Form 10-Q InPoint Commercial Real For: Mar 31
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller Reporting Company |
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Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 7, 2026, the Registrant had the following shares of common stock outstanding:
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025 |
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Unaudited Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025 |
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Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
43 |
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Item 4. |
44 |
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PART II OTHER INFORMATION |
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Item 1. |
44 |
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Item 1A. |
44 |
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Item 2. |
45 |
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Item 3. |
46 |
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Item 4. |
46 |
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Item 5. |
46 |
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Item 6. |
47 |
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48 |
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1
INPOINT COMMERCIAL REAL ESTATE INCOME, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share amounts)
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March 31, 2026 |
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December 31, 2025 |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Commercial mortgage loans: |
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Commercial mortgage loans at cost |
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Allowance for credit losses |
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Commercial mortgage loans at cost, net |
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Real estate owned, net of depreciation |
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Acquired lease intangible assets, net |
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Deferred debt finance costs |
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Accrued interest receivable |
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Prepaid expenses and other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Liabilities: |
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Repurchase agreements |
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$ |
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$ |
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Loan participations sold, net |
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Mortgage loan payable, net |
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Acquired lease intangible liabilities, net |
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Due to related parties |
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Accrued interest payable |
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Distributions payable |
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Accrued expenses and other liabilities |
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Total liabilities |
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Stockholders’ Equity: |
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Preferred stock, $ |
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Class P common stock, $ |
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Class A common stock, $ |
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Class T common stock, $ |
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Class S common stock, $ |
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Class D common stock, $ |
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Class I common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
2
INPOINT COMMERCIAL REAL ESTATE INCOME, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, dollar amounts in thousands, except per share amounts)
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Three months ended March 31, |
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2026 |
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2025 |
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Income: |
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Interest income |
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$ |
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$ |
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Less: Interest expense |
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Net interest income |
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Revenue from real estate |
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Total income |
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Operating expenses: |
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Advisory fee |
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Amortization of debt finance costs |
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Directors compensation |
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Professional service fees |
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Real estate operating expenses |
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Depreciation and amortization |
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Other expenses |
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Total operating expenses |
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Other income (loss): |
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(Provision for) reversal of credit losses |
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Total other (loss) income |
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Net (loss) income |
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Series A Preferred Stock dividends |
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Net (loss) income attributable to common stockholders |
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$ |
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$ |
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Net (loss) income attributable to common stockholders per share basic and diluted |
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$ |
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$ |
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Weighted average number of shares of common stock |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
3
INPOINT COMMERCIAL REAL ESTATE INCOME, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited, dollar amounts in thousands)
For the Three Months Ended March 31, 2026 |
Par Value |
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Par Value |
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Series A |
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Class P |
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Class A |
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Class T |
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Class S |
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Class D |
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Class I |
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Additional |
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Accumulated Deficit |
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Total |
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Balance as of December 31, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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Common stock distributions declared |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Preferred stock distributions declared |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2026 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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For the Three Months Ended March 31, 2025 |
Par Value |
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Par Value |
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Series A |
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Class P |
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Class A |
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Class T |
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Class S |
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Class D |
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Class I |
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Additional |
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Accumulated Deficit |
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Total |
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Balance as of December 31, 2024 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Common stock distributions declared |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Preferred stock distributions declared |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2025 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
4
INPOINT COMMERCIAL REAL ESTATE INCOME, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollar amounts in thousands)
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Three months ended March 31, |
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2026 |
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2025 |
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Cash flows from operating activities |
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Net (loss) income |
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$ |
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$ |
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Adjustments to reconcile net (loss) income to cash provided by operations: |
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Provision for (reversal of) credit losses |
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Depreciation and amortization expense |
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Amortization of acquired above- and below-market leases, net |
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Amortization of equity-based compensation |
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Amortization of debt finance costs to operating expense |
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Amortization of debt finance costs to interest expense |
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Amortization of loan extension fees |
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( |
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Changes in assets and liabilities: |
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Accrued interest receivable |
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( |
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Accrued expenses and other liabilities |
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( |
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Accrued interest payable |
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Due to related parties |
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( |
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Prepaid expenses and other assets |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Origination/funding of commercial loans |
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Loan extension fees received on commercial loans |
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Principal repayments of commercial loans |
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Real estate capital expenditures |
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( |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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Payment of offering costs |
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Proceeds from repurchase agreements |
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Principal repayments of repurchase agreements |
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Proceeds from sale of loan participations |
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Principal repayments of loan participations |
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( |
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Distributions paid to common stockholders |
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( |
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( |
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Distributions paid to preferred stockholders |
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( |
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( |
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Net cash used in financing activities |
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Net change in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Amortization of deferred exit fees due to related party |
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$ |
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$ |
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Interest paid |
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$ |
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$ |
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Receivable recorded for real estate loan paydown received subsequent to quarter end |
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$ |
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$ |
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Deferred interest capitalized on real estate loan |
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$ |
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$ |
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Accrued stockholder servicing fee due to related party |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these consolidated financial statements.
5
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
Note 1 – Organization and Business Operations
InPoint Commercial Real Estate Income, Inc. (the “Company”) was incorporated in Maryland on September 13, 2016 to originate, acquire and manage a diversified portfolio of commercial real estate (“CRE”) investments primarily comprised of CRE debt, including (a) primarily floating-rate first mortgage loans and (b) subordinate mortgage and mezzanine loans. The Company may also invest in participations in loans secured by CRE, floating-rate CRE securities, such as commercial mortgage-backed securities (“CMBS”), senior unsecured debt of publicly traded real estate investment trusts (“REITs”) and select equity investments in single-tenant, net leased properties. Substantially all of the Company’s business is conducted through InPoint REIT Operating Partnership, LP (the “Operating Partnership”), a Delaware limited partnership. The Company is the sole general partner and directly or indirectly holds all of the limited partner interests in the Operating Partnership. The Company has elected to be taxed as a REIT for U.S. federal income tax purposes.
The Company is externally managed by Inland InPoint Advisor, LLC (the “Advisor”), a Delaware limited liability company formed in August 2016 that is a wholly owned indirect subsidiary of Inland Real Estate Investment Corporation (“IREIC”), a member of The Inland Real Estate Group of Companies, Inc. The Advisor is responsible for coordinating the management of the day-to-day operations and originating, acquiring and managing the Company’s CRE investment portfolio, subject to the supervision of the Company’s board of directors (the “Board”). The Advisor performs its duties and responsibilities as the Company’s fiduciary pursuant to an amended and restated advisory agreement dated July 1, 2021 among the Company, the Advisor and the Operating Partnership (the “Advisory Agreement”).
The Advisor has delegated certain of its duties to SPCRE InPoint Advisors, LLC (the “Sub-Advisor”), a Delaware limited liability company formed in September 2016 that is a wholly owned subsidiary of Sound Point CRE Management, LP, a subsidiary of Sound Point Capital Management, LP (“Sound Point”), pursuant to a second amended and restated sub-advisory agreement between the Advisor and the Sub-Advisor dated July 1, 2021 (the “Sub-Advisory Agreement”). Among other duties, the Sub-Advisor has the authority to identify, negotiate, acquire and originate the Company’s investments and provide portfolio management, disposition, property management and leasing services to the Company. Notwithstanding such delegation to the Sub-Advisor, the Advisor retains ultimate responsibility for the performance of all the matters entrusted to it under the Advisory Agreement, including those duties which the Advisor has not delegated to the Sub-Advisor, such as (i) valuation of the Company’s assets and calculation of the Company’s net asset value (“NAV”); (ii) management of the Company’s day-to-day operations; (iii) preparation of stockholder reports and communications and arrangement of the Company’s annual stockholder meetings; and (iv) monitoring the Company’s ongoing compliance with the REIT qualification requirements for U.S. federal income tax purposes.
On October 25, 2016, the Company commenced a private offering (the “Private Offering”) of up to $
On May 3, 2019, the Company commenced its initial public offering (the “IPO”) of shares of Class A, Class T, Class S, Class D and Class I common stock pursuant to a registration statement on Form S-11 (File No. 333-230465). The IPO terminated upon the commencement of the Second Public Offering (described below). On November 2, 2022, the Company commenced its second public offering (the “Second Public Offering” and together with the IPO, the “Public Offerings”) of shares of Class A, Class T, Class S, Class D and Class I common stock pursuant to a registration statement on Form S-11 (File No. 333-264540). Inland Securities Corporation (the “Dealer Manager”) served as the Company’s dealer manager for the Public Offerings. On January 30, 2023, the Board unanimously approved the suspension of the sale of shares in the primary portion of the Second Public Offering, effective immediately, and the suspension of the sale of shares pursuant to the Company’s distribution reinvestment plan (“DRP”), effective as of February 10, 2023. The Board also suspended the Company’s share repurchase plan (the “SRP”) on January 30, 2023 in light of the pace of fundraising in the Second Public Offering and the amount of monthly redemption requests pursuant to the SRP, which were in excess of such fundraising. The Second Public Offering terminated on November 1, 2025. The Company issued
On September 22, 2021, the Company completed an underwritten public offering of
6
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
Series A Preferred Stock were issued and sold pursuant to an effective registration statement on Form S-11 (File No. 333-258802) filed with the SEC. The Company received net proceeds in the Preferred Stock Offering of $
For more information on the Public Offerings and the Preferred Stock Offering, see “Note 6 – Stockholders’ Equity”.
Please refer to “Note 14 – Subsequent Events” for updates to the Company’s business after March 31, 2026.
Note 2 – Summary of Significant Accounting Policies
Disclosures discussing all significant accounting policies are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 13, 2026 (the “Annual Report”), under the heading “Note 2 – Summary of Significant Accounting Policies.” See below for discussion of changes to the Company’s significant accounting policies for the three months ended March 31, 2026.
Basis of Accounting
The accompanying consolidated financial statements and related footnotes have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reported periods. Actual results could differ from such estimates.
In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
Cash, Cash Equivalents and Restricted Cash
Restricted cash represents cash the Company is required to hold in a segregated account as additional collateral on real estate securities repurchase agreements and cash required to be set aside by lenders for real estate taxes, insurance, capital expenditures and tenant improvements on the Company’s real estate owned (“REO”).
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company’s consolidated balance sheets to such amounts shown on the Company’s consolidated statements of cash flows:
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March 31, |
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2026 |
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2025 |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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— |
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Total cash, cash equivalents, and restricted cash |
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$ |
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$ |
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||
Accounting Pronouncements Recently Issued but Not Yet Effective
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, and in January 2025, the FASB issued ASU 2025-01, Clarifying the Effective Date, which revised the effective date of ASU 2024-03 for interim periods. ASU 2024-03 requires disclosures in the notes to the financial statements on specified information about certain costs and expenses that are included on the face of the income statement for each interim and annual reporting period. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual
7
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of ASU 2024-03 and ASU 2025-01 on the Company’s consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies interim reporting guidance, defines applicability to entities presenting full GAAP interim financial statements, provides form and content requirements for condensed statements, and introduces a principle requiring disclosure of material events occurring after the prior annual period. ASU 2025-11 does not change existing disclosure requirements. ASU 2025-11 is effective for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-11 on the Company’s interim reporting.
Note 3 – Commercial Mortgage Loans Held for Investment
The following tables show a summary of the Company’s commercial mortgage loans held for investment as of March 31, 2026 and December 31, 2025:
March 31, 2026
Loan Type (1) |
Number |
|
|
Principal |
|
|
Unamortized (fees)/costs, net |
|
|
Allowance for credit losses |
|
|
Carrying |
|
|
Weighted Average |
|
|
Weighted Average |
|
|||||||
First mortgage loans |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
% |
|
|
|
||||||
Credit loans |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
% |
|
|
|
|||||
Total and average |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
% |
|
|
|
||||||
December 31, 2025
Loan Type (1) |
Number |
|
Principal |
|
Unamortized (fees)/costs, net |
|
Allowance for credit losses |
|
Carrying |
|
Weighted Average |
|
Weighted Average |
|
|||||||
First mortgage loans |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|
% |
|
|
||||||
Credit loans |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
% |
|
|
|||||
Total and average |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|
% |
|
|
||||||
8
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
For the three months ended March 31, 2026, the activity in the Company’s commercial mortgage loans, held-for-investment portfolio was as follows:
|
|
Commercial mortgage loans at cost |
|
|
Allowance for credit losses |
|
|
Carrying Value |
|
|||
Balance at Beginning of Year |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Loan originations/advances |
|
|
|
|
|
— |
|
|
|
|
||
Principal repayments |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Amortization of loan origination and deferred exit fees |
|
|
|
|
|
— |
|
|
|
|
||
Origination fees and extension fees received on commercial loans |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Provision for credit losses |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at End of Period |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Allowance for Credit Losses
The following table presents the activity in the Company’s allowance for credit losses for the three months ended March 31, 2026:
|
|
Commercial Mortgage Loans |
|
|
Unfunded Loan Commitments (1) |
|
|
Total |
|
|||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(Provision for) reversal of credit losses |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Ending allowance for credit losses |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following table presents the activity in the Company’s allowance for credit losses for the three months ended March 31, 2025:
|
|
Commercial Mortgage Loans |
|
|
Unfunded Loan Commitments (1) |
|
|
Total |
|
|||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Reversal of credit losses |
|
|
|
|
|
|
|
|
|
|||
Ending allowance for credit losses |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
As of March 31, 2026, the Company had a total current expected credit loss (“CECL”) reserve of $
As of March 31, 2025, the Company had a total CECL reserve of $
Credit Characteristics
As part of the Company’s process for monitoring the credit quality of its investments, it performs a quarterly asset review of the investment portfolio and assigns risk ratings to each of its loans and certain securities it may own, such as CMBS. Risk factors include
9
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographic location, as well as national and regional economic factors. To determine the likelihood of loss, the loans are rated on a 5-point scale as follows:
Investment Grade |
Investment Grade Definition |
1 |
|
2 |
|
3 |
|
4 |
|
5 |
All investments are assigned an initial risk rating of 2 at origination or acquisition.
As of March 31, 2026,
Asset-Specific CECL Reserve
The table below provides the components of the asset-specific CECL reserve as of March 31, 2026 and December 31, 2025:
Loan Type |
Collateral Type |
March 31, 2026 |
|
December 31, 2025 |
|
|
||
Senior |
Multifamily |
$ |
|
$ |
|
(1) |
||
Senior |
Multifamily |
|
|
|
— |
|
(2) |
|
Total |
|
$ |
|
$ |
|
|
||
____________ |
|
|
|
|
|
|
||
Loan Modifications
The Company may amend or modify a loan based on its specific facts and circumstances. These modifications are often in the form of a term extension to provide the borrower additional time to refinance or sell the collateral property in order to repay the principal balance of the loan. Such extensions are generally made at the loan’s contractual interest rate and may require an extension fee be paid to the Company.
10
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
During the three months ended March 31, 2026, the Company made no modification that is disclosable under ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). During the three months ended March 31, 2025, the Company made one such modification that is disclosable under ASU 2022-02, as it was considered an other-than-insignificant payment delay for a borrower experiencing financial difficulty. In this instance, the Company granted a term extension to February 9, 2026 for a senior loan secured by an office property located in Honolulu, HI described above. The modification provided for $
Note 4 – Repurchase Agreements and Mortgage Loan Payable
Commercial Mortgage Loans
On May 6, 2019, the Company, through a wholly owned subsidiary, entered into an uncommitted master repurchase agreement (the “JPM Repo Facility”) with JPMorgan Chase Bank, National Association (“JPM”). The JPM Repo Facility provides up to $
The JPM Repo Facility has been, and continues to be, used to finance eligible loans and act in the manner of a revolving credit facility that can be repaid as the Company’s assets are paid off and re-drawn as advances against new assets.
The details of the JPM Repo Facility as of March 31, 2026 and December 31, 2025 are as follows:
March 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
||||||||
|
Committed Financing |
|
|
Amount |
|
|
Accrued |
|
|
Collateral |
|
|
Interest |
|
Days to |
|
||||||
JPM Repo Facility |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
|
|
||||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
||||||||
|
Committed Financing |
|
|
Amount |
|
|
Accrued |
|
|
Collateral |
|
|
Interest |
|
Days to |
|
||||||
JPM Repo Facility |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
|
|
||||||
Mortgage Loan Payable
On September 30, 2025, the Company entered into a mortgage loan agreement with Ladder Capital Finance LLC for an aggregate principal amount of $
11
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
Debt issuance costs for the mortgage loan are amortized as a component of interest expense. These costs are reported as a direct deduction to the Company’s outstanding mortgage loan payable. As of March 31, 2026, the carrying value of the mortgage loan payable was $
Note 5 – Loan Participations Sold, Net
On November 15, 2021, the Company sold a non-recourse senior participation interest in
The third party, as the senior participation interest holder, receives interest and principal payments from the borrower until they receive the amounts to which they are entitled. All expenses or losses on the underlying mortgages are allocated first to the Company and then to the third party. If the underlying mortgage is in default, the Company will have the option to purchase the third party’s participation interest and remove it from the loan participation agreement.
The financing or transfer of a portion of a loan by the non-recourse sale of a senior interest in the loan through a participation agreement generally does not qualify as a sale under GAAP. Therefore, in this instance, the Company presents the whole loan as an asset and the loan participation sold as a liability on the consolidated balance sheet until the loan is repaid. The obligation to pay principal and interest on these liabilities is generally based on the performance of the related loan obligation. The gross presentation of loan participations sold does not impact stockholders’ equity or net income.
On July 2, 2025, the Company acquired legal title to office property through a non-judicial foreclosure transaction. On July 2, 2024, the Company acquired legal title to
12
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
The following tables detail the Company’s loan participations sold as of March 31, 2026 and December 31, 2025:
|
|
March 31, 2026 |
||||||||||||||||
Loan Participations Sold |
|
Count |
|
|
Principal Balance |
|
|
Book Value |
|
|
Yield/Cost (1) |
|
Guarantee (2) |
|
Weighted Average Maximum Maturity (4) |
|||
Total Loans |
|
|
|
|
$ |
|
|
$ |
|
|
SOFR+ |
|
n/a |
|
n/a |
|||
Senior participations (3) (5) |
|
|
|
|
$ |
|
|
$ |
|
|
SOFR+ |
|
n/a |
|
n/a |
|||
|
|
December 31, 2025 |
|
|||||||||||||||||
Loan Participations Sold |
|
Count |
|
|
Principal Balance |
|
|
Book Value |
|
|
Yield/Cost (1) |
|
Guarantee (2) |
|
Weighted Average Maximum Maturity (4) |
|
||||
Total Loans |
|
|
|
|
$ |
|
|
$ |
|
|
SOFR+ |
|
n/a |
|
|
|
||||
Senior participations (3) (5) |
|
|
|
|
$ |
|
|
$ |
|
|
SOFR+ |
|
n/a |
|
|
|
||||
____________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 6 – Stockholders’ Equity
Series A Preferred Stock
The Company issued
Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears at a rate per annum equal to
The Company may not redeem the Series A Preferred Stock prior to
On August 11, 2022, the Board authorized and approved a share repurchase program (the “Series A Preferred Repurchase Program”) pursuant to which the Company was permitted to repurchase up to the lesser of
13
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
of shares of the Company’s Series A Preferred Stock were to be made at management’s discretion from time to time through open market purchases, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws. On January 30, 2023, the Board approved the termination of the Series A Preferred Repurchase Program.
The Series A Preferred Stock is listed on the New York Stock Exchange under the symbol ICR PR A.
Share Activity for Common Stock and Preferred Stock
The following tables detail the change in the Company’s outstanding shares of all classes of common and preferred stock, including restricted common stock:
|
Preferred Stock |
|
Common Stock |
|
|||||||||||||||||
Three months ended March 31, 2026 |
Series A |
|
Class P |
|
Class A |
|
Class T |
|
Class S |
|
Class D |
|
Class I |
|
|||||||
Beginning balance |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||||
Ending balance |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||||
|
Preferred Stock |
|
Common Stock |
|
|||||||||||||||||
Three months ended March 31, 2025 |
Series A |
|
Class P |
|
Class A |
|
Class T |
|
Class S |
|
Class D |
|
Class I |
|
|||||||
Beginning balance |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||||
Ending balance |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||||
Distributions – Common Stock and Series A Preferred Stock
The table below presents the aggregate annualized and monthly distributions declared on common stock by record date for all classes of shares since January 1, 2025.
Record date |
|
Aggregate annualized gross distribution declared per share |
|
|
Aggregate monthly gross distribution declared per share |
|
||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
The gross distribution was reduced each month for Class D and Class T of the Company’s common stock for applicable class-specific stockholder servicing fees to arrive at a lower net distribution amount paid to those classes. For a description of the stockholder servicing fees applicable to Class D, Class S and Class T shares of the Company’s common stock, please see “Note 10 – Transactions with Related Parties” below. Since the IPO and through March 31, 2026, the Company had not issued any shares of Class S common stock.
14
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
The following table shows the monthly net distribution per share for shares of Class D and Class T common stock since January 1, 2025.
Record date |
|
Monthly net distribution declared per share of Class D common stock |
|
|
Monthly net distribution declared per share of Class T common stock |
|
||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
Series A Preferred Stock dividends are paid quarterly in arrears based on an annualized distribution rate of
The tables below present the aggregate distributions declared per share for each applicable class of common stock and preferred stock during the three months ended March 31, 2026 and 2025. The tables exclude distributions declared for any month for a class of shares of stock when there were no shares of that class outstanding on the applicable record date.
|
Preferred Stock |
|
Common Stock |
|
|||||||||||||||||
Three months ended March 31, 2026 |
Series A |
|
Class P |
|
Class A |
|
Class T |
|
Class S |
|
Class D |
|
Class I |
|
|||||||
Aggregate gross distributions declared per share |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
— |
|
$ |
|
$ |
|
||||||
Stockholder servicing fee per share |
N/A |
|
N/A |
|
N/A |
|
|
|
|
— |
|
|
|
N/A |
|
||||||
Net distributions declared per share |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
— |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Preferred Stock |
|
Common Stock |
|
|||||||||||||||||
Three months ended March 31, 2025 |
Series A |
|
Class P |
|
Class A |
|
Class T |
|
Class S |
|
Class D |
|
Class I |
|
|||||||
Aggregate gross distributions declared per share |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
— |
|
$ |
|
$ |
|
||||||
Stockholder servicing fee per share |
N/A |
|
N/A |
|
N/A |
|
|
|
|
— |
|
|
|
N/A |
|
||||||
Net distributions declared per share |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
— |
|
$ |
|
$ |
|
||||||
As of March 31, 2026 and December 31, 2025, distributions declared but not yet paid amounted to $
Note 7 – Net Income (Loss) Per Share Attributable to Common Stockholders
Basic earnings per share attributable to common stockholders (“EPS”) is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) attributable to common stockholders by the common shares plus common share equivalents. The Company’s common share equivalents are unvested restricted shares. The Company excludes antidilutive restricted shares from the calculation of weighted-average shares for diluted earnings per share. There were
15
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
The following table is a summary of the basic and diluted net income (loss) per share attributable to common stockholders computation for the three months ended March 31, 2026 and 2025:
|
|
Three months ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Net (loss) income attributable to common stockholders |
|
$ |
( |
) |
|
$ |
|
|
Weighted average shares outstanding, basic |
|
|
|
|
|
|
||
Dilutive effect of restricted stock |
|
|
|
|
|
|
||
Weighted average shares outstanding, diluted |
|
|
|
|
|
|
||
Net (loss) income attributable to common stockholders per share, basic and diluted |
|
$ |
( |
) |
|
$ |
|
|
Note 8 – Commitments and Contingencies
In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. The Company has no knowledge of material legal or regulatory proceedings pending or known to be contemplated against the Company at this time.
Note 9 – Segment Reporting
The Company operates as
Note 10 – Transactions with Related Parties
During the fourth quarter of 2016, the Advisor invested $
During the fourth quarter of 2016, Sound Point invested $
16
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
The following table summarizes the Company’s related party transactions for the three months ended March 31, 2026 and 2025 and the amount due to related parties as of March 31, 2026 and December 31, 2025:
|
|
Three months ended March 31, |
|
|
Payable as of |
|
|
Payable as of |
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Advisory fee (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Loan fees(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued stockholder servicing fee (3) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expense Limitation Agreement
Pursuant to an expense limitation agreement (the “Expense Limitation Agreement”) dated July 1, 2021, the Advisor and Sub-Advisor agree to
Separately from the limitation on ordinary operating expenses under the Expense Limitation Agreement, the Advisor and Sub-Advisor voluntarily chose not to seek reimbursement for certain expenses that they incurred or paid on behalf of the Company during the three
17
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
months ended March 31, 2026, and for which they may have been entitled to be reimbursed. The Advisory Agreement and Sub-Advisory Agreement provide that expenses will be submitted monthly to the Company for reimbursement, and the amount of expenses submitted for reimbursement in any particular month is not necessarily indicative of the total amount of expenses actually incurred by the Advisor and Sub-Advisor in providing services to the Company and for which reimbursement could have been received by the Advisor and Sub-Advisor.
Revolving Credit Liquidity Letter Agreements
IREIC, the Company’s sponsor, and Sound Point have agreed under separate letter agreements dated July 20, 2021, and July 15, 2021, respectively, to make revolving credit loans to the Company in an aggregate principal amount outstanding at any one time not to exceed $
Note 11 – Equity-Based Compensation
With each stock grant, the Company awards each of its
Grant Date |
Class of common stock granted |
Total number of shares granted |
|
Grant Date Fair Value Per Share |
|
Total Fair Value of Grant |
|
Proportion of total shares that vest annually |
|
Vesting Date Year 1 |
Vesting Date Year 2 |
Vesting Date Year 3 |
||||
October 3, 2022 |
Class I |
|
|
$ |
|
$ |
|
|
|
|||||||
September 29, 2023 |
Class I |
|
|
$ |
|
$ |
|
|
|
|||||||
September 12, 2024 |
Class I |
|
|
$ |
|
$ |
|
|
|
|||||||
September 18, 2025 |
Class I |
|
|
$ |
|
$ |
|
|
|
|||||||
Under the Company’s Independent Director Restricted Share Plan (the “RSP”), restricted shares generally vest over a
18
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
A summary table of the status of the restricted shares granted under the RSP is presented below:
|
|
Restricted Shares |
|
|
Weighted Average Grant Date Fair Value Per Share |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
— |
|
|
|
— |
|
Vested |
|
|
— |
|
|
|
— |
|
Outstanding at March 31, 2026 |
|
|
|
|
$ |
|
||
Note 12 – Fair Value of Financial Instruments
GAAP requires the disclosure of fair value information about financial instruments, whether or not they are recognized at fair value in the consolidated balance sheets, for which it is practicable to estimate that value.
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||||||||||
|
Carrying |
|
|
Estimated Fair |
|
|
Carrying |
|
|
Estimated Fair |
|
||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash, cash equivalents and restricted cash |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial mortgage loans, net |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Repurchase agreements — commercial mortgage |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Loan participations — sold |
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage loan payable, net |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following describes the Company’s methods for estimating the fair value for financial instruments:
19
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
Note 13 – Real Estate Owned
2025 Acquisitions
During the year ended December 31, 2025, the Company acquired
The following table shows additional information about the acquisitions, including the fair value of the assumed assets and liabilities on the acquisition dates:
|
Arbor Mist |
|
|
Parkview |
|
||
Acquisition date |
|
|
|
||||
Number of properties |
|
|
|
||||
Location |
|
|
|
||||
Property type |
|
|
|
||||
Amortized cost basis of loan as of acquisition date |
$ |
|
|
$ |
|
||
CECL reserve as of acquisition date |
$ |
|
|
$ |
|
||
Loan risk rating as of acquisition date |
|
|
|
||||
CECL reserve charge-off upon acquisition |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Land |
$ |
|
|
$ |
|
||
Building and improvements |
|
|
|
|
|
||
Furniture, fixtures and equipment |
|
|
|
|
— |
|
|
Acquired in-place lease value |
|
|
|
|
|
||
Acquired above-market lease value |
|
— |
|
|
|
|
|
Acquired below-market lease value |
|
— |
|
|
|
( |
) |
Total |
$ |
|
|
$ |
|
||
The Company recognized a net gain of $
Real Estate Owned
The following table presents the REO assets as of March 31, 2026 and December 31, 2025:
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||
Land |
$ |
|
|
$ |
|
||
Building and improvements |
|
|
|
|
|
||
Furniture, fixtures and equipment |
|
|
|
|
|
||
Accumulated depreciation |
|
( |
) |
|
|
( |
) |
Real estate owned, net |
$ |
|
|
$ |
|
||
During the three months ended March 31, 2026 and 2025 the Company incurred $
20
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
Acquired Intangible Assets and Liabilities
The following table summarizes the Company’s identified intangible assets and liabilities as of March 31, 2026 and December 31, 2025:
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||
Intangible assets: |
|
|
|
|
|
|
||
Acquired in-place lease value |
|
$ |
|
|
$ |
|
||
Acquired above-market lease value |
|
|
|
|
|
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Acquired lease intangible assets, net |
|
$ |
|
|
$ |
|
||
Intangible liabilities: |
|
|
|
|
|
|
||
Acquired below-market lease value |
|
$ |
|
|
$ |
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Acquired lease intangible liabilities, net |
|
$ |
|
|
$ |
|
||
Amortization pertaining to acquired in-place lease value, above-market lease value and below-market lease value is summarized below:
|
Three months ended March 31, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Amortization recorded as amortization expense: |
|
|
|
|
|
||
Acquired in-place lease value |
$ |
|
|
$ |
|
||
Amortization recorded as a (reduction) increase to rental income: |
|
|
|
|
|
||
Acquired above-market leases |
$ |
( |
) |
|
$ |
( |
) |
Acquired below-market leases |
|
|
|
|
|
||
Net rental income increase |
$ |
|
|
$ |
|
||
Estimated amortization of the respective intangible lease assets and liabilities as of March 31, 2026 for each of the five succeeding years and thereafter is as follows:
|
|
In-Place |
|
|
Above-Market Leases |
|
|
Below-Market |
|
|||
2026 (remainder of year) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2027 |
|
|
|
|
|
|
|
|
|
|||
2028 |
|
|
|
|
|
|
|
|
|
|||
2029 |
|
|
|
|
|
|
|
|
|
|||
2030 |
|
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
21
InPoint Commercial Real Estate Income, Inc.
Notes to Consolidated Financial Statements
March 31, 2026
(Unaudited, dollar amounts in thousands, except per share amounts)
Rental Revenue as a Lessor
The table below presents the future minimum lease payments to be received under non-cancelable operating leases, excluding tenant reimbursements of expenses, and assuming no expiring leases are renewed, as of March 31, 2026. Leases for the multifamily properties are generally 12 months or less and are therefore excluded from the table below.
|
|
Lease Payments |
|
|
2026 (remainder of year) |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 14 – Subsequent Events
The Company has evaluated subsequent events through May 8, 2026, the date the consolidated financial statements were issued, and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements except for the following transactions:
Common Stock Distributions
On
|
|
Common Stock |
|
|||||||||||||||||||||
|
|
Class P |
|
|
Class A |
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
||||||
Aggregate gross distributions declared per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Stockholder servicing fee per share |
|
N/A |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
||||||
Net distributions declared per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
$ |
|
|||||||
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words such as “may,” “could,” “should,” “expect,” “intend,” “plan,” “goal,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “variables,” “potential,” “continue,” “expand,” “maintain,” “create,” “strategies,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions, are intended to identify forward-looking statements.
These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of the management of InPoint Commercial Real Estate Income, Inc. (which we refer to herein as the “Company,” “we,” “our” or “us”) based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors listed and described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 13, 2026 (the “Annual Report”) some of which are briefly summarized below:
Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Quarterly Report on Form 10-Q and may ultimately prove to be incorrect or false. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.
The following discussion and analysis relate to the three months ended March 31, 2026 and 2025 and as of March 31, 2026 and December 31, 2025. You should read the following discussion and analysis along with our unaudited consolidated financial statements and the related notes included in this Quarterly Report on Form 10-Q.
All dollar amounts are stated in thousands unless otherwise noted, except share data.
Overview
We are a Maryland corporation formed on September 13, 2016 to originate, acquire and manage an investment portfolio of CRE investments primarily comprised of CRE debt, including primarily floating-rate first mortgage loans and fixed rate mezzanine loans. We may also invest in participations in CRE debt, floating-rate CRE securities such as CMBS, senior unsecured debt of publicly traded REITs and select equity investments in single-tenant, net leased properties. Substantially all of our business is conducted through our Operating Partnership, of which we are the sole general partner. We are externally managed by our Advisor, an indirect subsidiary of
23
IREIC. Our Advisor has engaged the Sub-Advisor, a subsidiary of Sound Point CRE Management, LP, to perform certain services on behalf of the Advisor for us.
We have operated in a manner that allows us to qualify as a REIT for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2017.
For a discussion of the history of the Company and its Private Offering, IPO, Second Public Offering and Preferred Stock Offering, please see “Note 1 – Organization and Business Operations” in the notes to our consolidated financial statements above. The IPO and the Second Public Offering are collectively referred to herein as the “Public Offerings”.
Recent Developments
The CRE debt market has experienced increased activity with the U.S. Federal Reserve’s recent moves to lower interest rates. During 2025, the U.S. Federal Reserve reduced rates three times with the most recent reduction occurring in December 2025, which lowered the target range to 3.50% to 3.75%. According to CBRE, Inc., CRE investment volume increased by 29% year-over-year in the fourth quarter of 2025 to $172 billion. The CBRE Lending Momentum Index, which tracks loans originated or brokered by CBRE, increased 67% year-over-year in the fourth quarter of 2025, with December marking the highest monthly level since 2021.
If the U.S. Federal Reserve continues rate-cutting during 2026, we may start to see more liquidity in the CRE debt market, with borrowers having an improved ability to refinance and pay off the existing loans in our portfolio, and improvement of property values. While lower market rates could mean lower lending rates for newly-originated loans, we may also see a reduction in our borrowing costs, which could help maintain spreads in the portfolio. We continue to consider all of these market factors as we assess our options for the most efficient use of the cash on our balance sheet.
During the first quarter of 2026, we originated one loan with a principal balance of $11.4 million and received paydowns of $25.9 million on existing loans. In May 2026, we originated a first mortgage loan secured by an industrial property in Florida with a principal balance of $16.9 million. The loan earns interest at SOFR+3.15%, has an all-in yield of 6.8%, and an LTV of 47.9%. During the remainder of 2026, we intend to focus on originating additional loans and continue working with our current borrowers on extending or restructuring our maturing loans with an emphasis on obtaining principal reductions or loan payoffs.
We continue to evaluate all loans on a quarterly basis and assign our internal risk rating with the majority of our loans continuing to perform as expected. Our primary focus continues to be on refinance risk and our CECL reserve will place emphasis on loans with maturity dates nine months forward from the reporting date.
Company Business Plan
The Company’s management has been analyzing the portfolio impact of liquidating the real estate in the portfolio and potentially redeploying those proceeds into newly originated first mortgage loans. The Company’s goal is to position the portfolio to pursue a future strategic transaction when capital market conditions have improved, in order to maximize stockholder value and potentially provide our investors with access to some level of liquidity. There is no assurance that the Company will be able to successfully implement any strategic plan. We are continually impacted by evolving market conditions and other complex factors such as (i) the state of the commercial real estate market and financial markets, (ii) our ability to access additional capital or leverage and (iii) changes in general economic conditions such as high interest rates, among other factors. We will provide updates as the Company considers appropriate or as required under applicable law.
Q1 2026 Highlights
Operating Results:
24
Loan Portfolio:
Capital Markets and Financing Activity:
Significant Accounting Policies and Use of Estimates
Disclosures discussing all significant accounting policies are set forth in our Annual Report under the heading “Note 2 – Summary of Significant Accounting Policies.” See “Note 2 – Summary of Significant Accounting Policies” for a discussion of changes to our significant accounting policies for the three months ended March 31, 2026.
Investment Portfolio
Our strategy is to originate, acquire and manage an investment portfolio of CRE debt that is primarily floating rate and diversified based on the type and location of collateral securing the underlying CRE debt.
The charts below summarize our debt investments portfolio as a percentage of par value by type of rate, our total investment portfolio by investment type, including real estate owned (“REO”) and our loan portfolio by collateral type and geographical region as of March 31, 2026 and December 31, 2025:
Floating vs. Fixed Rate Debt Investments:
March 31, 2026 |
December 31, 2025 |
|
|
25
All Investments by Type:
March 31, 2026 |
December 31, 2025 |
|
|
Loans by Property Type:
March 31, 2026 |
December 31, 2025 |
|
|
26
Loans by Region:
March 31, 2026 |
December 31, 2025 |
|
|
An investment’s region is defined according to the below map based on the location of underlying property.
The changes in our loan portfolio by property type and by region as of March 31, 2026 compared to December 31, 2025 were primarily due to the origination of one loan and the repayment of loans by borrowers in ordinary course.
27
Commercial Mortgage Loans Held for Investment
|
As of |
|
|
As of |
|
||
Principal balance of first mortgage loans |
$ |
328,661 |
|
|
$ |
343,175 |
|
Number of first mortgage loans |
|
14 |
|
|
|
14 |
|
Principal balance of credit loans |
$ |
7,500 |
|
|
$ |
7,500 |
|
Number of credit loans |
|
1 |
|
|
|
1 |
|
Total balance of loans |
$ |
336,161 |
|
|
$ |
350,675 |
|
Total number of loans |
|
15 |
|
|
|
15 |
|
All-in yield (1) |
|
7.3 |
% |
|
|
7.3 |
% |
Weighted average years to maximum maturity |
|
0.8 |
|
|
|
0.9 |
|
____________ |
|
|
|
|
|
||
During the three months ended March 31, 2026, one loan was paid off and one new loan was originated.
The table below presents select loan information for each of our commercial mortgage loans as of March 31, 2026:
|
Origination |
Loan |
Principal |
|
Cash Coupon (3) |
All-in |
|
|
Maximum Maturity (4) |
State |
Property |
LTV (5) |
|
Risk |
|
||||
1 |
12/12/17 |
First mortgage (2) |
$ |
12,700 |
|
SOFR+4.70% |
|
8.4 |
% |
|
2/9/26 (7) |
HI |
Office |
|
67.0 |
% |
|
4 |
|
2 |
9/27/19 |
First mortgage |
|
13,626 |
|
SOFR+3.10% |
|
6.8 |
% |
|
5/9/26 |
CA |
Office |
|
74.5 |
% |
|
3 |
|
3 |
11/12/21 |
First mortgage |
|
24,946 |
|
SOFR+2.90% |
|
6.7 |
% |
|
5/9/26 (8) |
TX |
Multifamily |
|
73.2 |
% |
|
4 |
|
4 |
11/16/21 |
First mortgage |
|
24,081 |
|
SOFR+3.05% |
|
6.8 |
% |
|
12/9/26 |
TX |
Multifamily |
|
73.7 |
% |
|
3 |
|
5 |
12/9/21 |
First mortgage |
|
39,217 |
|
SOFR+3.05% |
|
6.8 |
% |
|
12/9/26 |
GA |
Multifamily |
|
71.7 |
% |
|
3 |
|
6 |
12/15/21 |
First mortgage |
|
25,594 |
|
SOFR+3.20% |
|
7.0 |
% |
|
1/9/27 |
OR |
Multifamily |
|
70.2 |
% |
|
2 |
|
7 |
1/26/22 |
First mortgage |
|
16,040 |
|
SOFR+3.55% |
|
12.2 |
% |
(9) |
3/9/26 (9) |
NJ |
Industrial |
|
63.1 |
% |
|
4 |
|
8 |
1/28/22 |
First mortgage |
|
15,032 |
|
SOFR+3.30% |
|
7.0 |
% |
|
2/9/27 |
NC |
Multifamily |
|
69.9 |
% |
|
2 |
|
9 |
2/25/22 |
First mortgage |
|
30,000 |
|
SOFR+3.04% |
|
6.7 |
% |
|
3/9/27 |
NY |
Mixed Use |
|
66.7 |
% |
|
2 |
|
10 |
3/1/22 |
First mortgage |
|
29,472 |
|
SOFR+3.40% |
|
7.1 |
% |
|
3/9/27 |
TX |
Multifamily |
|
77.7 |
% |
|
2 |
|
11 |
4/7/22 |
First mortgage |
|
15,227 |
|
SOFR+3.25% |
|
6.9 |
% |
|
4/9/27 |
SC |
Multifamily |
|
69.0 |
% |
|
3 |
|
12 |
4/19/22 |
First mortgage |
|
20,102 |
|
SOFR+3.40% |
|
7.1 |
% |
|
5/9/26 (10) |
TX |
Multifamily |
|
76.3 |
% |
|
4 |
|
13 |
6/13/22 |
First mortgage |
|
51,224 |
|
SOFR+3.45% |
|
7.1 |
% |
|
6/9/27 |
TX |
Multifamily |
|
73.1 |
% |
|
4 |
|
14 |
2/27/26 |
First mortgage |
|
11,400 |
|
SOFR+3.50% |
|
7.2 |
% |
|
3/9/31 |
TX |
Multifamily |
|
67.1 |
% |
|
2 |
|
15 |
9/29/17 |
Credit |
|
7,500 |
|
9.20% |
|
9.2 |
% |
|
10/11/27 |
NJ |
Office |
|
79.9 |
% |
|
2 |
|
|
|
|
$ |
336,161 |
|
|
|
7.3 |
% |
|
|
|
|
|
71.7 |
% |
|
|
|
28
The following table allocates the loan principal balance and the net loan exposure based on our internal risk ratings as of March 31, 2026:
Risk Rating |
Number of Loans |
|
Principal Balance |
|
Net Loan Exposure (1) |
|
|||
1 |
|
— |
|
$ |
— |
|
$ |
— |
|
2 |
|
6 |
|
|
118,998 |
|
|
118,378 |
|
3 |
|
4 |
|
|
92,151 |
|
|
91,218 |
|
4 |
|
5 |
|
|
125,012 |
|
|
109,618 |
|
5 |
|
— |
|
|
— |
|
|
— |
|
Total |
|
15 |
|
$ |
336,161 |
|
$ |
319,214 |
|
Add: Unamortized (fees)/costs, net |
|
|
$ |
1,461 |
|
|
|
||
Less: Allowance for credit losses |
|
|
|
(8,818 |
) |
|
|
||
Commercial mortgage loans at cost, net |
|
|
$ |
328,804 |
|
|
|
||
(1) Net loan exposure excludes the amount of loan participation sold. See “Note 5 – Loan Participations Sold, Net.” Further, net loan exposure is calculated net of the CECL reserve recorded on the loans. See “Note 3 – Commercial Mortgage Loans Held for Investment – Allowance for Credit Losses.”
As of March 31, 2026 and December 31, 2025, we had borrowings under repurchase agreements totaling $215,074 and $223,397, respectively, and loan participations sold, net, of $47,715 and $47,009, respectively. During the three months ended March 31, 2026 and the year ended December 31, 2025, we had weighted average borrowings, which include borrowings under repurchase agreements and loan participations sold, net, of $227,446 and $321,492, respectively, and weighted average borrowing costs, which also include borrowings under repurchase agreements and loan participations sold, net, of 6.2% and 6.6%, respectively.
Real Estate Owned
2025 Acquisitions
During the year ended December 31, 2025, we acquired legal title to a multifamily property located in Kansas City, MO, the Arbor Mist property, and an office property located in Charlotte, NC, the Parkview property, through non-judicial foreclosure transactions. The properties previously collateralized two senior loans. The acquisitions were accounted for as asset acquisitions under applicable GAAP guidance. The properties were recorded on our consolidated balance sheet based on the estimated fair value at acquisition. The fair market value estimate was determined based on appraisals performed by independent third-party appraisers.
29
The following table shows additional information about the 2025 acquisitions:
|
Arbor Mist |
|
|
Parkview |
|
||
Acquisition date |
May 1, 2025 |
|
|
July 2, 2025 |
|
||
Number of properties |
1 |
|
|
1 |
|
||
Location |
Kansas City, MO |
|
|
Charlotte, NC |
|
||
Property type |
Multifamily |
|
|
Office |
|
||
Amortized cost basis of loan as of acquisition date |
$ |
38,933 |
|
|
$ |
22,892 |
|
CECL reserve as of acquisition date |
$ |
68 |
|
|
$ |
2,311 |
|
Loan risk rating as of acquisition date |
5 |
|
|
5 |
|
||
CECL reserve charge-off upon acquisition |
$ |
68 |
|
|
$ |
2,311 |
|
|
|
|
|
|
|
||
We recognized a net gain of $531 upon the foreclosure transactions, which represents total assets received, net of liabilities assumed, less carrying value of loans adjusted for interest, extension fee and CECL reserve.
The following table shows selected data for our REO in our portfolio as of March 31, 2026:
Property |
|
Acquisition Date |
|
Property Type |
|
Location |
|
Rentable Square Feet (RSF) / Number of Units |
|
|
% Leased |
|
||
Belvedere |
|
July 2, 2024 |
|
Office |
|
Addison, TX |
|
|
141,180 |
|
|
|
89.5 |
% |
Meridian |
|
July 2, 2024 |
|
Office |
|
Irving, TX |
|
|
100,359 |
|
|
|
53.0 |
% |
Fitz |
|
October 23, 2024 |
|
Multifamily |
|
Portland, OR |
|
|
64 |
|
|
|
67.2 |
% |
Arbor Mist |
|
May 1, 2025 |
|
Multifamily |
|
Kansas City, MO |
|
|
200 |
|
|
|
82.0 |
% |
Parkview |
|
July 2, 2025 |
|
Office |
|
Charlotte, NC |
|
|
124,788 |
|
|
|
61.7 |
% |
Results of Operations
Comparison of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities. The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the periods indicated:
|
Three months ended March 31, |
|
|||||||||||||||||||||
|
2026 |
|
|
2025 |
|
||||||||||||||||||
|
Average |
|
|
Interest |
|
|
Weighted |
|
|
Average |
|
|
Interest |
|
|
Weighted |
|
||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial mortgage loans |
$ |
340,208 |
|
|
$ |
6,493 |
|
|
|
7.6 |
% |
|
$ |
563,238 |
|
|
$ |
10,451 |
|
|
|
7.4 |
% |
Total/Weighted Average |
$ |
340,208 |
|
|
$ |
6,493 |
|
|
|
7.6 |
% |
|
$ |
563,238 |
|
|
$ |
10,451 |
|
|
|
7.4 |
% |
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Repurchase agreements — commercial mortgage loans |
$ |
217,436 |
|
|
$ |
3,312 |
|
|
|
6.1 |
% |
|
$ |
358,308 |
|
|
$ |
6,036 |
|
|
|
6.7 |
% |
Loan participations sold, net |
|
10,010 |
|
|
|
205 |
|
|
|
8.2 |
% |
|
|
29,007 |
|
|
|
455 |
|
|
|
6.3 |
% |
Total/Weighted Average |
$ |
227,446 |
|
|
$ |
3,517 |
|
|
|
6.2 |
% |
|
$ |
387,315 |
|
|
$ |
6,491 |
|
|
|
6.7 |
% |
Net interest income/spread |
|
|
|
$ |
2,976 |
|
|
|
1.4 |
% |
|
|
|
|
$ |
3,960 |
|
|
|
0.7 |
% |
||
Average leverage % (5) |
|
|
|
|
201.7 |
% |
|
|
|
|
|
|
|
|
220.2 |
% |
|
|
|
||||
Weighted average levered yield (6) |
|
|
|
|
|
|
|
10.6 |
% |
|
|
|
|
|
|
|
|
9.0 |
% |
||||
30
The change in our average interest-earning assets and interest-bearing liabilities was due to origination of a new loan, the paydown of the principal balance as loans matured and the subsequent repayment of the amount financed for these loans. The change in the weighted average levered yield was primarily due to the change in the composition of the loans in the portfolio and the change in the composition of financing.
Revenue from Real Estate
Our revenue from real estate during the three months ended March 31, 2026 and 2025, was $2,726 and $1,528, respectively. The increase in revenue was primarily due to the acquisition of two properties after the first quarter of 2025.
Operating Expenses
Operating expenses for the three months ended March 31, 2026 and 2025 consisted of the following:
|
|
Three months ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Advisory fee |
|
$ |
717 |
|
|
$ |
789 |
|
Amortization of debt finance costs |
|
|
329 |
|
|
|
343 |
|
Directors compensation |
|
|
20 |
|
|
|
19 |
|
Professional service fees |
|
|
207 |
|
|
|
267 |
|
Real estate operating expenses (1) |
|
|
1,665 |
|
|
|
655 |
|
Depreciation and amortization |
|
|
1,193 |
|
|
|
928 |
|
Other expenses |
|
|
300 |
|
|
|
334 |
|
Total operating expenses |
|
$ |
4,431 |
|
|
$ |
3,335 |
|
____________ |
|
|
|
|
|
|
||
Total operating expenses for the three months ended March 31, 2026 and 2025 were $4,431 and $3,335, respectively. The primary driver of the increase in total operating expenses was the acquisition of two properties after the first quarter of 2025.
Net (Loss) Income
For the three months ended March 31, 2026 and 2025, our net (loss) income was $(4,143) and $3,948, respectively. The decrease in net income was primarily due to a reduction in net interest income as the loan portfolio decreased, an increase in the CECL reserve and an increase in real estate operating expenses and depreciation and amortization, partially offset by an increase in revenue from real estate.
31
Non-GAAP Financial Measures
Funds from Operations and Modified Funds from Operations
We use Funds from Operations (“FFO”), a widely accepted metric, to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts (“NAREIT”) has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income (loss) attributable to common stockholders computed in accordance with GAAP, excluding gains (or losses) from sales of operating property, plus depreciation and amortization and after adjustments for unconsolidated entities. In addition, NAREIT has further clarified the FFO definition to add-back impairment write-downs of depreciable real estate or of investments in unconsolidated entities that are driven by measurable decreases in the fair value of depreciable real estate and to exclude the earnings impacts of cumulative effects of accounting changes. We have adopted the NAREIT definition for computing FFO.
Due to the unique features of publicly registered, non-listed REITs, the Institute for Portfolio Alternatives (“IPA”), an industry trade group, published a standardized measure known as Modified Funds from Operations (“MFFO”), which the IPA has promulgated as a supplemental measure for publicly registered non-listed REITs and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT.
The IPA defines MFFO as FFO adjusted for acquisition fees and expenses, amounts relating to straight line rents and amortization of premiums on debt investments, non-recurring impairments of real estate-related investments, mark-to-market adjustments included in net income, non-recurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures.
We define MFFO in accordance with the concepts established by the IPA and adjust FFO for certain items, such as amortization of premium and discounts on real estate securities. We purchase real estate securities at a premium or discount to par value, and in accordance with GAAP, record the amortization of premium/accretion of the discount to interest income. We believe that excluding the amortization of premiums and discounts provides better insight to the expected contractual cash flows. We also adjust FFO for gains or losses on preferred stock repurchases, when/if they occur, because we do not consider these gains or losses to be a measure of our operating performance. In addition, we adjust FFO for unrealized gains or losses on real estate securities. Any mark-to-market or fair value adjustments are based on general market or overall industry conditions and may be temporary in nature.
Because MFFO may be a recognized measure of operating performance within the non-listed REIT industry, MFFO and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed REITs. Like FFO, MFFO is not equivalent to our net income or loss as determined under GAAP, as detailed in the table below, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of investments.
Our presentation of FFO and MFFO may not be comparable to other similarly titled measures presented by other REITs. We believe that the use of FFO and MFFO provides a more complete understanding of our operating performance to stockholders and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. Neither FFO nor MFFO is intended to be an alternative to “net income” or to “cash flows from operating activities” as determined by GAAP as a measure of our capacity to pay distributions. Management uses FFO and MFFO to compare our operating performance to that of other REITs and to assess our operating performance.
Neither the SEC, any other regulatory body nor NAREIT has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, another regulatory body or NAREIT may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.
32
Our FFO and MFFO are calculated as follows:
|
Three months ended March 31, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Net (loss) income attributable to common stockholders |
$ |
(5,638 |
) |
|
$ |
2,453 |
|
Depreciation and amortization |
|
1,193 |
|
|
|
928 |
|
Funds from operations (FFO) attributable to common stockholders |
$ |
(4,445 |
) |
|
$ |
3,381 |
|
|
|
|
|
|
|
||
Amortization of debt financing costs |
$ |
329 |
|
|
$ |
343 |
|
Provision for (reversal of) credit losses |
|
4,883 |
|
|
|
(1,496 |
) |
Amortization of acquired lease intangibles, net |
|
(18 |
) |
|
|
(18 |
) |
Straight-line expense, net |
|
(243 |
) |
|
|
(110 |
) |
Modified funds from operations (MFFO) attributable to common stockholders |
$ |
506 |
|
|
$ |
2,100 |
|
Net Asset Value
Our NAV for each class of shares is based on the net asset values of our investments, the addition of any other assets (such as cash on hand) and the deduction of any liabilities, including the allocation/accrual of any performance participation and any stockholder servicing fees applicable to such class of shares. The Advisor is responsible for reviewing and confirming our NAV, as well as overseeing the process around the calculation of our NAV, in each case, as calculated by the independent valuation advisor. See “Valuation Guidelines” below for further information regarding our valuation policies used to determine our NAV.
The following table provides a breakdown of the major components of our total net asset value attributable to common stock as of March 31, 2026 ($ and shares in thousands):
Components of NAV |
As of |
|
|
Commercial mortgage loans |
$ |
333,449 |
|
Real estate owned |
|
99,764 |
|
Cash and cash equivalents and restricted cash |
|
82,627 |
|
Other assets |
|
4,722 |
|
Repurchase agreements - commercial mortgage loans |
|
(215,074 |
) |
Loan participations sold |
|
(47,715 |
) |
Mortgage loan payable |
|
(23,978 |
) |
Due to related parties |
|
(1,514 |
) |
Distributions payable |
|
(1,052 |
) |
Interest payable |
|
(2,950 |
) |
Accrued stockholder servicing fees (1) |
|
(280 |
) |
Other liabilities |
|
(3,074 |
) |
Preferred stock |
|
(88,313 |
) |
Net asset value attributable to common stock |
$ |
136,612 |
|
Number of outstanding common shares |
|
10,120 |
|
33
The following table provides a breakdown of our total net asset value attributable to common stock and NAV per share by share class as of March 31, 2026 ($ and shares in thousands, except per share data):
|
Common Stock |
|
|||||||||||||||||||||||||
NAV Per Share |
Class P |
|
|
Class A |
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
|
Total |
|
|||||||
Monthly NAV |
$ |
115,499 |
|
|
$ |
10,096 |
|
|
$ |
3,969 |
|
|
$ |
— |
|
|
$ |
651 |
|
|
$ |
6,401 |
|
|
$ |
136,612 |
|
Number of outstanding shares |
|
8,563 |
|
|
|
746 |
|
|
|
290 |
|
|
|
— |
|
|
|
48 |
|
|
|
473 |
|
|
|
10,120 |
|
NAV per share as of March 31, 2026 |
$ |
13.4884 |
|
|
$ |
13.5351 |
|
|
$ |
13.6705 |
|
|
$ |
— |
|
|
$ |
13.5645 |
|
|
$ |
13.5369 |
|
|
$ |
13.4992 |
|
The following table reconciles stockholders’ equity per our consolidated balance sheet to our NAV ($ in thousands):
Reconciliation of Stockholders’ Equity to NAV |
As of |
|
|
Stockholders’ equity per GAAP |
$ |
217,464 |
|
Adjustments: |
|
|
|
Unamortized stockholder servicing fee and other expenses |
|
364 |
|
Real estate owned non-cash adjustments |
|
2,435 |
|
Credit losses reserve - non-specific portion |
|
4,662 |
|
Net asset value |
$ |
224,925 |
|
Preferred Stock Adjustments: |
|
|
|
Preferred stock liquidation value |
|
(88,614 |
) |
Unamortized preferred stock offering costs |
|
301 |
|
Net asset value attributable to common stock |
$ |
136,612 |
|
Valuation Guidelines
Our Board, including a majority of our independent directors, has adopted valuation guidelines that contain a comprehensive set of methodologies to be used by our Advisor, with the assistance of our Sub-Advisor, and our independent valuation advisor in connection with estimating the values of our assets and liabilities for purposes of our NAV calculation. From time to time, our Board, including a majority of our independent directors, may adopt changes to the valuation guidelines if it (1) determines that such changes are likely to result in a more accurate reflection of NAV or a more efficient or less costly procedure for the determination of NAV without having a material adverse effect on the accuracy of such determination or (2) otherwise reasonably believes a change is appropriate for the determination of NAV. In connection with carrying out its responsibility to determine our NAV, our Advisor may delegate certain tasks to our Sub-Advisor. Our Advisor, however, is ultimately responsible for the NAV determination process.
The calculation of our NAV is intended to be a calculation of the value of our assets less our outstanding liabilities for the purpose of establishing a purchase and repurchase price for our shares of common stock and may differ from our financial statements. NAV is not a measure used under GAAP and the valuations of and certain adjustments made to our assets and liabilities used in the determination of NAV will differ from GAAP.
Our Advisor calculates the fair value of our assets in accordance with our valuation guidelines. Because these fair value calculations involve significant professional judgment in the application of both observable and unobservable attributes, the calculated fair value of our assets may differ from their actual realizable value or future fair value. Furthermore, no rule or regulation requires that we calculate NAV in a certain way. While we believe our NAV calculation methodologies are consistent with standard industry principles, there is no established practice among public REITs, whether listed or not, for calculating NAV in order to establish a purchase and repurchase price. As a result, other public REITs may use different methodologies or assumptions to determine NAV.
Our Independent Valuation Advisor
With the approval of our Board, including a majority of our independent directors, we have engaged BDO USA, P.C. to serve as our independent valuation advisor. Our Advisor, with the approval of our Board, including a majority of our independent directors, may engage additional independent valuation advisors in the future as it deems appropriate. At the end of each month, the independent valuation advisor reviews the calculation of our monthly NAV. The independent valuation advisor is not responsible for our NAV, and performs its services based solely on information received from us, our Advisor and our Sub-Advisor. Our Advisor, and not the independent valuation advisor, is ultimately responsible for the determination of our NAV.
34
Our independent valuation advisor may be replaced at any time, in accordance with agreed-upon notice requirements, by a majority vote of our Board, including a majority of our independent directors. We will promptly disclose any changes to the identity or role of the independent valuation advisor in reports we publicly file with the SEC. Our independent valuation advisor discharges its responsibilities in accordance with our valuation guidelines. Our Board is not involved in the monthly valuation of our assets and liabilities, but periodically receives and reviews such information about the valuation of our assets and liabilities as it deems necessary to exercise its oversight responsibility.
We have agreed to pay fees to our independent valuation advisor upon its delivery to us of its review reports. We have also agreed to indemnify our independent valuation advisor against certain liabilities arising out of this engagement. The compensation we pay to our independent valuation advisor is not based on the estimated values of our loans or our NAV.
Our independent valuation advisor may from time to time in the future perform other commercial real estate and financial advisory services for our Advisor or Sub-Advisor and their affiliates, so long as such other services do not adversely affect the independence of the independent valuation advisor.
Valuation of Investments
The majority of our investments consist of CRE loans intended to be held to maturity. We may also invest in real estate and other real estate-related assets and liquid non-real estate-related assets. Real estate-related assets include CRE securities, such as CMBS and CRE CLOs, and unsecured debt of publicly traded REITs. Our liquid non-real estate-related assets may include credit rated government and corporate debt securities, publicly traded equity securities and cash and cash equivalents.
Our Advisor seeks to determine the fair value of investments as of the last day of each month. Fair value determinations are based upon all available inputs that our Advisor deems relevant, including, but not limited to, indicative dealer quotes, values of like securities, discounted cash flow analysis, and valuations prepared by third-party valuation services. However, determination of fair value involves subjective judgments and estimates.
35
Valuation of Properties
Our valuation reports are not addressed to the public and may not be relied upon by any other person to establish an estimated value of our common stock and do not constitute a recommendation to any person to purchase or sell any shares of our common stock. In preparing our NAV calculation, our Advisor does not solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of our company. Real estate appraisals are reported on a free and clear basis (for example no mortgage), irrespective of any property-level financing that may be in place. The primary methodology used to value properties is the income approach, whereby value is derived by determining the present value of an asset’s stream of future cash flows (for example, discounted cash flow analysis). Consistent with industry practices, the income approach incorporates subjective judgments regarding comparable rental and operating expense data, the capitalization or discount rate, and projections of future rent and expenses based on appropriate evidence. Other methodologies that may also be used to value properties include sales comparisons and replacement cost approaches. Because the appraisals involve subjective judgments, the fair value of our assets, which is included in our NAV, may not reflect the liquidation value or net realizable value of our properties.
Liabilities
We include the fair value of our liabilities as part of our NAV calculation. Our liabilities generally include portfolio-level credit facilities, the fees payable to our Advisor and the Dealer Manager, accounts payable, accrued operating expenses, property-level mortgages, reserves for future liabilities and other liabilities. All liabilities are valued using widely accepted methodologies specific to each type of liability. Our debt is typically valued at fair value in accordance with GAAP. Our aggregate monthly NAV will be reduced to reflect the accrual of the liability to pay any declared (and unpaid) distributions for all classes of common stock. Liabilities allocable to a specific class of shares will only be included in the NAV calculation for that class.
NAV and NAV Per Share Calculation
Each class of our common stock, including Class P common stock that was not offered to the public, has an undivided interest in our assets and liabilities, other than class-specific liabilities. Our NAV is calculated by the independent valuation advisor for each of these classes. Our Advisor is responsible for reviewing and confirming our NAV, and overseeing the process around the calculation of our NAV, in each case, as calculated by the independent valuation advisor. Because stockholder servicing fees allocable to a specific class of shares will only be included in the NAV calculation for that class, the NAV per share for our share classes may differ.
At the end of each month, before taking into consideration class-specific expense accruals for that month, any change in our aggregate NAV (whether an increase or decrease) is allocated among each class of shares based on each class’s relative percentage of the previous aggregate NAV plus issuances of shares that were effective on the first business day of such month and issuances of shares under our DRP and less repurchases under our SRP during such month (if any). The NAV calculation is generally available within 15 calendar days after the end of the applicable month. Changes in our monthly NAV include, without limitation, accruals of our net portfolio
36
income, interest expense, the management fee, any accrued performance fee, distributions, unrealized/realized gains and losses on assets, provisions for credit losses recorded on specific loans, any applicable organization and offering costs and any expense reimbursements. Changes in our monthly NAV also include material non-recurring events, such as capital expenditures and material property acquisitions and dispositions occurring during the month. On an ongoing basis, our Advisor will adjust the accruals to reflect actual operating results and the outstanding receivable, payable and other account balances resulting from the accumulation of monthly accruals for which financial information is available.
For the purpose of calculating our NAV, offering costs are expenses we incur as we raise proceeds in our public and private offerings. For GAAP purposes, these costs are deducted from equity when incurred. For the NAV calculation, all of the offering costs from our public and private offerings incurred through July 17, 2019 (the “NAV Pricing Date”) were added back to equity and amortized into equity monthly over the 60 months beginning with the first full month that follows the NAV Pricing Date. Following the NAV Pricing Date, offering costs are included in the NAV calculation as and when incurred.
Following the aggregation of the NAV of our investments, the addition of any other assets (such as cash on hand) and the deduction of any other liabilities, the independent valuation advisor incorporates any class-specific adjustments to our NAV, including additional issuances and repurchases of our common stock and accruals of class-specific stockholder servicing fees. For each applicable class of shares, the stockholder servicing fees are calculated as a percentage of the aggregate NAV for such class of shares. NAV per share for each class is calculated by dividing such class’s NAV at the end of each month by the number of shares outstanding for that class at the end of such month.
The combination of the Class A NAV, Class T NAV, Class S NAV, Class D NAV, Class I NAV and Class P NAV equals the value of our assets less our liabilities, which include certain class-specific liabilities. Our Advisor calculates the value of our investments as directed by our valuation guidelines based upon values received from various sources, including independent valuation services. Our Advisor, with assistance from our Sub-Advisor, is responsible for information received from third parties that is used in calculating our NAV.
Limits on the Calculation of Our Per Share NAV
The overarching principle of our valuation guidelines is to produce reasonable estimated values for each of our investments (and other assets and liabilities). However, the majority of our assets consist of real estate loans and, as with any real estate valuation protocol and as described above, the valuation of our loans (and other assets and liabilities) is based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. The use of different judgments, assumptions or opinions would likely result in a different estimate of the value of our real estate loans (and other assets and liabilities). Any resulting potential disparity in our NAV per share may be in favor of stockholders whose shares are repurchased, existing stockholders or new purchasers of our common stock, as the case may be, depending on the circumstances at the time (for cases in which our transaction price is based on NAV).
Additionally, while the methodologies contained in our valuation guidelines are designed to operate reliably within a wide variety of circumstances, it is possible that in certain unanticipated situations or after the occurrence of certain extraordinary events (such as a significant disruption in relevant markets, a terrorist attack or an act of nature), our ability to calculate NAV may be impaired or delayed, including, without limitation, circumstances where there is a delay in accessing or receiving information from vendors or other reporting agents upon which we may rely upon in determining the monthly value of our NAV. In these circumstances, a more accurate valuation of our NAV could be obtained by using different assumptions or methodologies. Accordingly, in special situations when, in our Advisor’s reasonable judgment, the administration of the valuation guidelines would result in a valuation that does not represent a fair and accurate estimate of the value of our investment, alternative methodologies may be applied, provided that our Advisor must notify our Board at the next scheduled board meeting of any alternative methodologies utilized and their impact on the overall valuation of our investment. We include no discounts to our NAV for the illiquid nature of our shares, including the limitations under our SRP and our ability to suspend or terminate our SRP at any time. Our NAV generally does not consider exit costs that would likely be incurred if our assets and liabilities were liquidated or sold. While we may use market pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of open-end real estate funds listed on stock exchanges. Our NAV does not represent the fair value of our assets less liabilities under GAAP.
37
Liquidity and Capital Resources
Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay distributions to our stockholders, fund investments, originate loans, repay borrowings, and other general business needs including the payment of our operating and administrative expenses.
Our primary sources of funds for liquidity consist of net cash provided by operating activities, repayments of our outstanding loans by borrowers, proceeds from repurchase agreements and other financing arrangements and potential future issuances of equity and/or debt securities. As of March 31, 2026, we had $80 million in unrestricted cash, $311 million in available capacity on our borrowing facilities and $20 million in available borrowing capacity from our revolving credit letter agreements with IREIC and Sound Point.
Our primary liquidity needs include originating new loans, advances on our current loan portfolio, commitments to repay the principal and interest on our borrowings, funding our operations and distributions to our stockholders. We believe we have sufficient liquidity to meet our current needs. In the future we may seek additional sources of liquidity to fund our growth which may include the sale of common or preferred stock or additional financing through repurchase agreements, collateralized loan obligations, sale of loan participations or other borrowings.
Cash Flow Analysis
|
|
Three months ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Net cash provided by operating activities |
|
$ |
1,971 |
|
|
$ |
2,828 |
|
Net cash provided by (used in) investing activities |
|
|
13,823 |
|
|
|
(723 |
) |
Net cash used in financing activities |
|
|
(12,273 |
) |
|
|
(7,531 |
) |
Net increase (decrease) in cash and cash equivalents and restricted cash |
|
$ |
3,521 |
|
|
$ |
(5,426 |
) |
We experienced a net increase in cash and cash equivalents and restricted cash of $3,521 for the three months ended March 31, 2026 compared to a net decrease of $5,426 for the three months ended March 31, 2025. During the three months ended March 31, 2026, we funded $11,400 on a new loan, received $25,916 in principal payments from our loans, received $8,550 from repurchase agreements, paid down $16,873 on repurchase agreements and paid distributions of $4,648.
Repurchase Agreements and Mortgage Loan Payable
On May 6, 2019, we, through our wholly owned subsidiary, entered into an uncommitted master repurchase agreement (the “JPM Repo Facility”) with JPMorgan Chase Bank, National Association (“JPM”). The JPM Repo Facility provides up to $150,000 in advances that we expect to use to finance the acquisition or origination of eligible loans and participation interests therein. Advances made prior to December 2021 under the JPM Repo Facility accrue interest at per annum rates equal to the sum of (i) the applicable LIBOR index rate plus (ii) a margin of between 1.75% to 2.50% with no floor, depending on the attributes of the purchased assets. Advances made subsequent to December 2021 under the JPM Repo Facility accrue interest at per annum rates equal to the sum of SOFR plus an agreed upon margin. As of March 31, 2026, all of the advances made under the JPM Repo Facility were indexed to SOFR and have margins between 1.85% and 2.50% with a floor between 0.00% and 3.00%. In May 2022, the maturity date of the JPM Repo Facility was extended to May 6, 2023. On May 5, 2023, we entered into an amendment that extended the maturity date to May 6, 2026, with the option to extend the maturity date further to May 6, 2028 subject to two optional one-year extensions. The amendment also increased the maximum facility amount to $526,076. On May 5, 2026, we exercised our option to extend the maturity date to May 6, 2027. The JPM Repo Facility is subject to certain financial covenants. We were in compliance with all financial covenant requirements as of March 31, 2026 and December 31, 2025.
The JPM Repo Facility has been, and continues to be, used to finance eligible loans and act in the manner of a revolving credit facility that can be repaid as our assets are paid off and re-drawn as advances against new assets.
The tables below show details of the JPM Repo Facility as of March 31, 2026 and December 31, 2025:
March 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
||||||||
|
Committed Financing |
|
|
Amount |
|
|
Accrued |
|
|
Collateral |
|
|
Interest |
|
Days to |
|
||||||
JPM Repo Facility |
$ |
526,076 |
|
|
$ |
215,074 |
|
|
$ |
507 |
|
|
$ |
302,334 |
|
|
|
6.07 |
% |
|
767 |
|
38
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
||||||||
|
Committed Financing |
|
|
Amount |
|
|
Accrued |
|
|
Collateral |
|
|
Interest |
|
Days to |
|
||||||
JPM Repo Facility |
$ |
526,076 |
|
|
$ |
223,397 |
|
|
$ |
534 |
|
|
$ |
316,849 |
|
|
|
6.15 |
% |
|
857 |
|
Mortgage Loan Payable
On September 30, 2025, we entered into a mortgage loan agreement with Ladder Capital Finance LLC for an aggregate principal amount of $24,500. The mortgage loan is collateralized by the Arbor Mist property. As of March 31, 2026, we had $24,500 outstanding under the mortgage loan. The mortgage loan bears interest at a rate equal to the greater of (a) SOFR plus 2.95% or (b) a floor rate of 6.20% per annum. The mortgage loan requires interest-only payments until the maturity date, at which point the outstanding principal and interest are due. The maturity date of the mortgage loan is October 6, 2027, and we have the option to extend the maturity date for up to three additional one-year periods, subject to the payment of an extension fee, certain costs and expenses and certain other conditions. The mortgage loan contains customary default provisions including failure to pay amounts when due. As of March 31, 2026, the carrying value of the mortgage loan payable was $23,978.
Loan Participations Sold
On November 15, 2021, we sold a non-recourse senior participation interest in nine first mortgage loans to a third party. Under the loan participation agreement, in the event of default by the underlying mortgagor, any amounts paid are first allocated to the third party before any amounts are allocated to our subordinate interest. As the directing participant in the loan participation agreement, we are entitled to exercise, without the consent of the third party, each of the consent approval and control rights under the applicable underlying mortgage loan documents with a few exceptions. We require the third party’s approval for any modification or amendment to the loan, a bankruptcy plan for an underlying mortgagor where the third party would incur an out-of-pocket loss, or any transfer of the underlying mortgaged property if our approval is required by the underlying mortgage documents. We remain the directing participant unless certain conditions are met related to losses on the property or if the mortgagor is one of our affiliates. In the former case, we may post cash or short-term U.S. government securities as collateral to retain the rights of the directing participant.
The third party, as the senior participation interest holder, receives interest and principal payments from the borrower until they receive the amounts to which they are entitled. All expenses or losses on the underlying mortgages are allocated first to us and then to the third party. If the underlying mortgage is in default, we will have the option to purchase the third party’s participation interest and remove it from the loan participation agreement.
On July 2, 2025, we acquired legal title to an office property through a non-judicial foreclosure transaction. On July 2, 2024, we acquired legal title to two office properties through non-judicial foreclosure transactions. Both the underlying loans were subject to loan participation agreements. Upon foreclosure, we are still subject to the participation payments to the third party. Such payments are based on the underlying properties’ net income before depreciation adjusted for any non-cash revenue. If the monthly payment exceeds the interest due under the participation agreement, the excess is paid to the third party and recorded as a reduction of accrued and unpaid interest first and then as a reduction of the principal. If the monthly payment is less than the interest due under the participation agreement, the shortfall is accrued as interest payable.
The following tables detail our loan participations sold as of March 31, 2026 and December 31, 2025:
|
|
March 31, 2026 |
||||||||||||||||
Loan Participations Sold |
|
Count |
|
|
Principal Balance |
|
|
Book Value |
|
|
Yield/Cost (1) |
|
Guarantee (2) |
|
Weighted Average Maximum Maturity (4) |
|||
Total Loans |
|
|
1 |
|
|
$ |
12,700 |
|
|
$ |
10,382 |
|
|
SOFR+4.7% |
|
n/a |
|
n/a |
Senior participations (3) (5) |
|
|
3 |
|
|
$ |
47,715 |
|
|
$ |
47,715 |
|
|
SOFR+2.0% |
|
n/a |
|
n/a |
39
|
|
December 31, 2025 |
|
|||||||||||||||||
Loan Participations Sold |
|
Count |
|
|
Principal Balance |
|
|
Book Value |
|
|
Yield/Cost (1) |
|
Guarantee (2) |
|
Weighted Average Maximum Maturity (4) |
|
||||
Total Loans |
|
|
1 |
|
|
$ |
12,700 |
|
|
$ |
12,731 |
|
|
SOFR+4.7% |
|
n/a |
|
|
0.11 |
|
Senior participations (3) (5) |
|
|
3 |
|
|
$ |
47,009 |
|
|
$ |
47,009 |
|
|
SOFR+2.0% |
|
n/a |
|
|
0.11 |
|
____________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revolving Credit Liquidity Letter Agreements
IREIC, our sponsor, and Sound Point have agreed under separate letter agreements dated July 20, 2021, and July 15, 2021, respectively, to make revolving credit loans to us in an aggregate principal amount outstanding at any one time not to exceed $5,000 and $15,000, respectively (the “IREIC-Sound Point Commitments”) from time to time. Use of the IREIC-Sound Point Commitments is limited to satisfying requirements to maintain cash or cash equivalents under our repurchase and other borrowing arrangements.
Distributions
Common Stock
The table below presents the aggregate annualized and monthly distributions declared by record date for all classes of shares of common stock since January 1, 2025. The amount of distributions that we may pay in the future is not certain.
Record date |
|
Aggregate annualized gross distribution declared per share |
|
|
Aggregate monthly gross distribution declared per share |
|
||
January 31, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
February 28, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
March 31, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
April 30, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
May 31, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
June 30, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
July 31, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
August 31, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
September 30, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
October 31, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
November 30, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
December 31, 2025 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
January 31, 2026 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
February 28, 2026 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
March 31, 2026 |
|
$ |
1.2500 |
|
|
$ |
0.1042 |
|
The gross distribution was reduced each month for Class D and Class T of our common stock for applicable class-specific stockholder servicing fees to arrive at a lower net distribution amount paid to those classes. For a description of the stockholder servicing fees applicable to Class D, Class S and Class T shares of our common stock, please see “Note 10 – Transactions with Related Parties” in the notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q. Since the IPO and through March 31, 2026, we have not issued any shares of Class S common stock.
40
The following table shows our monthly net distribution per share for shares of Class D and Class T common stock since January 1, 2025.
Record date |
|
Monthly net distribution declared per share of Class D common stock |
|
|
Monthly net distribution declared per share of Class T common stock |
|
||
January 31, 2025 |
|
$ |
0.1007 |
|
|
$ |
0.0923 |
|
February 28, 2025 |
|
$ |
0.1010 |
|
|
$ |
0.0934 |
|
March 31, 2025 |
|
$ |
0.1007 |
|
|
$ |
0.0923 |
|
April 30, 2025 |
|
$ |
0.1008 |
|
|
$ |
0.0928 |
|
May 31, 2025 |
|
$ |
0.1007 |
|
|
$ |
0.0925 |
|
June 30, 2025 |
|
$ |
0.1009 |
|
|
$ |
0.0929 |
|
July 31, 2025 |
|
$ |
0.1007 |
|
|
$ |
0.0924 |
|
August 31, 2025 |
|
$ |
0.1007 |
|
|
$ |
0.0924 |
|
September 30, 2025 |
|
$ |
0.1009 |
|
|
$ |
0.0929 |
|
October 31, 2025 |
|
$ |
0.1009 |
|
|
$ |
0.0930 |
|
November 30, 2025 |
|
$ |
0.1010 |
|
|
$ |
0.0934 |
|
December 31, 2025 |
|
$ |
0.1009 |
|
|
$ |
0.0931 |
|
January 31, 2026 |
|
$ |
0.1012 |
|
|
$ |
0.0938 |
|
February 28, 2026 |
|
$ |
0.1015 |
|
|
$ |
0.0949 |
|
March 31, 2026 |
|
$ |
0.1012 |
|
|
$ |
0.0940 |
|
Series A Preferred Stock
Series A Preferred Stock dividends are paid quarterly in arrears based on an annualized distribution rate of 6.75% of the $25.00 per share liquidation preference, or $1.6875 per share per annum. The table below shows the aggregate annualized and quarterly distributions declared on the Series A Preferred Stock by record date since January 1, 2025.
Record date |
Aggregate annualized gross distribution declared per share |
|
Aggregate quarterly gross distribution declared per share |
|
||
March 15, 2025 |
$ |
1.6875 |
|
$ |
0.421875 |
|
June 15, 2025 |
$ |
1.6875 |
|
$ |
0.421875 |
|
September 15, 2025 |
$ |
1.6875 |
|
$ |
0.421875 |
|
December 15, 2025 |
$ |
1.6875 |
|
$ |
0.421875 |
|
March 15, 2026 |
$ |
1.6875 |
|
$ |
0.421875 |
|
Sources of Distributions to Common Stockholders
|
|
Three months ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Distributions to Holders of Common Stock |
|
|
|
|
|
|
||
Paid in cash |
|
$ |
3,153 |
|
|
$ |
3,152 |
|
Reinvested in shares |
|
|
— |
|
|
|
— |
|
Total distributions |
|
$ |
3,153 |
|
|
$ |
3,152 |
|
Cash flows from operating activities |
|
$ |
1,971 |
|
|
$ |
2,828 |
|
During the three months ended March 31, 2026 and 2025, 63% and 90%, respectively, of our common stock distributions were paid from cash flows from operating activities generated during the period, and the remainder was paid using cash generated during prior periods.
Critical Accounting Policies
There have been no material changes to our critical accounting policies set forth in our Annual Report on Form 10-K under the heading “Summary of Critical Accounting Policies and Estimates”.
Commercial Mortgage Loans Held for Investment and Allowance for Credit Losses
Loans held-for-investment are anticipated to be held until maturity, and reported at cost, net of allowance for credit losses, any unamortized acquisition premiums or discounts, loan fees and origination costs, as applicable. In accordance with ASU 2016-13,
41
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, we use a probability-weighted quantitative analytical model to estimate and recognize an allowance for credit losses on loans held-for-investment and their related unfunded commitments. We employed quarterly updated macroeconomic forecasts, which reflect expectations for overall economic output, interest rates, values of real estate properties and other factors, geopolitical instability and the Federal Reserve monetary policy impact on the overall U.S. economy and commercial real estate markets generally. These estimates may change in future periods based on available future macroeconomic data and might result in a material change in our future estimates of expected credit losses for our loan portfolio.
We consider loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For loans that we determine foreclosure of the collateral is probable, we measure the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that we determine foreclosure is not probable, we apply a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.
For loans assigned a risk rating of “5,” we have determined that the recovery of the loan’s principal is collateral-dependent. Accordingly, these loans are assessed individually, and we elected to apply a practical expedient in accordance with ASU 2016-13. While utilizing the practical expedient for collateral-dependent loans, we estimate the fair value of the loan’s underlying collateral using the discounted cash flow method of valuation, less the estimated cost to foreclose and sell the property when applicable. The estimation of the fair value of the collateral property also involves using various Level 3 unobservable inputs, which are inherently uncertain and subjective, and are in part developed based on discussions with various market participants and management’s best estimates, which may vary depending on the information available and market conditions as of the valuation date. Selecting the appropriate inputs and assumptions requires significant judgment and consideration of various factors that are specific to the underlying collateral property being assessed. Our estimate of the fair value of the collateral property is sensitive to both the valuation methodology selected and inputs used in the analysis. As a result, the fair value of the collateral property used in determining the expected credit losses is subject to uncertainty and any actual losses, if incurred, could differ materially from the estimated provision for credit losses.
Interest income on loans held-for-investment is recognized at the loan coupon rate. Any premiums or discounts, loan fees, contractual exit fees and origination costs are amortized or accreted into interest income over the lives of the loans using the effective interest method. Generally, loans held-for-investment are placed on nonaccrual status when delinquent for more than 90 days or when determined not to be probable of full collection. Interest income recognition is suspended when loans are placed on nonaccrual status. Interest accrued, but not collected, at the date loans are placed on nonaccrual is reversed and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. However, when there is doubt regarding the ultimate collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Loans held-for-investment are restored to accrual status only when contractually current or the collection of future payments is reasonably assured. We may make exceptions to placing a loan on nonaccrual status if the loan has sufficient collateral value and is in the process of collection or has been modified.
The allowance for credit losses is recorded in accordance with ASU 2016-13, and is a valuation account that is deducted from the amortized cost basis of loans held-for-investment on our consolidated balance sheets. Changes to the allowance for credit losses are recognized through net income (loss) on our consolidated statements of operations. The allowance is based on relevant information about past events, including historical loss experience, current portfolio, market conditions and reasonable and supportable forecasts for the duration of each respective loan. All loans held-for-investment within our portfolio have some amount of expected loss to reflect the GAAP principal underlying the CECL model that all loans have some inherent risk of loss, regardless of credit quality, subordinate capital or other mitigating factors.
Our loans typically include commitments to fund incremental proceeds to our borrowers over the life of the loan. Those future funding commitments are also subject to an allowance for credit losses. The allowance for credit losses related to future loan fundings is recorded as a component of “Accrued expenses and other liabilities” on our consolidated balance sheets, and not as an offset to the related loan balance. This allowance for credit losses is estimated using the same process outlined below for our outstanding loan balances, and changes in this component of the allowance for credit losses similarly flow through our consolidated statements of operations.
The allowance for credit losses is estimated on a quarterly basis and represents management’s estimates of current expected credit losses in our investment portfolio. Pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually. Estimating an allowance for credit losses is inherently subjective, as it requires management to exercise significant judgment in establishing appropriate factors used to determine the allowance and a variety of subjective assumptions, including (i) determination of relevant historical loan loss data sets, (ii) the expected timing and amount of future loan fundings and repayments, (iii) the current credit quality of loans and operating performance of loan collateral and our expectations of performance, (iv) selecting the forecast for macroeconomic conditions and (v) determining the reasonable and supportable forecast period.
42
We estimate the analytical portion of our allowance for credit losses by using a probability-weighted quantitative analytical model that considers the likelihood of default and loss-given-default for each individual loan. The analytical model incorporates a third-party licensed database for over 100,000 commercial real estate loans. We license certain macroeconomic financial forecasts from a third-party to inform our view of the potential future impact that broader macroeconomic conditions may have on the performance of the loans held-for-investment. These macroeconomic factors include unemployment rates, interest rates, price indices for commercial property and other factors. We may use one or more of these forecasts in the process of estimating our allowance for credit losses. Selection of these economic forecasts requires significant judgment about future events that, while based on the information available to us as of the balance sheet date, are ultimately unknowable with certainty, and the actual economic conditions impacting our portfolio could vary significantly from the estimates we made for the periods presented. Significant inputs to our estimate of the allowance for credit losses include the reasonable and supportable forecast period and loan specific factors such as debt service coverage ratio, or DSCR, loan-to-value ratio, or LTV, remaining contractual loan term, property type and others. In addition, we also consider relevant loan-specific qualitative factors to estimate our allowance for credit losses.
Recent Accounting Pronouncements
For information related to recently issued accounting pronouncements, reference is made to “Note 2 – Summary of Significant Accounting Policies” which is included in our notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
As of March 31, 2026, we had no off-balance sheet arrangements that were reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources excluding future loan advance commitments as disclosed in “Note 8 – Commitments and Contingencies.
Subsequent Events
For information related to subsequent events, reference is made to “Note 14 – Subsequent Events,” which is included in our notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.
Our Corporate Information
Our principal executive offices are located at 2901 Butterfield Rd., Oak Brook, Illinois 60523, our telephone number is (866) 694-6526 and our website is www.inland-investments.com/inpoint. From time to time, we may use our website as a distribution channel for material company information, including, for example, our position on any third-party tender offers for our securities. Our website is not incorporated by reference in or otherwise a part of this Quarterly Report on Form 10-Q. We will provide without charge a copy of this Quarterly Report on Form 10-Q upon written request delivered to our principal executive offices. We electronically file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and all amendments to those reports with the SEC. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Credit Risk
Our investments are subject to a high degree of credit risk. Credit risk is the exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy, and other factors beyond our control. All loans are subject to some risk of default. We manage credit risk through the underwriting process and investment structuring process, acquiring our investments at the appropriate discount to face value, if any, and establishing loss assumptions. We also carefully monitor the performance of the loans, as well as external factors that may affect their value.
Adverse economic conditions could negatively impact the commercial properties underlying our investments resulting in potential borrower delinquencies or defaults. If we fail to repay the lender at maturity, the lender has the right to immediately sell the collateral and pursue us for any shortfall if the sales proceeds are inadequate to cover the repurchase agreement financing.
43
Interest Rate Risk
Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we may borrow funds at fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. We do not hold or issue derivative contracts for trading or speculative purposes. We do not have any foreign denominated investments, and thus, we are not exposed to foreign currency fluctuations.
As of both March 31, 2026 and December 31, 2025, our debt investment portfolio was 98% variable rate investments based on SOFR for various terms. Borrowings under our master repurchase agreements were short-term and at a variable rate. Both our investment portfolio and borrowings have minimum levels for SOFR known as interest rate floors. The floors were established when the loans and borrowings were originated based on market conditions. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase or decrease by 25 or 50 basis points, assuming that our current balance sheet was to remain constant and no actions were taken to alter our existing interest rate sensitivity. The change from December 31, 2025 to March 31, 2026 was primarily due to the changes in the portfolio relating to origination, payoffs, paydowns and draws.
|
Estimated Percentage Change in Interest Income Net of Interest Expense |
|
|||||
Change in Rates |
March 31, 2026 |
|
|
December 31, 2025 |
|
||
(-) 50 Basis Points |
|
(3.24 |
)% |
|
|
(3.50 |
)% |
(-) 25 Basis Points |
|
(1.62 |
)% |
|
|
(1.75 |
)% |
Base Interest Rate |
|
0.00 |
% |
|
|
0.00 |
% |
(+) 25 Basis Points |
|
1.62 |
% |
|
|
1.75 |
% |
(+) 50 Basis Points |
|
3.24 |
% |
|
|
3.50 |
% |
For this analysis, SOFR was assumed to not fall below zero.
Item 4. Controls and Procedures
Controls and Procedures
In accordance with Exchange Act Rules 13a-15 and 15d-15, we evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
In the ordinary course of business, we may become subject to litigation. We have no knowledge of material legal proceedings pending or known to be contemplated against us at this time.
Item 1A. Risk Factors
There are no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2025.
44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Equity Securities
We did not have any sales of unregistered securities during the period covered by this Quarterly Report on Form 10-Q.
Use of Proceeds
On May 3, 2019, our 2019 Registration Statement on Form S-11 (File No. 333-230465) for our IPO of common stock of up to $2,350,000 in shares of Class A, Class T, Class S, Class D and Class I common stock, was declared effective under the Securities Act. The IPO terminated upon the commencement of the Second Public Offering. On April 28, 2022, we filed a Registration Statement on Form S-11 (File No. 333-264540) with the SEC, for our Second Public Offering, to register up to $2,200,000 in shares of common stock, which was declared effective by the SEC on November 2, 2022. Inland Securities Corporation served as our dealer manager for the Public Offerings. On January 30, 2023, the Board unanimously approved the suspension of the sale of shares in the primary portion of the Second Public Offering, effective immediately, and the suspension of the sale of shares pursuant to the DRP, effective as of February 10, 2023. The Second Public Offering terminated on November 1, 2025.
As of March 31, 2026, we had received net offering proceeds of $42.8 million from the IPO and Second Public Offering. The following table summarizes certain information about the Public Offerings’ proceeds ($ in thousands):
|
Class A |
|
Class T |
|
Class S |
|
Class D |
|
Class I |
|
Total |
|
||||||
Primary shares sold |
|
794,715 |
|
|
464,881 |
|
|
— |
|
|
53,815 |
|
|
489,069 |
|
|
1,802,480 |
|
Gross proceeds from primary offerings |
$ |
19,695 |
|
$ |
11,309 |
|
$ |
— |
|
$ |
1,237 |
|
$ |
10,999 |
|
$ |
43,240 |
|
Reinvestments of distributions |
|
619 |
|
|
304 |
|
|
— |
|
|
93 |
|
|
658 |
|
|
1,674 |
|
Total gross proceeds |
|
20,314 |
|
|
11,613 |
|
|
— |
|
|
1,330 |
|
|
11,657 |
|
|
44,914 |
|
Selling commissions and dealer manager fees |
|
1,142 |
|
|
313 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,455 |
|
Stockholder servicing fees |
|
— |
|
|
547 |
|
|
— |
|
|
98 |
|
|
— |
|
|
645 |
|
Total expenses |
|
1,142 |
|
|
860 |
|
|
— |
|
|
98 |
|
|
— |
|
|
2,100 |
|
Net offering proceeds (1) |
$ |
19,172 |
|
$ |
10,753 |
|
$ |
— |
|
$ |
1,232 |
|
$ |
11,657 |
|
$ |
42,814 |
|
We primarily used the net offering proceeds from the Public Offerings to originate commercial real estate loans and purchase real estate securities on a levered basis, subject to our investment guidelines and to the extent consistent with maintaining our REIT qualification, and other general corporate purposes.
On September 15, 2021, our registration statement on Form S-11 (File No. 333-258802) for our Preferred Stock Offering of up to 3,500,000 shares of Series A Preferred Stock was declared effective under the Securities Act. Raymond James & Associates acted as representative of the underwriters. On September 22, 2021, we issued and sold 3,500,000 shares of our Series A Preferred Stock at a public offering price of $25.00 per share. In addition, on October 15, 2021, the underwriters partially exercised their over-allotment option and purchased an additional 100,000 shares of Series A Preferred Stock. The Series A Preferred Stock is listed on the New York Stock Exchange with the ticker symbol ICR PR A.
As of March 31, 2026, we received net offering proceeds of $86.3 million from our Preferred Stock Offering. The following table summarizes certain information about the proceeds from our Preferred Stock Offering ($ in thousands):
|
Series A |
|
|
Primary shares sold |
|
3,600,000 |
|
Gross proceeds from primary offering |
$ |
90,000 |
|
Underwriting discounts and commissions |
|
2,835 |
|
Other expenses |
|
855 |
|
Total expenses |
|
3,690 |
|
Net offering proceeds |
$ |
86,310 |
|
45
We contributed the net proceeds from the Preferred Stock Offering to our Operating Partnership, which in turn used the net proceeds to originate first mortgage loans and acquire other targeted assets in a manner consistent with our investment strategies and investment guidelines and for general corporate purposes.
Repurchases of Common Stock
We adopted an SRP, effective May 3, 2019 (currently suspended), whereby on a monthly basis, stockholders who have held our shares of common stock for at least one year may request that we repurchase all or any portion of their shares. Due to the illiquid nature of investments in real estate, we may not have sufficient liquid resources to fund repurchase requests. Because there is no public market for our shares, stockholders may have difficulty selling their shares if we choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular month, in our discretion, or if our Board modifies, suspends or terminates the SRP.
In addition, we have established limitations on the amount of funds we may use for repurchases during any calendar month and quarter. We may repurchase fewer shares than have been requested in any particular month to be repurchased under our SRP, or none at all, in our discretion at any time. In addition, the total amount of aggregate repurchases of shares will be limited to no more than 2% of our aggregate NAV per month and no more than 5% of our aggregate NAV per calendar quarter.
In light of the pace of fundraising in the Second Public Offering and the amount of monthly redemption requests pursuant to the SRP, which were in excess of such fundraising, on January 30, 2023, our Board suspended the SRP. The SRP remains suspended unless and until such time as the Board approves its resumption.
During the three months ended March 31, 2026, we repurchased no shares of our common stock.
Repurchases of Series A Preferred Stock
Subject to certain exceptions, we may not redeem our Series A Preferred Stock until on or after September 22, 2026. Preferred stockholders may only convert their Series A Preferred Shares into Class I common stock if there is a Change of Control and we do not redeem the shares within 120 days of the Change of Control event. For the three months ended March 31, 2026, there were no redemptions of our Series A Preferred Stock and no conversions of our Series A Preferred Stock to common stock.
On August 11, 2022, the Board authorized and approved a share repurchase program (the “Series A Preferred Repurchase Program”) pursuant to which we were permitted to repurchase up to the lesser of 1,000,000 shares or $15 million of the outstanding shares of our Series A Preferred Stock through December 31, 2022. On November 10, 2022, the Board approved to extend the Series A Preferred Repurchase Program through December 31, 2023. Under the Series A Preferred Repurchase Program, repurchases of shares of our Series A Preferred Stock were to be made at management’s discretion from time to time through open market purchases, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws. On January 30, 2023, our Board terminated the Series A Preferred Repurchase Program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Trading Arrangements
During the quarter ended March 31, 2026, none of the Company’s directors or officers
46
Item 6. Exhibits
The representations, warranties and covenants made by us in any agreement filed as an exhibit to this Quarterly Report on Form 10-Q are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties or covenants to, or with, you. Moreover, these representations, warranties and covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.
The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto and are incorporated herein by reference.
Exhibit No. |
|
Description |
|
|
|
3.1 |
|
|
3.2 |
|
|
3.3 |
|
|
3.4 |
|
|
3.5 |
|
|
3.6 |
|
|
4.1 |
|
|
4.2 |
|
|
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema with Embedded Linkbases Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed as part of this Quarterly Report on Form 10-Q
47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
INPOINT COMMERCIAL REAL ESTATE INCOME, INC. |
|
|
|
|
|
By: |
/s/ Denise C. Kramer |
|
Name: |
Denise C. Kramer |
|
Title: |
Chief Executive Officer |
|
|
(principal executive officer) |
|
Date: |
May 8, 2026 |
|
|
|
|
By: |
/s/ Catherine L. Lynch |
|
Name: |
Catherine L. Lynch |
|
Title: |
Chief Financial Officer |
|
|
(principal financial officer) |
|
Date: |
May 8, 2026 |
48
ATTACHMENTS / EXHIBITS
XBRL TAXONOMY EXTENSION SCHEMA WITH EMBEDDED LINKBASES DOCUMENT
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