v3.26.1
CURRENT EXPECTED CREDIT LOSSES
 6 Months Ended
Jun. 30, 2026
Credit Loss [Abstract]  
CURRENT EXPECTED CREDIT LOSSES CURRENT EXPECTED CREDIT LOSSES
As of June 30, 2026 and December 31, 2025, the Company’s CECL Reserve for its loans held at carrying value was approximately $1.1 million and $2.1 million, respectively, or 0.37% and 0.68%, respectively, of the Company’s total loans held at carrying value of approximately $296.8 million and $302.7 million, respectively. The CECL reserve consisted of an allowance on outstanding loan balances of approximately $0.9 million and $1.9 million, respectively, and a liability for unfunded loan commitments of approximately $0.2 million at both June 30, 2026 and December 31, 2025. The liability for unfunded commitments represents expected credit losses on the unfunded portion of loan commitments over the contractual period during which the Company is exposed to credit risk through its obligation to extend credit. In estimating this liability, management considered the likelihood that commitments will be funded and, if funded, the expected credit losses on the funded portion of those commitments.
Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value as of and for the three and six months ended June 30, 2026 was as follows:
Outstanding(1)
Unfunded(2)
Total
Balance at March 31, 2026$322,786 $228,826 $551,612 
Provision for current expected credit losses609,435 (52,187)557,248 
Write-offs— — — 
Recoveries— — — 
Balance at June 30, 2026$932,221 $176,639 $1,108,860 
Outstanding(1)
Unfunded(2)
Total
Balance at December 31, 2025$1,891,170 $178,066 $2,069,236 
Provision for current expected credit losses618,958 (1,427)617,531 
Write-offs(3)
(1,577,907)— (1,577,907)
Recoveries— — — 
Balance at June 30, 2026$932,221 $176,639 $1,108,860 

(1)As of June 30, 2026 and December 31, 2025, the CECL Reserve related to outstanding balances on loans held at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.
(2)As of June 30, 2026 and December 31, 2025, the CECL Reserve related to unfunded commitments on loans held at carrying value is recorded within current expected credit loss reserve as a liability in the Company’s consolidated balance sheets.
(3)During the six months ended June 30, 2026, the Company wrote off the provision for credit losses associated with the San Antonio Loan that was derecognized in connection with the foreclosure and contribution to a joint venture.
The Company continuously evaluates the credit quality of each loan by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Such factors may include property type, geographic and local market dynamics, physical condition, projected cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage ratio, project sponsorship, and other factors deemed necessary by the Company. Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:
RatingDefinition
1Very Low Risk — Investment exceeds performance expectations. Trends and risk factors since time of investment are favorable.
2Low Risk — Investment performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3Medium Risk — Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4High Risk/ Potential for Loss — Investment underperforming with the potential of some interest loss. Trends and risk factors are negative.
5Impaired/ Loss Likely — Investment underperforming with expected loss of interest, and full recovery of principal is unlikely.
The risk ratings are primarily based on historical data as well as taking into account future economic conditions.
As of June 30, 2026, the carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value within each risk rating by year of origination is as follows:
Risk Rating:202620252024
Total
1$— $— $— $— 
243,867,010 135,152,669 117,733,819 296,753,498 
3— — — — 
4— — — — 
5— — — — 
Total$43,867,010 $135,152,669 $117,733,819 $296,753,498 
Gross write-offs$— $— $(1,577,907)$(1,577,907)
In March 2026, the Company and its affiliate co-lender exercised their rights to foreclose on the hotel property underlying the San Antonio Loan. Upon foreclosure, the Company derecognized the loan and the related CECL reserve of approximately $1.6 million. At the time of foreclosure, the San Antonio Loan had an outstanding principal balance of approximately $26.4 million and an amortized cost basis of approximately $26.2 million. Prior to foreclosure, the loan had a risk rating of “5.” The amortized cost basis of the loan, net of the related CECL reserve, approximated the fair value of the acquired collateral of approximately $24.6 million, which was subsequently contributed to a newly formed unconsolidated joint venture. See Note 6 included in these consolidated financial statements for additional information.