NOTE 5 – ACQUISITION & DISPOSITION OF RENTAL PROPERTY

In November 2022, through a Settlement in Lieu of Foreclosure Agreement, the Company obtained majority ownership and the controlling interest in rental property located in Stafford, Virginia. As part of the agreement, a $9.5 million mortgage held by the Company was assigned to a newly created special-purpose entity, KDM Stafford LLC, which is majority-owned and controlled by the Company. The original borrower maintained a minority interest in the special-purpose entity. In 2025, KDM Stafford LLC moved from being a majority owned entity to a wholly owned entity. For the six months ended June 30, 2026 and June 30, 2025, the Company recorded net income and net loss attributable to the non-controlling interest of $0 and $29,294, respectively. In addition, a portfolio loan held by the Company in the amount of $7.5 million was classified as an investment in the special-purpose entity which is eliminated in consolidation.

In March 2024, through foreclosure and via a special-purpose entity named KDM Nagog Park LLC, a wholly owned subsidiary, KDM now owns a 3 building office park in Acton, Massachusetts KDM Nagog Park LLC is included in the Company’s unaudited condensed consolidated financial statements.

Similarly, via deed in lieu of foreclosure in April 2024, KDM took ownership of an office building in St. Louis, Missouri through a wholly owned subsidiary named KDM Cupples REO LLC. After taking the office building in April 2024, in May 2025, KDM Cupples REO LLC defaulted on the ground lease of the property it owned in St. Louis, Missouri. After a meeting with the bondholders, where KDM informed all bondholders that capital would need to be raised to pay the taxes, insurance, and ground rent, in order to not default, with additional funds in order to stabilize the property, the bondholders chose to let the property go. The ground lessor terminated the ground lease and KDM Cupples REO LLC no longer owns the leasehold estate. On June 23, 2025, KDM removed the $9,000,000 asset from its statement of financial condition and canceled the related outstanding bonds. The transaction is reflected in the statements of operations in the second quarter of 2025 as a loss on foreclosures and change in fair value of mortgage secured notes.

In March 2025 and April 2025, via deed in lieu of foreclosure, KDM acquired a mixed use property in Los Angeles, California, a majority-owned via a subsidiary named KDM Seaton Colyton Holdings, LLC and an owner-occupied building in Selma, TX.

Please see Note 17 Segment Reporting.

As of June 30, 2026 and June 30, 2025, we had 16 operating leases under which we are the lessor. Leasing revenue recognized from these operating leases totaled $2,342,697 and $3,181,453 for the six months ended June 30, 2026 and 2025, respectively. These leases primarily relate to retail and office space. Future undiscounted lease income from operating leases where we are the lessor were as follows as of June 30, 2026:

Property is recorded at fair market value and depreciation is recognized over a 39-year period. For these properties, we recorded depreciation expense of $875,106 and $332,239 for the six months ended June 30, 2026 and 2025, respectively.