
Other expenses
Total operating expenses
The amount for the year ended December 31, 2025 is presented net of $408 in employee retention credits received during the year. These credits relate to the Renaissance O’Hare property that we owned from August 20, 2020 through September 28, 2023.
Total operating expenses increased $7,501 in the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to the acquisition of two properties in 2025 and partial year of activity for the three properties acquired during 2024 compared to full year of activity for those properties during 2025.
Total operating expenses decreased $16,127 in the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to the decrease in real estate operating expenses related to the Renaissance O’Hare, which was sold in September 2023.
For the year ended December 31, 2025, our total operating expenses were 3.2% of our average invested assets, including REO.
Other Income (Loss)
For the years ended December 31, 2025, 2024 and 2023, other loss was $6,718, $1,359 and $16,705, respectively. The primary reason for the activity in other loss was due to the change in the provision for credit losses and loss (gain) on disposition of commercial loans. For more information, see Part IV, Item 15, “Note 3 - Commercial Mortgage Loans Held for Investment - Allowance for Credit Losses.”
Non-GAAP Financial Measures
Funds from Operations and Modified Funds from Operations
We use Funds from Operations (“FFO”), a widely accepted metric, to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts (“NAREIT”) has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income (loss) attributable to common stockholders computed in accordance with GAAP, excluding gains (or losses) from sales of operating property, plus depreciation and amortization and after adjustments for unconsolidated entities. In addition, NAREIT has further clarified the FFO definition to add-back impairment write-downs of depreciable real estate or of investments in unconsolidated entities that are driven by measurable decreases in the fair value of depreciable real estate and to exclude the earnings impacts of cumulative effects of accounting changes. We have adopted the NAREIT definition for computing FFO.
Due to the unique features of publicly registered, non-listed REITs, the Institute for Portfolio Alternatives (“IPA”), an industry trade group, published a standardized measure known as Modified Funds from Operations (“MFFO”), which the IPA has promulgated as a supplemental measure for publicly registered non-listed REITs and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT.
The IPA defines MFFO as FFO adjusted for acquisition fees and expenses, amounts relating to straight line rents and amortization of premiums on debt investments, non-recurring impairments of real estate-related investments, mark-to-market adjustments included in net income, non-recurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures.
We define MFFO in accordance with the concepts established by the IPA and adjust FFO for certain items, such as amortization of premium and discounts on real estate securities. We purchase real estate securities at a premium or discount to par value, and in accordance with GAAP, record the amortization of premium/accretion of the discount to interest income. We believe that excluding the amortization of premiums and discounts provides better insight to the expected contractual cash flows. We also adjust FFO for gains or losses on preferred stock repurchases, when/if they occur, because we do not consider these gains or losses to be a measure of our operating performance. In addition, we adjust FFO for unrealized gains or losses on real estate securities. Any mark-to-market or fair value adjustments are based on general market or overall industry conditions and may be temporary in nature.
Because MFFO may be a recognized measure of operating performance within the non-listed REIT industry, MFFO and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed REITs. Like FFO, MFFO is not equivalent to our net income or loss as determined under GAAP, as detailed in the table below, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of investments.
Our presentation of FFO and MFFO may not be comparable to other similarly titled measures presented by other REITs. We believe that the use of FFO and MFFO provides a more complete understanding of our operating performance to stockholders and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. Neither FFO nor MFFO is intended to be an alternative to “net income” or to “cash flows from operating activities” as determined by GAAP as a measure of our capacity to pay distributions. Management uses FFO and MFFO to compare our operating performance to that of other REITs and to assess our operating performance.
Neither the SEC, any other regulatory body nor NAREIT has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, another regulatory body or NAREIT may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.
Our FFO and MFFO are calculated as follows:
Year Ended December 31, 2025
Year Ended December 31, 2024
Year Ended December 31, 2023
Net (loss) income attributable to common stockholders
Depreciation and amortization
Provision for asset impairment
Gain on sale of real estate
Funds from operations (FFO) attributable to common stockholders
Amortization of debt financing costs
Non-cash adjustment for ground lease
(Reversal of) provision for credit losses
Amortization of acquired lease intangibles, net
Straight-line expense, net
Adjustment for gain on repurchase and retirement of preferred stock
Net realized loss (gain) on disposition of commercial loans
Modified funds from operations (MFFO) attributable to common stockholders
Liquidity and Capital Resources
Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay distributions to our stockholders, fund investments, originate loans, repay borrowings, and other general business needs including the payment of our operating and administrative expenses.
Our primary sources of funds for liquidity consist of net cash provided by operating activities, repayments of our outstanding loans by borrowers, proceeds from repurchase agreements and other financing arrangements and future issuances of equity and/or debt securities. As of December 31, 2025, we had $76,557 in unrestricted cash, $302,679 in available capacity on our borrowing facilities and $20,000 in available borrowing capacity from our revolving credit letter agreements.
Our primary liquidity needs include originating new loans, advances on our current loan portfolio, commitments to repay the principal and interest on our borrowings, funding our operations, and distributions to our stockholders. We believe we have sufficient liquidity to
meet our current needs. In the future we may seek additional sources of liquidity to fund our growth which may include the sale of common or preferred stock or additional financing through repurchase agreements, collateralized loan obligations, sale of loan participations or other borrowings.
Cash Flow Analysis
Year Ended December 31, 2025
Year Ended December 31, 2024
Year Ended December 31, 2023
Net cash provided by operating activities
Net cash provided by investing activities
Net cash used in financing activities
Net increase in cash and cash equivalents
We experienced a net increase in cash and cash equivalents of $14,557 for the year ended December 31, 2025 compared to a net increase of $10,406 for the year ended December 31, 2024. During the year ended December 31, 2025, we funded $2,043 on existing mortgage loans, received $99,593 in principal payments from our loans, paid down $137,280 on our borrowing facilities, received $24,500 from the mortgage loan on REO, received $39,064 from the sale of a commercial loan and paid distributions of $18,587.
Repurchase Agreements, Credit Facility and Mortgage Loan Payable
On February 15, 2018, we, through our wholly owned subsidiary, entered into a master repurchase agreement (the “Atlas Repo Facility”) with Column Financial, Inc. as administrative agent for certain of its affiliates. As our business grew, we extended the maturity date of the Atlas Repo Facility. The most recent extension was in November 2023 for a twelve-month term and the maximum advance amount was reduced to $100,000. On February 8, 2023, Column Financial, Inc. and affiliated parties sold and assigned their interest in the Atlas Repo Facility to Atlas Securitized Products Investments 2, L.P. with no changes to the terms of the Atlas Repo Facility. Advances under the Atlas Repo Facility accrued interest at a per annum rate equal to SOFR plus 2.50% to 3.00% with a 0.15% to 0.25% floor. We paid off the outstanding balance on the Atlas Repo Facility in May 2023. The Atlas Repo Facility matured on November 8, 2024 and we chose not to extend the line as we did not believe it was needed.
On May 6, 2019, we, through our wholly owned subsidiary, entered into an uncommitted master repurchase agreement (the “JPM Repo Facility”) with JPMorgan Chase Bank, National Association (“JPM”). The JPM Repo Facility provides up to $150,000 in advances that we expect to use to finance the acquisition or origination of eligible loans and participation interests therein. Advances made prior to December 2021 under the JPM Repo Facility accrue interest at per annum rates equal to the sum of (i) the applicable LIBOR index rate plus (ii) a margin of between 1.75% to 2.50% with no floor, depending on the attributes of the purchased assets. Advances made subsequent to December 2021 under the JPM Repo Facility accrue interest at per annum rates equal to the sum of SOFR plus an agreed upon margin. As of December 31, 2025, all of the advances made under the JPM Repo Facility were indexed to SOFR and have margins between 1.85% and 2.50% with a floor between 0.00% and 0.10%. In May 2022, the maturity date of the JPM Repo Facility was extended to May 6, 2023. On May 5, 2023, we entered into an amendment that extended the maturity date to May 6, 2026, with the option to extend the maturity date further to May 6, 2028 subject to two optional one-year extensions. The amendment also increased the maximum facility amount to $526,076. We used the increased capacity to pay off the balance on the Atlas Repo Facility. The JPM Repo Facility is subject to certain financial covenants. We were in compliance with all financial covenant requirements as of December 31, 2025 and 2024.
On March 10, 2021, we, through our wholly owned subsidiary, entered into a credit facility with Western Alliance Bank (the “WA Credit Facility”). The WA Credit Facility provided for loan advances up to the lesser of $75,000 or the borrowing base. The borrowing base consisted of eligible assets pledged to and accepted by Western Alliance in its discretion up to the lower of (i) 60% to 70% of loan-to-unpaid balance or (ii) 45% to 50% of the loan-to-appraised value (depending on the property type underlying the asset, for both (i) and (ii)). Assets that would otherwise be eligible became ineligible after being pledged as part of the borrowing base for 36 months. Advances under the WA Credit Facility accrued interest at an annual rate equal to one-month LIBOR plus 3.25% with a floor of 0.75%. The initial maturity date of the WA Credit Facility was March 10, 2023. On March 9, 2023, we extended the maturity date of the WA Credit Facility to March 10, 2025, modified that loan advances are up to the lesser of $40,000 or the borrowing base, and changed the index rate from LIBOR to SOFR. In addition, the spread increased to 3.50% and the floor to 2.50%. We had an option to convert the loan made pursuant to the WA Credit Facility upon its initial maturity to a term loan with the same interest rate and floor and a maturity of two years in exchange for, among other things, a conversion fee of 0.25% of the outstanding amount at the time of conversion. The WA Credit Facility required maintenance of an average unrestricted aggregate deposit account balance with Western of not less than $3,750 until the calendar quarter ended on June 30, 2023 and not less than $5,000 commencing with the calendar quarter ended on September 30, 2023. to meet the minimum deposit balance resulted in, among other things, the interest rate of the WA Credit Facility increasing by 0.50% per annum for each quarter in which the compensating balances were not maintained. We paid off the
outstanding balance on the WA Credit Facility in May 2024. We decided the WA Credit Facility was no longer necessary and chose not to renew it when it matured on March 10, 2025.
The JPM Repo Facility, Atlas Repo Facility (prior to its maturity) and WA Credit Facility (prior to its maturity) (collectively, the “Facilities”) have been, and continue to be (in the case of the JPM Repo Facility), used to finance eligible loans and act in the manner of a revolving credit facility that can be repaid as our assets are paid off and re-drawn as advances against new assets.
The tables below show our Facilities as of December 31, 2025 and 2024:
December 31, 2025
Weighted Average
Committed
Financing
Amount
Outstanding (1)
Accrued Interest Payable
Collateral
Pledged
Interest
Rate
Days to
Maturity
JPM Repo Facility
Total Repurchase Facilities — commercial mortgage loans
December 31, 2024
Weighted Average
Committed
Financing
Amount
Outstanding (1)
Accrued Interest Payable
Collateral
Pledged
Interest
Rate
Days to
Maturity
JPM Repo Facility
Total Repurchase Facilities — commercial mortgage loans
WA Credit Facility
Excluding $0 of unamortized debt issuance costs as of December 31, 2025 and 2024.
Mortgage Loan Payable
On September 30, 2025, we entered into a mortgage loan agreement with Ladder Capital Finance LLC for an aggregate principal amount of $24,500. The mortgage loan is collateralized by the Arbor Mist property. As of December 31, 2025, we had $24,500 outstanding under the mortgage loan. The mortgage loan bears interest at a rate equal to the greater of (a) SOFR plus 2.95% or (b) a floor rate of 6.20% per annum. The mortgage loan requires interest-only payments until the maturity date, at which point the outstanding principal and interest are due. The maturity date of the mortgage loan is October 6, 2027, and we have the option to extend the maturity date for up to three additional one-year periods, subject to the payment of an extension fee, certain costs and expenses and certain other conditions. The mortgage loan contains customary default provisions including failure to pay amounts when due. As of December 31, 2025, the carrying value of the mortgage loan payable was $23,891.
Loan Participations Sold
On November 15, 2021, we sold a non-recourse senior participation interest in nine first mortgage loans to a third party. Under the loan participation agreement, in the event of default by the underlying mortgagor, any amounts paid are first allocated to the third party before any amounts are allocated to our subordinate interest. As the directing participant in the loan participation agreement, we are entitled to exercise, without the consent of the third party, each of the consent approval and control rights under the applicable underlying mortgage loan documents with a few exceptions. We require the third party’s approval for any modification or amendment to the loan, a bankruptcy plan for an underlying mortgagor where the third party would incur an out-of-pocket loss, or any transfer of the underlying mortgaged property if our approval is required by the underlying mortgage documents. We remain the directing participant unless certain conditions are met related to losses on the property or if the mortgagor is one of our affiliates. In the former case, we may post cash or short-term U.S. government securities as collateral to retain the rights of the directing participant.
The third party, as the senior participation interest holder, receives interest and principal payments from the borrower until they receive the amounts to which they are entitled. All expenses or losses on the underlying mortgages are allocated first to us and then to the third party. If the underlying mortgage is in default, we will have the option to purchase the third party’s participation interest and remove it from the loan participation agreement.
During July 2023, we sold a senior office loan located in Alexandria, VA. The loan originally had a senior participation sold under a loan participation agreement to a third party. We sold our interest in the loan to the participant counterparty to extinguish the debt. We had previously recorded an asset-specific CECL reserve of $3,483 for this loan which was charged-off against the CECL reserve.
On July 2, 2025, we acquired legal title to an office property through a non-judicial foreclosure transaction. On July 2, 2024, we acquired legal title to two office properties through non-judicial foreclosure transactions. Both the underlying loans were subject to loan participation agreements. Upon foreclosure, we are still subject to the participation payments to the third party. Such payments are based on the underlying properties’ net income before depreciation adjusted for any non-cash revenue. If the monthly payment exceeds the interest due under the participation agreement, the excess is paid to the third party and recorded as a reduction of accrued and unpaid interest first and then as a reduction of the principal. If the monthly payment is less than the interest due under the participation agreement, the shortfall is accrued as interest payable.
The following tables detail our loan participations sold as of December 31, 2025 and 2024:
December 31, 2025
Loan Participations Sold
Count
Principal Balance
Book Value
Yield/Cost (1)
Guarantee (2)
Weighted Average Maximum Maturity (4)
Total Loans
SOFR+4.7%
Senior participations (3)(5)
SOFR+2.0%
December 31, 2024
Loan Participations Sold
Count
Principal Balance
Book Value
Yield/Cost (1)
Guarantee (2)
Weighted Average Maximum Maturity (4)
Total Loans
SOFR+3.6%
Senior participations (3)(5)
SOFR+2.0%
The yield/cost is the present value of all future principal and interest payments on the loan or participation interest and does not include any origination fees or deferred commitment fees. The yield/cost excludes maturity default interest and interest on loans placed on nonaccrual status.
As of December 31, 2025 and 2024, the loan participations sold were non-recourse to us.
During the years ended December 31, 2025 and 2024, we recorded $2,971 and $3,762 of interest expense related to loan participations sold, respectively.
Based on the furthest maximum maturity date of all the loans subject to the participation agreement.
Includes participation interest related to the foreclosed properties described above.
Revolving Credit Liquidity Letter Agreements
IREIC, our sponsor, and Sound Point have agreed under separate letter agreements dated July 20, 2021, and July 15, 2021, respectively, to make revolving credit loans to us in an aggregate principal amount outstanding at any one time not to exceed $5,000 and $15,000, respectively (the “IREIC-Sound Point Commitments”) from time to time. Use of the IREIC-Sound Point Commitments is limited to satisfying requirements to maintain cash or cash equivalents under our repurchase and other borrowing arrangements.
Distributions
Common Stock
The table below presents the aggregate annualized and monthly distributions declared by record date for all classes of shares of common stock since January 1, 2023. The amount of distributions that we may pay in the future is not certain.
Record date
Aggregate annualized gross distribution declared per share of common stock
Aggregate monthly gross distribution declared per share of common stock
January 31, 2023
February 28, 2023
March 31, 2023
April 30, 2023
May 31, 2023
June 30, 2023
July 31, 2023
August 31, 2023
September 30, 2023
October 31, 2023
November 30, 2023
December 31, 2023
January 31, 2024
February 29, 2024
March 31, 2024
April 30, 2024
May 31, 2024
June 30, 2024
July 31, 2024
August 31, 2024
September 30, 2024
October 31, 2024
November 30, 2024
December 31, 2024
January 31, 2025
February 28, 2025
March 31, 2025
April 30, 2025
May 31, 2025
June 30, 2025
July 31, 2025
August 31, 2025
September 30, 2025
October 31, 2025
November 30, 2025
December 31, 2025
The gross distribution was reduced each month for Class D and Class T of our common stock for applicable class-specific stockholder servicing fees to arrive at a lower net distribution amount paid to those classes. For a description of the stockholder servicing fees applicable to Class D, Class S and Class T shares of our common stock, please see “Note 10 – Transactions with Related Parties” in the notes to our consolidated financial statements below. Since the IPO and through December 31, 2025, we have not issued any shares of Class S common stock.
The following table shows our monthly net distribution per share for shares of Class D and Class T common stock since January 1, 2023.
Record date
Monthly net distribution declared per share of Class D common stock
Monthly net distribution declared per share of Class T common stock
January 31, 2023
February 28, 2023
March 31, 2023
April 30, 2023
May 31, 2023
June 30, 2023
July 31, 2023
August 31, 2023
September 30, 2023
October 31, 2023
November 30, 2023
December 31, 2023
January 31, 2024
February 29, 2024
March 31, 2024
April 30, 2024
May 31, 2024
June 30, 2024
July 31, 2024
August 31, 2024
September 30, 2024
October 31, 2024
November 30, 2024
December 31, 2024
January 31, 2025
February 28, 2025
March 31, 2025
April 30, 2025
May 31, 2025
June 30, 2025
July 31, 2025
August 31, 2025
September 30, 2025
October 31, 2025
November 30, 2025
December 31, 2025
Series A Preferred Stock
Series A Preferred Stock dividends are paid quarterly in arrears based on an annualized distribution rate of 6.75% of the $25.00 per share liquidation preference, or $1.6875 per share per annum. The table below shows the aggregate annualized and quarterly distributions declared on the Series A Preferred Stock by record date since January 1, 2023.
Record date
Aggregate annualized gross distribution declared per share
Aggregate quarterly gross distribution declared per share
March 15, 2023
June 15, 2023
September 15, 2023
December 15, 2023
March 15, 2024
June 15, 2024
September 15, 2024
December 15, 2024
March 15, 2025
June 15, 2025
September 15, 2025
December 15, 2025
Sources of Distributions to Common Stockholders
Year Ended December 31,
Distributions to Holders of Common Stock
Paid in cash
Reinvested in shares
Total distributions
Cash flows from operating activities
For the year ended December 31, 2025, 90% of our common stock distributions were paid from cash flows from operating activities generated during the period, and the remainder was paid using cash generated during prior periods. For the years ended December 31, 2024 and 2023, 100% and 100%, respectively, of our common stock distributions were paid from cash flows from operating activities generated during the period.
Off-Balance Sheet Arrangements
As of December 31, 2025 and 2024, we had no off-balance sheet arrangements that were reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources excluding future loan advance commitments as disclosed in Part IV, Item 15, “Note 8 - Commitments and Contingencies.”
Review of our Policies
Our Board, including our independent directors, has reviewed our policies described in this Annual Report on Form 10-K and determined that they are in the best interests of our stockholders because: (i) they increase the likelihood that we will be able to originate, acquire and manage a diversified portfolio of first mortgage loans secured by CRE and credit loans, thereby reducing risk in our portfolio; (ii) there are sufficient loan underwriting opportunities with the attributes that we seek; (iii) our executive officers, director, affiliates of our Advisor and Sub-Advisor have expertise with the type of real estate investments we seek; and (iv) our borrowings will enable us to originate and acquire loan assets and earn revenue more quickly, thereby increasing our likelihood of generating income for our stockholders and preserving stockholder capital.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
Credit Risk
Our investments are subject to a high degree of credit risk. Credit risk is the exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy, and other factors beyond our control. All loans are subject to some risk of default. We manage credit risk through the underwriting process and investment structuring process, acquiring our investments at the appropriate discount to face value, if any, and establishing loss assumptions. We also carefully monitor the performance of the loans, as well as external factors that may affect their value.
Adverse economic conditions could negatively impact the commercial properties underlying our investments resulting in potential borrower delinquencies or defaults. If we fail to repay the lender at maturity, the lender has the right to immediately sell the collateral and pursue us for any shortfall if the sales proceeds are inadequate to cover the repurchase agreement financing.
Interest Rate Risk
Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we may borrow funds at fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. We do not hold or issue derivative contracts for trading or speculative purposes. We do not have any foreign denominated investments, and thus, we are not exposed to foreign currency fluctuations.
As of both December 31, 2025 and 2024, our debt investment portfolio was 98% variable rate investments based on SOFR for various terms. Borrowings under our master repurchase agreements were short-term and at a variable rate. Both our investment portfolio and borrowings have minimum levels for SOFR known as interest rate floors. The floors were established when the loans and borrowings were originated based on market conditions. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase or decrease by 25 or 50 basis points, assuming that our current balance sheet was to remain constant and no actions were taken to alter our existing interest rate sensitivity. The change from December 31, 2024 to December 31, 2025 was primarily due to the changes in the composition of our loan portfolio.
Estimated Percentage Change in Interest Income Net of Interest Expense
Change in Rates
December 31, 2025
December 31, 2024
(-) 50 Basis Points
(-) 25 Basis Points
Base Interest Rate
(+) 25 Basis Points
(+) 50 Basis Points
Item 8. Financial Statement s and Supplementary Data.
Our consolidated financial statements and the accompanying notes to our consolidated financial statements are included under Item 15 of this Annual Report on Form 10-K.
