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DEBT
 3 Months Ended
Mar. 31, 2025
Debt Disclosure [Abstract]  
DEBT
7. DEBT
The following table summarizes the debt balances as of March 31, 2025 and December 31, 2024, and the debt activity for the three months ended March 31, 2025 (in thousands):
During the Three Months Ended March 31, 2025
Balances as of December 31, 2024Debt Issuances & AssumptionsRepaymentsAccretion & (Amortization)Balances as of March 31, 2025
Mortgages Payable:
Fixed rate mortgages payable$269,100 $— $— $— $269,100 
Variable rate mortgage payable171,346 9,013 — — 180,359 
440,446 9,013 — — 449,459 
Deferred debt origination costs — Mortgages Payable(3,995)(119)— 517 (3,597)
Total Mortgages Payable436,451 8,894 — 517 445,862 
Secured Borrowings — Government Guaranteed Loans:
Outstanding Balance1,361 — (12)— 1,349 
Unamortized premiums22 — — (1)21 
Total Secured Borrowings — Government Guaranteed Loans1,383 — (12)(1)1,370 
Other Debt:
2022 credit facility revolver1,367 — — — 1,367 
2022 credit facility term loan13,633 — — — 13,633 
Junior subordinated notes27,070 — — — 27,070 
SBA 7(a) loan-backed notes27,857 — (2,594)— 25,263 
Deferred debt origination costs — other(733)(73)— 168 (638)
Discount on junior subordinated notes(1,296)— — 27 (1,269)
Total Other Debt67,898 (73)(2,594)195 65,426 
Total Debt, Net$505,732 $8,821 $(2,606)$711 $512,658 

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 March 31, 2025, 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 (which the Company intends to exercise).
Variable Rate Mortgage 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 March 31, 2025, the Company’s variable rate mortgages payable had a variable interest rate of SOFR plus 3.36%, SOFR plus 4.35% and SOFR plus 3.00%, with monthly payments of interest only, with an initial maturity date of July 7, 2025, January 1, 2027 and February 14, 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 March 31, 2025, the Company’s secured borrowings-government guaranteed loans included $349,000 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 8.21% at March 31, 2025, 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 5.85% at March 31, 2025.
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 March 31, 2025, the variable interest rate was 8.42%. 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 during the year ended December 31, 2024 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 both March 31, 2025 and December 31, 2024, there was no amount 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 and March 31, 2025, 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. On May 14, 2024, 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. 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 a modification agreement to the 2022 Credit Facility (the “Fifth Modification Agreement”). On March 27, 2025, the lenders under the 2022 Credit Facility and the Company entered into a modification
agreement (the “Sixth Modification Agreement”), pursuant to which the credit facility’s maturity date was extended from March 31, 2025 to May 31, 2025.
On April 3, 2025 the Company completed the refinancing of an office property in Austin, Texas (see further discussion in Subsequent Events) (the “Austin Refinancing”). The Company used a portion of the proceeds from the Austin Refinancing to repay the 2022 Credit Facility in full and, in connection with such repayment, the 2022 Credit Facility was terminated.
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) 30-day average compounded SOFR plus 2.90% and (ii) prime rate minus 0.35%. As of March 31, 2025, the variable interest rate was 7.15%. 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 $3.3 million as of March 31, 2025.
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 March 31, 2025 and December 31, 2024, accrued interest and unused commitment fees payable of $2.4 million and $1.1 million, respectively, were included in accounts payable and accrued expenses.
Future principal payments on the Company’s debt (face value) as of March 31, 2025 are as follows (in thousands):
Years Ending December 31,
Mortgage Payable (1)
Secured Borrowings Principal (2)
2022 Credit Facility (3)
Other (2) (4)
Total
2025 (Nine months ending December 31, 2025)$154,000 $70 $15,000 $5,855 $174,925 
202697,100 100 — 8,504 105,704 
202793,359 107 — 7,235 100,701 
2028— 114 — 3,669 3,783 
2029— 121 — — 121 
Thereafter105,000 837 — 27,070 132,907 
$449,459 $1,349 $15,000 $52,333 $518,141 
______________________
(1)With 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)The 2022 Credit Facility paid off and terminated in April 2025.
(4)Represents the junior subordinated notes and SBA 7(a) loan-backed notes.