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DEBT | 12 Months Ended
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Dec. 31, 2024
Debt Disclosure [Abstract] |
DEBT | 7. DEBT The following table summarizes the debt balances as of December 31, 2024 and 2023, and the debt activity for the year ended December 31, 2024 (in thousands):
|  |  |  | During the Year Ended December 31, 2024 |  |
|  | Balances as of December 31, 2023 |  | Debt Issuances & Assumptions |  | Repayments (1) |  | Accretion & (Amortization) |  | Balances as of December 31, 2024
Mortgages Payable: |  |  |  |  |  |  |  |  |  |
Fixed rate mortgages payable |  | $ | 163,700 |  |  | $ | 105,400 |  |  | $ | — |  |  | $ | — |  |  | $ | 269,100 |
Variable rate mortgages payable |  | 87,000 |  |  | 84,346 |  |  | — |  |  | — |  |  | 171,346 |
|  | 250,700 |  |  | 189,746 |  |  | — |  |  | — |  |  | 440,446 |
Deferred debt issuance costs — Mortgages Payable |  | (954) |  |  | (3,828) |  |  | — |  |  | 787 |  |  | (3,995) |
Total Mortgages Payable |  | 249,746 |  |  | 185,918 |  |  | — |  |  | 787 |  |  | 436,451 |
Secured Borrowings – Government Guaranteed Loans: |  |  |  |  |  |  |  |  |  |
Outstanding Balance |  | 3,007 |  |  | — |  |  | (1,646) |  |  | — |  |  | 1,361 |
Unamortized premiums |  | 100 |  |  | — |  |  | — |  |  | (78) |  |  | 22 |
Total Secured Borrowings—Government Guaranteed Loans |  | 3,107 |  |  | — |  |  | (1,646) |  |  | (78) |  |  | 1,383 |
Other Debt: |  |  |  |  |  |  |  |  |  |
2022 credit facility revolver |  | 97,000 |  |  | 20,000 |  |  | (115,633) |  |  | — |  |  | 1,367 |
2022 credit facility term loan |  | 56,230 |  |  | — |  |  | (42,597) |  |  | — |  |  | 13,633 |
Junior subordinated notes |  | 27,070 |  |  | — |  |  | — |  |  | — |  |  | 27,070 |
SBA 7(a) loan-backed notes |  | 41,394 |  |  | — |  |  | (13,537) |  |  | — |  |  | 27,857 |
Deferred debt issuance costs — other |  | (1,588) |  |  | (19) |  |  | 275 |  |  | 599 |  |  | (733) |
Discount on junior subordinated notes |  | (1,398) |  |  | — |  |  | — |  |  | 102 |  |  | (1,296) |
Total Other Debt |  | 218,708 |  |  | 19,981 |  |  | (171,492) |  |  | 701 |  |  | 67,898 |
Total Debt, Net |  | $ | 471,561 |  |  | $ | 205,899 |  |  | $ | (173,138) |  |  | $ | 1,410 |  |  | $ | 505,732 |
(1)The write-off of $275,000 of deferred debt issuance costs associated with the 2022 Credit Facility Term Loan resulting from the early extinguishment of debt during incurred during the year ended December 31, 2024 is reflected here within Deferred debt issuance costs — other. See further discussion under 2022 Credit Facility. Fixed Rate Mortgages Payable—The Company’s fixed rate mortgages payable are non-recourse and are secured by, among other things, first priority deeds of trust, security agreements or other similar security instruments on the fee simple interests in properties underlying such mortgages and assignments of rents receivable. As of December 31, 2024, the Company’s fixed rate mortgages payable had fixed interest rates of 4.14%, 6.25% and 7.41% per annum, with payments of interest only and initial maturity dates of July 1, 2026, June 7, 2025 and January 11, 2030, respectively. In regards to the mortgage payable maturing on June 7, 2025, the Company has a one-year extension option exercisable at its discretion. Variable Rate Mortgages Payable—The Company’s variable rate mortgages payable are non-recourse and are secured by, among other things, first priority deeds of trust, security agreements or other similar security instruments on the Company’s fee simple and leasehold interests in its hotel asset and adjacent parking garage and by a deed of trust on and assignment of rents receivable from a multifamily property. As of December 31, 2024, the Company’s variable rate mortgages payable had a variable interest rate of SOFR plus 3.36% and SOFR plus 4.35%, with monthly payments of interest only, with an initial maturity date of July 7, 2025 and January 1, 2027. With regards to the mortgage payable maturing on July 7, 2025 (the “Channel House Mortgage”), the Company has an extension option subject to certain conditions. The Company has been in discussions with the lender under the Channel House Mortgage, which is non-recourse and has no cross-collateral provisions and is secured by Channel House (a multifamily property in Oakland, California), to restructure the terms of the mortgage, as the Company does not expect the property will meet certain conditions that are required in order for the Company to exercise the option to extend the Channel House Mortgage beyond July 7, 2025. There can be no assurance that such restructuring will occur. If the Company and the lender under the Channel House Mortgage cannot agree on a modification of the mortgage and the Company fails to exercise its extension option, such failure would constitute an event of default under the mortgage and would allow the lender to, among other remedies, declare principal and interest under the mortgage loan to be immediately due and payable. Secured Borrowings—Government Guaranteed Loans—Secured borrowings—government guaranteed loans represent sold loans which are treated as secured borrowings because the loan sales did not meet the derecognition criteria provided for in ASC 860-30, Secured Borrowing and Collateral. These loans included cash premiums that are amortized as a reduction to interest expense over the life of the loan using the effective interest method and are fully amortized when the underlying loan is repaid in full. As of December 31, 2024, the Company’s secured borrowings-government guaranteed loans included $0.4 million of loans sold for a premium and excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 8.71% at December 31, 2024, and $1.0 million of loans sold for an excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 6.35% at December 31, 2024. 2022 Credit Facility—In December 2022, the Company refinanced its 2018 credit facility and replaced it with a new 2022 credit facility (the “2022 Credit Facility”), entered into with a bank syndicate, that included a $56.2 million term loan (the “2022 Credit Facility Term Loan”) as well as a revolver that originally allowed the Company to borrow up to $150.0 million (the “2022 Credit Facility Revolver”), both of which are collectively subject to a borrowing base calculation. At the time the 2022 Credit Facility was entered into, it was collateralized by six of the Company’s office properties, as well as the Company’s hotel property and adjacent parking garage (the “Hotel Properties”). The 2022 Credit Facility bears interest at (A) the base rate plus 1.50% or (B) SOFR plus 2.60%. As of December 31, 2024, the variable interest rate was 7.29%. The 2022 Credit Facility Revolver is also subject to an unused commitment fee of 0.15% or 0.25% depending on the amount of aggregate unused commitments. The 2022 Credit Facility is guaranteed by the Company and the Company is subject to certain financial maintenance covenants. The 2022 Credit Facility originally had a maturity date in December 2025 and provided for two one-year extension options. In December 2024, using proceeds from the closing of a variable rate mortgage on the Hotel Properties and a fixed rate mortgage on three of the Company’s office properties (collectively, “the Refinancings”), the Company repaid $111.7 million on the 2022 Credit Facility Revolver and $42.6 million on the 2022 Credit Facility Term Loan. Following the completion of the Refinancings, the 2022 Credit Facility was secured by three of the Company’s office properties. The 2022 Credit Facility is not cross-collateralized by any other of the Company’s assets. In connection with the Refinancings, the Company recorded a loss on early extinguishment of debt of $1.4 million related to the write-off of deferred debt origination costs of $1.1 million associated with the 2022 Credit Facility Revolver and $275,000 associated with the 2022 Credit Facility Term Loan. As of December 31, 2024 and 2023, $0 and $53.0 million, respectively, was available for future borrowings. At the end of the first three quarters of 2024, the Company was not in compliance with a financial covenant under the 2022 Credit Facility. Further, as of December 31, 2024, the Company was not in compliance with two covenants under the 2022 Credit Facility. Such non-compliance events during 2024 constituted events of default under the 2022 Credit Facility. Lenders under the 2022 Credit Facility and the Company entered into an agreement (the “First Modification Agreement”) pursuant to which the lenders waived such event of default with respect to the test period ending March 31, 2024. Among other restrictions, the First Modification Agreement also prohibited subsidiaries of the Company that own properties that secured the 2022 Credit Facility from making any distributions to its parent entities. On August 7, 2024, lenders under the 2022 Credit Facility and the Company entered into an agreement (the “Second Modification Agreement”) pursuant to which the lenders waived such event of default with respect to the test period ending June 30, 2024. Simultaneously with the execution of the Second Modification Agreement, the Company made a $4.0 million repayment under the 2022 Credit Facility. On October 24, 2024, lenders under the 2022 Credit Facility and the Company entered into an agreement (the “Third Modification Agreement”) pursuant to which the lenders waived such event of default with respect to the test period ending September 30, 2024, pursuant to which the aggregate commitments under the 2022 Credit Facility were reduced from $206.2 million to $169.3 million, and pursuant to which the lenders under the 2022 Credit facility agreed to release the Hotel Properties in order to facilitate the refinancing of such properties. On December 24, 2024, in connection with the Refinancings, the lenders under the 2022 Credit Facility and the Company entered into an agreement (the “Fourth Modification Agreement”) pursuant to which the lenders agreed to release assets relating to three of the Company’s office buildings located in Los Angeles, California, in order to facilitate a refinancing of such properties, subject to a minimum prepayment of the 2022 Credit Facility in connection with such refinancing. In addition, the Fourth Modification Agreement changed the maturity date of the facility to January 31, 2025, subject to a 2-month extension option. Such extension option was executed on January 31, 2025, pursuant to an additional modification agreement to the 2022 Credit Facility (the “Fifth Modification Agreement”), as described under “Subsequent Events.” The event of default under the 2022 Credit Facility as of December 31, 2024 allows lenders under the 2022 Credit Facility to, among other remedies, declare the unpaid principal amount of all outstanding loans, and all interest accrued and unpaid thereon, to be immediately due and payable. Management plans to address such default by further modifying the 2022 Credit Facility and/or refinancing an additional office property in Austin, Texas (the “Austin Refinancing”). As the Company has reduced the outstanding borrowings under the 2022 Credit Facility from $169.3 million to $15.0 million during December 2024 in connection with the Refinancings, Management expects the proceeds from the Austin Refinancing will be more than sufficient to repay all amounts outstanding under the 2022 Credit Facility, with the remaining proceeds to be used for general corporate purposes. Management believes its plan to repay amounts outstanding under the 2022 Credit Facility is probable based on the favorable loan-to-value ratio (“LTV”) of the property associated with the Austin Refinancing. Junior Subordinated Notes—The Company has junior subordinated notes with a variable interest rate which resets quarterly based on the three-month SOFR plus 3.51%, with quarterly interest only payments. The junior subordinated balance is due at maturity on March 30, 2035. The junior subordinated notes may be redeemed at par at the Company’s option. SBA 7(a) Loan-Backed Notes—On March 9, 2023, the Company completed a securitization of the unguaranteed portion of certain of its SBA 7(a) loans receivable with the issuance of $54.1 million of unguaranteed SBA 7(a) loan-backed notes (with net proceeds of approximately $43.3 million, after payment of fees and expenses in connection with the securitization and the funding of a reserve account and an escrow account). The SBA 7(a) loan-backed notes are collateralized by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of the Company’s SBA 7(a) loans receivable. The SBA 7(a) loan-backed notes mature on March 20, 2048, with monthly payments due as payments on the collateralized loans are received. The SBA 7(a) loan-backed notes bear interest at a per annum rate equal to the lesser of (i) the 30-day average compounded SOFR plus 2.90% and (ii) the prime rate minus 0.35%. As of December 31, 2024, the variable interest rate was 7.40%. The Company reflects the SBA 7(a) loans receivable as assets on its consolidated balance sheet and the SBA 7(a) loan-backed notes as debt on its consolidated balance sheet. The restricted cash on the Company’s consolidated balance sheets included funds related to the Company’s SBA 7(a) loan-backed notes was $2.4 million as of December 31, 2024. Other—Deferred debt issuance costs, which represent legal and third-party fees incurred in connection with the Company’s borrowing activities, are capitalized and amortized to interest expense on a straight-line or effective interest method over the life of the related loan. Deferred debt issuance costs are presented net of accumulated amortization and are a reduction to total debt. As of December 31, 2024 and 2023, accrued interest and unused commitment fees payable of $1.1 million and $1.8 million, respectively, are included in accounts payable and accrued expenses. Future principal payments on the Company’s debt (face value) as of December 31, 2024 are as follows:
Years Ending December 31, |  | Mortgages Payable (1) |  | Secured Borrowings Principal (2) |  | 2022 Credit Facility |  | Other (2) (3) |  | Total
|  | (in thousands)
2025 |  | $ | 154,000 |  |  | $ | 91 |  |  | $ | 15,000 |  |  | $ | 8,449 |  |  | $ | 177,540 |
2026 |  | 97,100 |  |  | 97 |  |  | — |  |  | 8,504 |  |  | 105,701 |
2027 |  | 84,346 |  |  | 104 |  |  | — |  |  | 7,235 |  |  | 91,685 |
2028 |  | — |  |  | 111 |  |  | — |  |  | 3,669 |  |  | 3,780 |
2029 |  | — |  |  | 119 |  |  | — |  |  | — |  |  | 119 |
Thereafter |  | 105,000 |  |  | 839 |  |  | — |  |  | 27,070 |  |  | 132,909 |
|  | $ | 440,446 |  |  | $ | 1,361 |  |  | $ | 15,000 |  |  | $ | 54,927 |  |  | $ | 511,734 |
(1)In respect to the $154.0 million of mortgages payable maturing in 2025, each such mortgage payable has a one-year extension option. The extension option for the fixed rate mortgage is at the Company’s discretion and the Company intends to execute such option. In regards to the Channel House Mortgage, see the discussion under Variable Rate Mortgages Payable. (2)Principal payments on secured borrowings and SBA 7(a) loan-backed notes, which are included in Other, are generally dependent upon cash flows received from the underlying loans. The Company’s estimate of their repayment is based on scheduled payments on the underlying loans. The Company’s estimate will differ from actual amounts to the extent the Company experiences prepayments and/or loan liquidations or charge-offs. (3)Represents the junior subordinated notes and SBA 7(a) loan-backed notes.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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