REAL ESTATE OWNED

3 Months Ended

Mar. 31, 2026

During the period ended March 31, 2026, Lument Real Estate Capital, LLC ("LREC"), as special servicer for LCMT NPL Warehouse, LLC, an indirect wholly owned subsidiary of the Company, foreclosed on a multifamily bridge loan located in Colorado Springs, CO, with an aggregate net carrying value of $8.2 million, net of specific reserves of $2.4 million, with ownership and deed to the properties being taken by a newly formed subsidiary of the Company.

During the year ended December 31, 2025, LREC, as special servicer for 2021-FL1 CLO foreclosed on two multifamily bridge loans located in San Antonio, TX with an aggregate net carrying value of $39.5 million, net of specific CECL reserves of $2.4 million, with ownership and deed to the properties being taken by newly formed subsidiaries of the Company. Additionally, LREC, as special servicer for LMF 2023-1 Financing foreclosed on two multifamily bridge loans located in Houston, TX and San Antonio, TX with an aggregate net carrying value of $19.9 million, net of specific CECL reserves of $0.7 million, with ownership and deed to the properties being taken by newly formed subsidiaries of the Company.

The fair value of the REO at time of foreclosure was determined using the income approach, market approach, or a combination thereof. The significant unobservable input for the income capitalization approach is the overall capitalization rate assumption, used in the direct capitalization method, which was 6.25%-7.40%. The significant unobservable input used for the market approach is the price per unit from an appraisal or broker opinion of value.

During the period ended March 31, 2026, the Company remeasured the fair value of one of the San Antonio properties and the Houston property classified as held for sale under ASC 360. As a result, the Company recognized a loss of $1.4 million for the three months ended March 31, 2026, recorded in "Real estate owned impairment expense" within "Other income and expense" in the consolidated statements of operations. The carrying amount of the properties was $23.0 million as of March 31, 2026, compared with $24.1 million as of December 31, 2025.

On December 22, 2025, the Company sold one of the properties located in San Antonio, TX held by a subsidiary of the Company to a third party for $8.2 million and recognized a $0.5 million realized loss on the sale of the property. The realized loss on the sale of the property was included within realized loss on real estate owned in the Company's consolidated statements of operations on Form 10-K for the year ended December 31, 2025.

At March 31, 2026 and December 31, 2025, our REO assets were comprised of four and three multifamily properties, respectively, held within various subsidiaries of the Company. A summary of our REO assets is as follows:


	March 31, 2026		December 31, 2025
Real estate owned, held-for-investment
Land	$	4,621,569	$	4,278,272
Building	30,431,952		22,907,888
Less: Accumulated depreciation	(623,029)		(347,150)
Total	$	34,430,492	$	26,839,010

Real estate owned, held-for-sale
Real estate owned, held-for-sale	$	23,040,000	$	24,099,072
Total	$	23,040,000	$	24,099,072

At March 31, 2026 and December 31, 2025, our REO properties had a weighted average occupancy rate of approximately 72.3% and 69.1%, respectively.

We recorded depreciation and amortization expense related to the REO assets of $0.3 million for the three months ended March 31, 2026, recorded as "net income (expense) from real estate owned operations" in the consolidated statement of operations. Additionally, we recorded operating income of $1.6 million and operating expense of $1.4 million for the three months ended March 31, 2026, recorded as "Net income (expense) from real estate owned operations" in the consolidated statement of operations.