Loans Held for Investment, Net

12 Months Ended

Sep. 30, 2024

As part of our strategic initiative to expand our private capital business, our plan is to amass a small portfolio of loans, financed, in part, through a bank repurchase facility, in a Tremont managed vehicle and bring in third parties to invest in the vehicle. The vehicle would then continue growing by making additional loans.

Generally, these loans are classified as held for investment based upon our intent and ability to hold them until maturity. Loans that are held for investment are carried at cost, net of unamortized loan origination fees, accreted exit fees, unamortized premiums and unaccreted discounts, as applicable, that are required to be recognized in the carrying value of the loans in accordance with GAAP, unless the loans are determined to be collateral dependent.

In July 2024, we originated a floating rate first mortgage loan that is secured by a hotel property in Revere, MA for a total commitment of $40,000, which has been fully funded as of September 30, 2024. This loan requires the borrower to pay interest at a rate of the Secured Overnight Financing Rate, or SOFR, plus a premium of 395 basis points per annum and has an initial term of two years with three one year extensions.

In July 2024, we originated a floating rate first mortgage loan that is secured by an industrial property in Wayne, PA for a total commitment of $27,000, of which $17,180 has been funded as of September 30, 2024. This loan requires the borrower to pay interest at the rate of SOFR plus a premium of 425 basis points per annum and has an initial term of three years with two one year extensions.

We deferred origination fees totaling $700, of which $651 remains unamortized as of September 30, 2024. We have also accrued $35 in exit fee receivables which we include in loans held for investment in our consolidated balance sheets.

The table below provides overall statistics for our loan portfolio as of September 30, 2024:



Number of loans	2
Total loan commitments	$	67,000
Unfunded loan commitments (1)	$	9,820
Principal balance	$	57,180
Weighted average coupon rate	9.15		%
Weighted average all in yield (2)	10.13		%
Weighted average floor	4.34		%
Weighted average maximum maturity (years) (3)	4.80

(1)Unfunded loan commitments are primarily used to finance property improvements and leasing capital and are generally funded over the term of the loan.

(2)All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan.

(3)Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions.

Credit Quality Information

We evaluate the credit quality of each of our loans at least quarterly by assessing a variety of risk factors in relation to each loan and assigning a risk rating to each loan based on those factors. The higher the number, the greater the risk level. As of September 30, 2024, our two loans had an internal risk rating of 3.

We estimate credit losses over a reasonable and supportable forecast period of 12 months, followed by a straight-line reversion period of 12 months back to average historical losses. For the fiscal year ended September 30, 2024, we recorded an allowance for credit losses of $343 related to our then outstanding loans held for investment and increased accounts payable and accrued expenses by $259 related to then unfunded loan commitments.

We have elected to exclude accrued interest receivable from amortized cost and not to measure an allowance for credit losses on accrued interest receivable. Accrued interest receivables are generally written off when payments are 120 days past due. Such amounts, if any, are reversed against interest income and no further interest will be recorded until it is collected. As of September 30, 2024, we recognized $454 in prepaid and other current assets on our consolidated balance sheets related to accrued interest receivable on our loans and no amounts were written off for the fiscal year ended September 30, 2024.

As of September 30, 2024 and November 5, 2024, our borrowers with outstanding loans had paid their debt service obligations owed and due to us.