PREFERRED EQUITY |
6 Months Ended | |||||||||||||||
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Jun. 30, 2026 | ||||||||||||||||
| Equity [Abstract] | ||||||||||||||||
| PREFERRED EQUITY | NOTE 11 – PREFERRED EQUITY
On September 27, 2019, the Company issued shares of its Series A 6% Cumulative Perpetual Convertible Preferred Stock, par value $ per share, for net proceeds of $4,750,000. The Company paid $250,000 in expenses related to the preferred stock issuance to J. W. Korth as underwriter and distributor. Each share was sold for $25 and is convertible into common stock at a ratio of 5 shares of common stock for each share of Series A Preferred Stock. On September 15, 2021, June 28, 2022, and March 23, 2023, the Company sold an additional , , and shares, respectively, of its Series A 6% Cumulative Perpetual Convertible Preferred Stock for net proceeds of $2,375,000, $11,856,480, and $3,896,000.
On August 12, 2022, the Company repurchased and retired shares of its Series A 6% Cumulative Perpetual Convertible Preferred Stock at a price of $ per share, for a total of $12,120,480. The Company paid $640,000 in interest expense.
On June 29, 2021, the Company issued shares of its Series B 6.50% Cumulative Non-Voting Redeemable Secured Preferred Stock, with a liquidation preference of $1,000 per share, for net proceeds of $18,302,500. The Company paid $697,500 in expenses related to the preferred stock issuance to its financial advisor and placement agent.
The Series B preferred stock is non-convertible and pays cumulative dividends, if and when declared by the Company’s Board of Directors, at a rate of 6.50% per annum. Dividends declared will be payable quarterly in arrears on the 15th day of January, April, July and October of each year. The Series B preferred stock ranks senior to KDM’s common stock and Series A 6% Cumulative Preferred Stock in dividend rights and upon liquidation, winding up or dissolution, and will rank pari passu with, or senior to, all future issuances of preferred stock of KDM.
The Company is required to use commercially reasonable efforts to maintain a nationally recognized statistical ratings organization, or NRSRO, rating for so long as any shares of Series B preferred stock remain outstanding. If the Company fails to maintain an NRSRO rating for the Series B preferred stock of at least BBB (or the equivalent thereof), the dividend rate applicable to the Series B preferred stock will be increased by 25 basis points, and in the event the Company fails to maintain an NRSRO rating of at least BBB- (or the equivalent thereof), the dividend rate applicable to the Series B preferred stock will be increased by an additional 25 basis points. The Company’s current corporate rating is BBB.
The Series B preferred stock is redeemable at the Company’s option, in whole or in part, on or after June 29, 2026, at a redemption price per share equal to $ per share, plus accrued and unpaid dividends, if any. Subject to applicable law, the Company is required to redeem the Series B preferred stock, in each case at a redemption price equal to $ per share, plus accrued and unpaid dividends, as follows:
The Company’s obligations to redeem the Series B preferred stock are secured by a security interest on servicing fees, as specified in each mortgage secured note issued by the Company, which is the difference between the interest payable pursuant to the mortgage secured note and the interest receivable pursuant to the related commercial real estate mortgage loan. The requisite holders of Series B preferred stock will be entitled to exercise rights and remedies pursuant to such security interest in the event that the Company does not pay the relevant mandatory redemption price (inclusive of any accrued and unpaid dividends) within thirty (30) days of the applicable redemption date, except with respect to the final redemption date, which is not subject to a thirty (30)-day grace period.
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