Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2023 | Oct. 27, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-34383 | |
Entity Registrant Name | Seven Hills Realty Trust | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 20-4649929 | |
Entity Address, Address Line One | Two Newton Place | |
Entity Address, Address Line Two | 255 Washington Street | |
Entity Address, Address Line Three | Suite 300 | |
Entity Address, City or Town | Newton | |
Entity Address, State or Province | MA | |
Entity Address, Postal Zip Code | 02458-1634 | |
City Area Code | 617 | |
Local Phone Number | 332-9530 | |
Title of 12(b) Security | Common Shares of Beneficial Interest | |
Trading Symbol | SEVN | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 14,811,410 | |
Entity Central Index Key | 0001452477 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
ASSETS | ||
Cash and cash equivalents | $ 60,391 | $ 71,057 |
Restricted cash | 139 | 10 |
Loans held for investment | 671,129 | 669,929 |
Allowance for credit losses | (3,281) | 0 |
Loans held for investment, net | 667,848 | 669,929 |
Real estate owned | 11,705 | 0 |
Accumulated depreciation | (41) | 0 |
Real estate owned, net | 11,664 | 0 |
Accrued interest receivable | 3,614 | 3,354 |
Prepaid expenses and other assets, net | 6,330 | 2,497 |
Total assets | 749,986 | 746,847 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
Accounts payable, accrued liabilities and other liabilities | 4,705 | 1,903 |
Secured financing facilities, net | 473,337 | 471,521 |
Due to related persons | 1,663 | 1,844 |
Total liabilities | 479,705 | 475,268 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common shares of beneficial interest, $0.001 par value per share; 25,000,000 shares authorized; 14,815,574 and 14,709,165 shares issued and outstanding, respectively | 15 | 15 |
Additional paid in capital | 239,337 | 238,505 |
Cumulative net income | 65,615 | 52,290 |
Cumulative distributions | (34,686) | (19,231) |
Total shareholders' equity | 270,281 | 271,579 |
Total liabilities and shareholders' equity | $ 749,986 | $ 746,847 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Common shares, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 25,000,000 | 25,000,000 |
Common shares issued (in shares) | 14,815,574 | 14,709,165 |
Common shares outstanding (in shares) | 14,815,574 | 14,709,165 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
INCOME FROM INVESTMENTS: | ||||
Interest and related income | $ 17,137 | $ 11,650 | $ 48,814 | $ 30,098 |
Purchase discount accretion | 1,075 | 1,596 | 3,307 | 9,167 |
Less: interest and related expenses | (8,979) | (5,447) | (24,600) | (10,191) |
Income from loan investments, net | 9,233 | 7,799 | 27,521 | 29,074 |
Revenue from real estate owned | 565 | 0 | 714 | 0 |
Total revenue | 9,798 | 7,799 | 28,235 | 29,074 |
OTHER EXPENSES: | ||||
Base management fees | 1,077 | 1,064 | 3,223 | 3,190 |
Incentive fees | 469 | 0 | 661 | 0 |
General and administrative expenses | 941 | 942 | 3,018 | 3,118 |
Reimbursement of shared services expenses | 642 | 594 | 1,913 | 1,742 |
Reversal of credit losses | (1,338) | 0 | (1,299) | 0 |
Expenses from real estate owned | 516 | 0 | 734 | 0 |
Other transaction related costs | 0 | 0 | 0 | 37 |
Total other expenses | 2,307 | 2,600 | 8,250 | 8,087 |
Income before income taxes | 7,491 | 5,199 | 19,985 | 20,987 |
Income tax expense | (18) | (23) | (65) | (107) |
Net income | $ 7,473 | $ 5,176 | $ 19,920 | $ 20,880 |
Weighted average common shares outstanding - basic (in shares) | 14,640 | 14,551 | 14,609 | 14,526 |
Weighted average common shares outstanding - diluted (in shares) | 14,640 | 14,551 | 14,609 | 14,526 |
Net income per common share - basic (in dollars per share) | $ 0.51 | $ 0.35 | $ 1.35 | $ 1.43 |
Net income per common share - diluted (in dollars per share) | $ 0.51 | $ 0.35 | $ 1.35 | $ 1.43 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - USD ($) $ in Thousands | Total | Cumulative-effect adjustment upon adoption of ASU No. 2016-13 | Common Shares | Additional Paid In Capital | Cumulative Net Income | Cumulative Net Income Cumulative-effect adjustment upon adoption of ASU No. 2016-13 | Cumulative Distributions |
Beginning balance (in shares) at Dec. 31, 2021 | 14,597,000 | ||||||
Beginning balance at Dec. 31, 2021 | $ 257,694 | $ 15 | $ 237,624 | $ 24,650 | $ (4,595) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Share grants | 82 | 82 | |||||
Net income | 11,126 | 11,126 | |||||
Distributions | (3,649) | (3,649) | |||||
Ending balance (in shares) at Mar. 31, 2022 | 14,597,000 | ||||||
Ending balance at Mar. 31, 2022 | 265,253 | $ 15 | 237,706 | 35,776 | (8,244) | ||
Beginning balance (in shares) at Dec. 31, 2021 | 14,597,000 | ||||||
Beginning balance at Dec. 31, 2021 | 257,694 | $ 15 | 237,624 | 24,650 | (4,595) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 20,880 | ||||||
Ending balance (in shares) at Sep. 30, 2022 | 14,714,000 | ||||||
Ending balance at Sep. 30, 2022 | $ 268,409 | $ 15 | 238,417 | 45,530 | (15,553) | ||
Accounting Standards Update [Extensible Enumeration] | Accounting Standards Update 2016-13 [Member] | ||||||
Beginning balance (in shares) at Dec. 31, 2021 | 14,597,000 | ||||||
Beginning balance at Dec. 31, 2021 | $ 257,694 | $ 15 | 237,624 | 24,650 | (4,595) | ||
Ending balance (in shares) at Dec. 31, 2022 | 14,709,165 | 14,709,000 | |||||
Ending balance at Dec. 31, 2022 | $ 271,579 | $ (6,595) | $ 15 | 238,505 | 52,290 | $ (6,595) | (19,231) |
Beginning balance (in shares) at Mar. 31, 2022 | 14,597,000 | ||||||
Beginning balance at Mar. 31, 2022 | 265,253 | $ 15 | 237,706 | 35,776 | (8,244) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Share grants (in shares) | 42,000 | ||||||
Share grants | 548 | 548 | |||||
Share forfeitures (in shares) | (1,000) | ||||||
Net income | 4,578 | 4,578 | |||||
Distributions | (3,649) | (3,649) | |||||
Ending balance (in shares) at Jun. 30, 2022 | 14,638,000 | ||||||
Ending balance at Jun. 30, 2022 | 266,730 | $ 15 | 238,254 | 40,354 | (11,893) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Share grants (in shares) | 85,000 | ||||||
Share grants | 259 | 259 | |||||
Share repurchases (in shares) | (9,000) | ||||||
Share repurchases | (96) | (96) | |||||
Net income | 5,176 | 5,176 | |||||
Distributions | (3,660) | (3,660) | |||||
Ending balance (in shares) at Sep. 30, 2022 | 14,714,000 | ||||||
Ending balance at Sep. 30, 2022 | $ 268,409 | $ 15 | 238,417 | 45,530 | (15,553) | ||
Beginning balance (in shares) at Dec. 31, 2022 | 14,709,165 | 14,709,000 | |||||
Beginning balance at Dec. 31, 2022 | $ 271,579 | (6,595) | $ 15 | 238,505 | 52,290 | (6,595) | (19,231) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Share grants | 121 | 121 | |||||
Share repurchases (in shares) | (1,000) | ||||||
Share repurchases | (13) | (13) | |||||
Share forfeitures (in shares) | (1,000) | ||||||
Share forfeitures | (1) | (1) | |||||
Net income | 7,803 | 7,803 | |||||
Distributions | (5,147) | (5,147) | |||||
Ending balance (in shares) at Mar. 31, 2023 | 14,707,000 | ||||||
Ending balance at Mar. 31, 2023 | $ 267,747 | $ 15 | 238,612 | 53,498 | (24,378) | ||
Beginning balance (in shares) at Dec. 31, 2022 | 14,709,165 | 14,709,000 | |||||
Beginning balance at Dec. 31, 2022 | $ 271,579 | $ (6,595) | $ 15 | 238,505 | 52,290 | $ (6,595) | (19,231) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Share repurchases (in shares) | (13,257) | ||||||
Share repurchases | $ (138) | ||||||
Net income | 19,920 | ||||||
Distributions | $ (15,455) | ||||||
Ending balance (in shares) at Sep. 30, 2023 | 14,815,574 | 14,816,000 | |||||
Ending balance at Sep. 30, 2023 | $ 270,281 | $ 15 | 239,337 | 65,615 | (34,686) | ||
Beginning balance (in shares) at Mar. 31, 2023 | 14,707,000 | ||||||
Beginning balance at Mar. 31, 2023 | 267,747 | $ 15 | 238,612 | 53,498 | (24,378) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Share grants (in shares) | 42,000 | ||||||
Share grants | 579 | 579 | |||||
Share repurchases (in shares) | (3,000) | ||||||
Share repurchases | (24) | (24) | |||||
Share forfeitures (in shares) | (1,000) | ||||||
Net income | 4,644 | 4,644 | |||||
Distributions | (5,148) | (5,148) | |||||
Ending balance (in shares) at Jun. 30, 2023 | 14,745,000 | ||||||
Ending balance at Jun. 30, 2023 | 267,798 | $ 15 | 239,167 | 58,142 | (29,526) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Share grants (in shares) | 80,000 | ||||||
Share grants | 273 | 273 | |||||
Share repurchases (in shares) | (8,000) | ||||||
Share repurchases | (101) | (101) | |||||
Share forfeitures (in shares) | (1,000) | ||||||
Share forfeitures | (2) | (2) | |||||
Net income | 7,473 | 7,473 | |||||
Distributions | $ (5,160) | (5,160) | |||||
Ending balance (in shares) at Sep. 30, 2023 | 14,815,574 | 14,816,000 | |||||
Ending balance at Sep. 30, 2023 | $ 270,281 | $ 15 | $ 239,337 | $ 65,615 | $ (34,686) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 19,920 | $ 20,880 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Accretion of purchase discount | (3,307) | (9,167) |
Reversal of credit losses | (1,299) | 0 |
Amortization of loan origination and exit fees | (2,529) | (2,935) |
Amortization of deferred financing costs | 1,002 | 784 |
Straight line rental income | (362) | 0 |
Depreciation and amortization | 308 | 0 |
Share based compensation | 970 | 889 |
Changes in operating assets and liabilities: | ||
Accrued interest receivable | (480) | (1,291) |
Prepaid expenses and other assets | 911 | 199 |
Accounts payable, accrued liabilities and other liabilities | (9) | (53) |
Due to related persons | (181) | 657 |
Net cash provided by operating activities | 14,944 | 9,963 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Origination of loans held for investment | (78,038) | (179,265) |
Additional funding of loans held for investment | (4,710) | (12,095) |
Repayment of loans held for investment | 71,643 | 79,490 |
Cash assumed from transfer of loans held for investment to real estate owned | 1,742 | 0 |
Real estate owned improvements | (1,339) | 0 |
Net cash used in investing activities | (10,702) | (111,870) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from secured financing facilities | 63,206 | 284,867 |
Repayments under secured financing facilities | (61,955) | (119,905) |
Payments of deferred financing costs | (437) | (1,859) |
Repurchase of common shares | (138) | (96) |
Distributions | (15,455) | (10,958) |
Net cash (used in) provided by financing activities | (14,779) | 152,049 |
Increase in cash, cash equivalents and restricted cash | (10,537) | 50,142 |
Cash, cash equivalents and restricted cash at beginning of period | 71,067 | 26,295 |
Cash, cash equivalents and restricted cash at end of period | 60,530 | 76,437 |
SUPPLEMENTAL DISCLOSURES: | ||
Interest paid | 23,550 | 8,728 |
Income taxes paid | 133 | 92 |
NON-CASH INVESTING ACTIVITIES: | ||
Transfer of loans held for investment to real estate owned | 14,800 | 0 |
SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | ||
Cash and cash equivalents | 60,391 | 76,371 |
Restricted cash | 139 | 66 |
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ 60,530 | $ 76,437 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, or our 2022 Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim periods have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the accompanying condensed consolidated financial statements include the allowance for credit losses, the valuation of real estate owned and the fair value of financial instruments. Certain prior year amounts have been reclassified to conform to current year presentation. |
Recently Adopted Accounting Pro
Recently Adopted Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements On January 1, 2023, we adopted Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments - Credit Losses (Topic 326) : Measurement of Credit Losses on Financial Instruments , which replaces the “incurred loss” model for recognizing credit losses with a forward-looking “expected loss” model that generally will result in the earlier recognition of credit losses. The measurement of current expected credit losses, or CECL, is based upon historical experience, current conditions, and reasonable and supportable forecasts incorporating forward-looking information that affect the collectability of the reported amount. ASU No. 2016-13 is applicable to financial assets measured at amortized cost and off-balance sheet credit exposures, such as unfunded loan commitments. The allowance for credit losses required under ASU No. 2016-13 is a valuation account that is deducted from the related loans’ amortized cost basis in our condensed consolidated balance sheets. Our loans typically include commitments to fund incremental proceeds to borrowers over the life of the loan; these future funding commitments are also subject to the CECL model. The allowance for credit losses related to unfunded loan commitments is included in accounts payable, accrued liabilities and other liabilities in our condensed consolidated balance sheets. Given the lack of historical loss data related to our loan portfolio, we elected to estimate our expected losses using an analytical model that considers the likelihood of default and loss given default for each individual loan. This analytical model incorporates data from a third party database with historical loan loss information for commercial mortgage-backed securities, or CMBS, and commercial real estate, or CRE, loans since 1998. We estimate the allowance for credit losses for our loan portfolio, including unfunded loan commitments, at the individual loan level. Significant inputs to the model include certain loan specific data, such as loan to value, or LTV, property type, geographic location, occupancy, vintage year, remaining loan term, net operating income, expected timing and amounts of future loan fundings, and macroeconomic forecast assumptions, including the performance of CRE assets, unemployment rates, interest rates and other factors. We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period, followed by a straight-line reversion period to average historical losses. Average historical losses are established using a population of third party historical loss data that approximates our portfolio as of the measurement date. We evaluate the estimated allowance for each of our loans individually and we consider our internal loan risk rating as the primary credit quality indicator underlying our assessment. If a loan is determined to be collateral dependent (because the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral property) and the borrower is experiencing financial difficulties, but foreclosure is not probable, we may elect to apply a practical expedient to determine the loan's allowance for credit losses by comparing the collateral's fair value, less costs to sell, if applicable, to the amortized cost basis of the loan. For collateral-dependent loans for which foreclosure is probable, the related allowance for credit losses is determined using the fair value, less costs to sell, if applicable, of the collateral compared to the loan's amortized cost. Upon adoption of ASU No. 2016-13 using the modified retrospective transition method and, based on our loan portfolio, the then current economic environment and expectations for future conditions, we recorded a cumulative-effect adjustment reducing our cumulative net income in our condensed consolidated balance sheets by $6,595, establishing an allowance for credit losses of $4,893 with respect to our then outstanding loans held for investment and increasing accounts payable, accrued liabilities and other liabilities by $1,702 with respect to our then unfunded loan commitments. No reserve for loan losses or allowance for credit losses was recognized within our consolidated financial statements prior to our adoption of ASU No. 2016-13. Concurrent with our adoption of ASU No. 2016-13, on January 1, 2023, we adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures , which eliminated the guidance for and recognitions of troubled debt restructurings for all entities that adopted ASU No. 2016-13. Instead, an entity must determine whether a modification results in a new loan or continuation of an existing loan under Accounting Standards Codification, or ASC, 310, Receivables (Topic 310). If a borrower is experiencing financial difficulty, enhanced disclosures are required. ASU No. 2022-02 also requires disclosure of current period gross write offs by year of origination. The adoption of ASU No. 2022-02 using the prospective transition method did not have a material impact on our condensed consolidated financial statements. See Note 2 to our Consolidated Financial Statements included in Part IV, Item 15 of our 2022 Annual Report for further information regarding our measurement of reserves for loan losses prior to our adoption of ASU No. 2016-13 and our internal loan risk rating policy. |
Loans Held for Investment, net
Loans Held for Investment, net | 9 Months Ended |
Sep. 30, 2023 | |
Receivables [Abstract] | |
Loans Held for Investment, net | Loans Held for Investment, net We originate first mortgage loans secured by middle market and transitional CRE, which are generally to be held as long term investments. We fund our loan portfolio using cash on hand and advancements under our Secured Financing Facilities, as defined in Note 5. See Note 5 for further information regarding our secured financing agreements. The table below provides overall statistics for our loan portfolio as of September 30, 2023 and December 31, 2022: As of September 30, 2023 As of December 31, 2022 Number of loans 26 27 Total loan commitments $ 720,397 $ 727,562 Unfunded loan commitments (1) $ 45,182 $ 49,007 Principal balance $ 675,215 $ 678,555 Carrying value $ 667,848 $ 669,929 Weighted average coupon rate 9.21 % 8.07 % Weighted average all in yield (2) 9.66 % 8.57 % Weighted average floor 1.09 % 0.62 % Weighted average maximum maturity (years) (3) 2.8 3.3 Weighted average risk rating 2.9 2.9 (1) Unfunded loan commitments are primarily used to finance property improvements and leasing capital and are generally funded over the term of the loan. (2) All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion. (3) Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions. The tables below represent our loan activities during the three months ended September 30, 2023 and 2022: Principal Balance Deferred Fees and Other Items Amortized Cost Balance at June 30, 2023 $ 634,920 $ (5,395) $ 629,525 Additional funding 919 — 919 Originations 41,550 (528) 41,022 Repayments (2,174) — (2,174) Net amortization of deferred fees — 762 762 Purchase discount accretion — 1,075 1,075 Balance at September 30, 2023 $ 675,215 $ (4,086) $ 671,129 Principal Balance Deferred Fees and Other Items Amortized Cost Balance at June 30, 2022 $ 682,285 $ (12,100) $ 670,185 Additional funding 4,267 — 4,267 Originations 38,440 (510) 37,930 Repayments (19,532) (115) (19,647) Net amortization of deferred fees — 823 823 Purchase discount accretion — 1,596 1,596 Balance at September 30, 2022 $ 705,460 $ (10,306) $ 695,154 The tables below represent our loan activities during the nine months ended September 30, 2023 and 2022: Principal Balance Deferred Fees and Other Items Amortized Cost Balance at December 31, 2022 $ 678,555 $ (8,626) $ 669,929 Additional funding 4,943 (14) 4,929 Originations 79,050 (1,012) 78,038 Repayments (71,468) (175) (71,643) Transfer to real estate owned (15,865) (95) (15,960) Net amortization of deferred fees — 2,529 2,529 Purchase discount accretion — 3,307 3,307 Balance at September 30, 2023 $ 675,215 $ (4,086) $ 671,129 Principal Balance Deferred Fees and Other Items Amortized Cost Balance at December 31, 2021 $ 590,590 $ (19,810) $ 570,780 Additional funding 12,497 — 12,497 Originations 181,244 (1,979) 179,265 Repayments (78,871) (619) (79,490) Net amortization of deferred fees — 2,935 2,935 Purchase discount accretion — 9,167 9,167 Balance at September 30, 2022 $ 705,460 $ (10,306) $ 695,154 The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Property Type Number of Loans Amortized Cost Percentage of Value Number of Loans Amortized Cost Percentage of Value Office (1) 9 $ 225,027 34 % 11 $ 252,796 38 % Multifamily 8 224,878 33 % 8 197,229 29 % Retail 4 110,815 17 % 4 109,248 16 % Industrial (1) 4 93,346 14 % 4 110,656 17 % Hotel 1 17,063 2 % — — — % 26 $ 671,129 100 % 27 $ 669,929 100 % (1) As of December 31, 2022, one loan investment secured by a mixed use property consisting of office space and an industrial warehouse in Aurora, IL was classified as office for the purpose of counting the number of loans in our portfolio because the majority of the square footage of the property consisted of office space. The amortized cost of this loan investment was reflected in office and industrial based on the fair value of the building at the time of origination relative to the total fair value of the property. During the nine months ended September 30, 2023, our loan investment in Aurora, IL was repaid. September 30, 2023 December 31, 2022 Geographic Location Number of Loans Amortized Cost Percentage of Value Number of Loans Amortized Cost Percentage of Value Midwest 8 $ 229,263 34 % 9 $ 251,208 37 % South 7 196,554 29 % 6 166,616 25 % West 8 155,826 24 % 8 146,837 22 % East 3 89,486 13 % 4 105,268 16 % 26 $ 671,129 100 % 27 $ 669,929 100 % Credit Quality Information We evaluate the credit quality of each of our loans at least quarterly by assessing a variety of risk factors in relation to each loan and assigning a risk rating to each loan based on those factors. The higher the number, the greater the risk level. See our 2022 Annual Report for more information regarding our loan risk ratings. As of September 30, 2023 and December 31, 2022, the amortized cost of our loan portfolio within each internal risk rating by year of origination was as follows: September 30, 2023 Risk Rating Number of Loans Percentage of Portfolio 2023 2022 2021 Prior Total 1 — — % $ — $ — $ — $ — $ — 2 6 22 % — 42,044 33,063 74,308 149,415 3 17 63 % 78,349 129,895 201,968 9,179 419,391 4 3 15 % — 36,735 65,588 — 102,323 5 — — % — — — — — 26 100 % $ 78,349 $ 208,674 $ 300,619 $ 83,487 $ 671,129 December 31, 2022 Risk Rating Number of Loans Percentage of Portfolio 2022 2021 2020 Prior Total 1 1 1 % $ — $ — $ 9,708 $ — $ 9,708 2 6 20 % — 65,902 68,740 — 134,642 3 17 65 % 169,516 235,602 — 28,998 434,116 4 3 14 % 36,506 39,314 — 15,643 91,463 5 — — % — — — — — 27 100 % $ 206,022 $ 340,818 $ 78,448 $ 44,641 $ 669,929 The weighted average risk rating of our loans by amortized cost was 2.9 as of September 30, 2023 and December 31, 2022. Certain of our borrowers' business operations or tenants, particularly certain office and retail properties, were negatively impacted by the COVID-19 pandemic and continue to be impacted by market conditions that arose or intensified during or in response to the pandemic. Current inflationary pressures, rising or sustained high interest rates, supply chain issues or a prolonged economic slowdown or recession could amplify those negative impacts. Therefore, certain of our borrowers’ business plans have taken or will likely take longer to execute than initially expected, and as a result, certain of our borrowers may be unable to pay their debt service obligations owed and due to us as currently scheduled or at all. The borrower of our loan secured by an office property located in Yardley, PA did not pay its debt service obligations due in May 2023, resulting in an event of default. In June 2023, we assumed legal title to the property through a deed in lieu of foreclosure. See Note 4 for further information. The tables below represent the changes to the allowance for credit losses during the three and nine months ended September 30, 2023: Loans Held for Investment, net Unfunded Loan Commitments Total Balance at June 30, 2023 $ 4,201 $ 1,725 $ 5,926 (Reversal of) provision for credit losses (1,660) 322 (1,338) Recoveries 740 — 740 Balance at September 30, 2023 $ 3,281 $ 2,047 $ 5,328 Loans Held for Investment, net Unfunded Loan Commitments Total Balance at December 31, 2022 $ — $ — $ — Cumulative-effect adjustment upon adoption of ASU No. 2016-13 4,893 1,702 6,595 (Reversal of) provision for credit losses (1,644) 345 (1,299) Write offs (708) — (708) Recoveries 740 — 740 Balance at September 30, 2023 $ 3,281 $ 2,047 $ 5,328 We estimate credit losses over a reasonable and supportable forecast period of 12 months, followed by a straight-line reversion period of 12 months back to average historical losses. The decrease in the allowance for credit losses during the three months ended September 30, 2023 is primarily attributable to a reversal of credit losses of $740 for estimated costs to sell related to the reclassification of the property located in Yardley, PA from held for sale to held for investment, favorable changes in the macroeconomic outlook, most notably in CRE pricing forecasts and loan repayments. The decrease in the allowance for credit losses during the nine months ended September 30, 2023, compared to the January 1, 2023 cumulative-effect adjustment upon adoption of ASU No. 2016-13, is primarily attributable to a write off related to the loan transferred to real estate owned in June 2023, loan repayments and favorable changes in CRE pricing forecasts mentioned above. We may enter into loan modifications that include, among other changes, extensions of maturity dates, repurposing or required replenishment of reserves, increases or decreases in loan commitments and required pay downs of principal amounts outstanding. Loan modifications are evaluated to determine whether a modification results in a new loan or a continuation of an existing loan under ASC 310. In June 2023, we amended the agreement governing our loan secured by an office property in St. Louis, MO. As part of this amendment, the borrower repaid $5,000 of the outstanding principal amount and the maturity date was extended by six months to December 19, 2023. As of September 30, 2023, this loan had an amortized cost of $23,988 and a risk rating of 2. We accounted for the amendment as a modification to the existing loan because the changes to the terms were determined to be minor. In October 2023, the borrower repaid the full outstanding principal amount on this loan. In August 2023, we amended the agreement governing our loan secured by an office property in Dublin, OH. As part of this amendment, the borrower repaid $2,000 of the outstanding principal amount and the maturity date was extended by one year to August 16, 2024. As of September 30, 2023, this loan had an amortized cost of $20,690 and a risk rating of 2. We accounted for the amendment as a modification to the existing loan because the changes to the terms were determined to be minor. In October 2023, the borrower repaid the full outstanding principal amount on this loan. There were no other modifications to our loan portfolio for borrowers experiencing financial difficulties during the nine months ended September 30, 2023. We have elected to exclude accrued interest receivable from amortized cost and not to measure an allowance for credit losses on accrued interest receivable. Accrued interest receivables are generally written off when payments are 120 days past due. Such amounts are reversed against interest income and no further interest will be recorded until it is collected. During the nine months ended September 30, 2023, we reversed $88 of accrued interest related to the loan transferred to real estate owned in June 2023. We did not have any outstanding past due loans or nonaccrual loans as of September 30, 2023 or December 31, 2022. As of September 30, 2023 and October 27, 2023, all of our borrowers with outstanding loans had paid their debt service obligations owed and due to us. See our 2022 Annual Report for more information regarding our nonaccrual policy. |
Real Estate Owned
Real Estate Owned | 9 Months Ended |
Sep. 30, 2023 | |
Banking and Thrift, Interest [Abstract] | |
Real Estate Owned | Real Estate Owned Real estate owned is property acquired in full or partial settlement of loan obligations generally through foreclosure or by deed in lieu of foreclosure. Upon acquisition, we allocate the fair value of the real estate owned in accordance with ASC 805, Business Combinations. We generally expect to sell real estate owned within one year of acquisition and classify real estate owned as held for sale when it meets the criteria required by ASC 360, Impairments and Disposals of Long-Lived Assets. Upon acquisition, real estate owned is recognized at the lesser of the fair value of the property less estimated costs to sell, if applicable, and the amortized cost of the loan secured by the property at the time of acquisition. The fair value of the property is determined using Level III inputs and standard industry valuation methods, including discounted cash flow analyses and sales comparisons. If the amortized cost of the loan exceeds the fair value of the property less estimated costs to sell, if applicable, the difference is recorded through the allowance for credit losses as a write off. Conversely, if the fair value of the property less estimated costs to sell, if applicable, exceeds the amortized cost of the loan, the difference is recorded through the allowance for credit losses as a recovery. Any related shortfall or excess of previously established allowances for credit losses is recognized in the condensed consolidated statements of operations as a provision for or reversal of credit losses, respectively. Subsequent to acquisition, costs incurred related to improvements to the property are capitalized and depreciated over their estimated useful lives and costs related to the operation of the property are expensed as incurred. We regularly evaluate real estate owned for indicators of impairment. Impairment indicators may include declining tenant occupancy, lack of progress leasing vacant space, tenant bankruptcies, low long term prospects for improvement in property performance, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. We determine the amount of any impairment loss by comparing the carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation methods. In June 2023, we assumed legal title to an office property located in Yardley, PA through a deed in lieu of foreclosure. As of June 30, 2023, the property met the held for sale criteria required by ASC 360 and was classified as held for sale. The amortized cost basis of $15,960 of the related loan exceeded the fair value of the property, including cash assumed of $1,742 and net liabilities assumed of $550, less estimated costs to sell of $740, by $708. The previously established allowance for credit losses for the related loan was $1,335, resulting in a decrease to our provision for credit losses of $627 recorded in our condensed consolidated statements of operations during the six months ended June 30, 2023. Upon assumption of legal title of the property, we also assumed $2,258 of outstanding commitments for lease related costs pursuant to previously executed tenant leases. As of September 30, 2023, although there was not a change to the plan of sale, the property did not meet the held for sale criteria required by ASC 360 and was classified as held for investment. As a result, we recorded a reversal of credit losses of $740 for estimated costs to sell in our condensed consolidated statements of operations during the three months ended September 30, 2023. We accounted for the acquisition as an asset acquisition and allocated the fair value of the assumed assets and liabilities on the acquisition date as follows: Acquisition Date Fair Value Land Buildings and Improvements Acquired Real Estate Leases June 2023 $ 14,800 $ 2,880 $ 7,325 $ 4,595 Other assets related to real estate owned of $5,290, including $4,337 of acquired real estate leases, net and $362 of straight line rent receivables, are included in prepaid expenses and other assets, net in our condensed consolidated balance sheets at September 30, 2023. As of September 30, 2023, the weighted average remaining life of acquired real estate leases was 7.4 years. Accrued expenses and other liabilities related to real estate owned of $762 are included in accounts payable, accrued liabilities and other liabilities in our condensed consolidated balance sheets at September 30, 2023. There were no other assets or accrued expenses and other liabilities related to real estate owned at December 31, 2022. Revenue from real estate owned represents rental income from operating leases with tenants and is recognized on a straight line basis over the lease term. We increased revenue from real estate owned to record revenue on a straight line basis by $295 and $362 for the three and nine months ended September 30, 2023, respectively. Expenses from real estate owned represents costs related to the acquisition of the property and costs to operate the property. |
Secured Financing Agreements
Secured Financing Agreements | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Secured Financing Agreements | Secured Financing Agreements Our secured financing agreements at September 30, 2023 consisted of agreements that govern: our master repurchase facility with Wells Fargo, National Association, or Wells Fargo, or the Wells Fargo Master Repurchase Facility; our master repurchase facility with Citibank, N.A., or Citibank, or the Citibank Master Repurchase Facility; our facility loan program with BMO Harris Bank N.A., or BMO, or the BMO Facility, and our master repurchase facility with UBS AG, or UBS, or the UBS Master Repurchase Facility. We refer to the Wells Fargo Master Repurchase Facility, Citibank Master Repurchase Facility and UBS Master Repurchase Facility, collectively, as our Master Repurchase Facilities. We refer to the Master Repurchase Facilities and the BMO Facility, collectively, as our Secured Financing Facilities. See our 2022 Annual Report for more information regarding our Secured Financing Facilities. In July 2023, we amended and restated our master repurchase agreement with UBS, or the UBS Master Repurchase Agreement. The amended and restated UBS Master Repurchase Agreement made certain changes to the agreement and related fee letter, including extending the stated maturity date to February 18, 2025. In August 2023, we amended the related fee letter to increase the maximum amount of available advancements under the UBS Master Repurchase Facility to $205,000. As of September 30, 2023, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities. As of September 30, 2023 and October 27, 2023, we had a $474,866 and $446,461, respectively, aggregate outstanding principal balance under our Secured Financing Facilities. The table below summarizes our Secured Financing Facilities as of September 30, 2023 and December 31, 2022: Debt Obligation Weighted Average Collateral Maximum Facility Size Principal Balance Carrying Value Coupon Rate (1) Remaining Maturity (years) (2) Principal Balance September 30, 2023: Citibank Master Repurchase Facility $ 215,000 $ 136,730 $ 136,539 7.38 % 0.6 $ 199,509 UBS Master Repurchase Facility 205,000 141,558 141,314 7.55 % 0.8 195,467 BMO Facility 150,000 101,027 100,595 7.25 % 1.5 135,978 Wells Fargo Master Repurchase Facility 125,000 95,551 94,889 7.41 % 1.4 127,011 Total/weighted average $ 695,000 $ 474,866 $ 473,337 7.41 % 1.0 $ 657,965 December 31, 2022: Citibank Master Repurchase Facility $ 215,000 $ 150,647 $ 150,360 6.34 % 1.1 $ 205,234 UBS Master Repurchase Facility 192,000 144,437 143,887 6.48 % 1.1 198,254 BMO Facility 150,000 111,105 110,473 6.22 % 2.2 148,476 Wells Fargo Master Repurchase Facility 125,000 67,426 66,801 6.23 % 2.1 89,008 Total/weighted average $ 682,000 $ 473,615 $ 471,521 6.34 % 1.5 $ 640,972 (1) The weighted average coupon rate is determined using the Secured Overnight Financing Rate, or SOFR, plus a spread ranging from 1.83% to 2.70%, as applicable, for the respective borrowings under our Secured Financing Facilities as of the applicable date. (2) The weighted average remaining maturity is determined using the current maturity date of our corresponding loan investments, assuming no borrower loan extension options have been exercised. As of September 30, 2023, our Citibank Master Repurchase Facility, UBS Master Repurchase Facility and Wells Fargo Master Repurchase Facility mature on March 15, 2025, February 18, 2025 and March 11, 2025, respectively. Our BMO Facility matures at various dates based on the respective underlying loans held for investment. As of September 30, 2023, our outstanding borrowings under our Secured Financing Facilities had the following remaining maturities: Year Principal Payments on 2023 $ 66,482 2024 235,076 2025 173,308 2026 and thereafter — $ 474,866 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The carrying values of cash and cash equivalents, restricted cash and accounts payable approximate their fair values due to the short term nature of these financial instruments. We estimate the fair values of our loans held for investment and outstanding principal balances under our Secured Financing Facilities by using Level III inputs, including discounted cash flow analyses and currently prevailing market terms as of the reporting date. See our 2022 Annual Report for further information regarding the fair value of financial instruments. The table below provides information regarding financial assets and liabilities not carried at fair value in our condensed consolidated balance sheets: September 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Financial assets Loans held for investment $ 667,848 $ 673,667 $ 669,929 $ 679,911 Financial liabilities Secured Financing Facilities $ 473,337 $ 473,836 $ 471,521 $ 471,362 |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Shareholders' Equity | Shareholders' Equity Common Share Awards On May 23, 2023, in accordance with our Trustee compensation arrangements, we awarded to each of our then seven Trustees 6,000 of our common shares, valued at the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq on that day. The aggregate value of common shares awarded was $387. On September 13, 2023, we awarded an aggregate of 80,000 of our common shares to our officers and certain other employees of Tremont Realty Capital LLC, or Tremont, and of The RMR Group LLC, or RMR, valued at the closing price of our common shares on Nasdaq that day. The aggregate value of common shares awarded was $876. Common Share Purchases During the nine months ended September 30, 2023, we purchased 13,257 of our common shares from certain of our current and former officers and current and former officers and employees of Tremont and RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares, valued at the closing price of our common shares on Nasdaq on the applicable purchase date. The aggregate value of common shares purchased was $138. Distributions For the nine months ended September 30, 2023, we declared and paid regular quarterly distributions to common shareholders, using cash on hand, as follows: Record Date Payment Date Distribution per Share Total Distribution January 23, 2023 February 16, 2023 $ 0.35 $ 5,147 April 24, 2023 May 18, 2023 0.35 5,148 July 24, 2023 August 17, 2023 0.35 5,160 $ 1.05 $ 15,455 On October 12, 2023, we declared a quarterly distribution of $0.35 per common share, or $5,185, to shareholders of record on October 23, 2023. We expect to pay this distribution on or about November 16, 2023, using cash on hand. |
Management Agreement with Tremo
Management Agreement with Tremont | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transactions [Abstract] | |
Management Agreement with Tremont | Management Agreement with TremontWe have no employees. The personnel and various services we require to operate our business are provided to us by Tremont, pursuant to a management agreement, which provides for the day to day management of our operations by Tremont, subject to the oversight and direction of our Board of Trustees.We pay Tremont an annual base management fee payable quarterly (0.375% per quarter) in arrears equal to 1.5% of our “Equity,” as defined under our management agreement. We include these amounts in base management fees in our condensed consolidated statements of operations. Pursuant to the terms of our management agreement, we also pay Tremont management incentive fees, subject to Tremont earning those fees in accordance with the management agreement. We include these amounts in incentive fees in our condensed consolidated statements of operations.Tremont, and not us, is responsible for the costs of its employees who provide services to us, unless any such payment or reimbursement is specifically approved by a majority of our Independent Trustees, is a shared services cost or relates to awards made under any equity compensation plan adopted by us. We are required to pay or to reimburse Tremont and its affiliates for all other costs and expenses of our operations. Some of these overhead, professional and other services are provided by RMR, pursuant to a shared services agreement between Tremont and RMR. These reimbursements include an allocation of the cost of personnel employed by RMR. These shared services costs are subject to approval by a majority of our Independent Trustees at least annually. We include these amounts in reimbursement of shared services expenses in our condensed consolidated statements of operations. See our 2022 Annual Report for further information regarding our management agreement with Tremont. |
Related Person Transactions
Related Person Transactions | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transactions [Abstract] | |
Related Person Transactions | Related Person Transactions We have relationships and historical and continuing transactions with Tremont, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees or officers who are also our Trustees or officers. Tremont is a subsidiary of RMR, which is a majority owned subsidiary of RMR Inc., and RMR Inc. is the managing member of RMR. RMR provides certain shared services to Tremont that are applicable to us, and we reimburse Tremont or pay RMR for the amounts Tremont or RMR pays for those services. One of our Managing Trustees and Chair of our Board of Trustees, Adam D. Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and he is also a director of Tremont, the chair of the board of directors, a managing director, the president and chief executive officer of RMR Inc., and an officer and employee of RMR. Matthew P. Jordan, our other Managing Trustee, is a director and the president and chief executive officer of Tremont. Mr. Jordan is also an officer of RMR Inc. and an officer and employee of RMR, and our executive officers are officers and employees of Tremont and/or RMR. See Note 7 for information relating to the awards of our common shares we made in September 2023 to our officers and certain other employees of Tremont and/or RMR and common shares we purchased from certain of our current and former officers and current and former officers and employees of Tremont and/or RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares. We include amounts recognized as expense for awards of our common shares to our officers and employees of Tremont and/or RMR in general and administrative expenses in our condensed consolidated statements of operations. Some of our Independent Trustees also serve as independent trustees of other public companies to which RMR provides management services. Adam D. Portnoy serves as the chair of the board and as a managing trustee of those companies. Other officers of RMR and Tremont serve as managing trustees or officers of certain of these companies. Our Manager, Tremont Realty Capital LLC. We have a management agreement with Tremont to provide management services to us. See Note 8 for further information regarding our management agreement with Tremont. On May 11, 2022, Tremont purchased 882,407 of our common shares from Diane Portnoy, the mother of Adam D. Portnoy. Tremont paid an aggregate purchase price of $9,469 for these shares. As of September 30, 2023, Tremont owned 1,708,058 of our common shares, and Mr. Portnoy beneficially owned (including through Tremont and ABP Trust) 13.4% of our outstanding common shares. Acceleration of Unvested Shares of Former Officer. G. Douglas Lanois resigned as our Chief Financial Officer and Treasurer, effective September 30, 2022. Our Compensation Committee approved the acceleration of all 3,648 of our unvested common shares owned by Mr. Lanois as of his separation date, January 1, 2023. Property Management Agreement with RMR. We entered into a property management agreement with RMR in July 2023 with respect to the real estate owned in Yardley, PA. Pursuant to this agreement, RMR provides property management services and we pay management fees equal to 3.0% of gross collected rents. Also under the terms of this property management agreement, we pay RMR additional fees for construction supervision services equal to 5.0% of the cost of such construction. Either we or RMR may terminate this agreement upon 30 days' prior notice. No termination fee would be payable as a result of terminating the agreement. We recognized property management and construction supervision fees of $8 for the three and nine months ended September 30, 2023, related to real estate owned. For further information about these and other such relationships and certain other related person transactions, refer to our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders and to our 2022 Annual Report. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income TaxesWe have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the IRC. Accordingly, we generally are not, and will not be, subject to U.S. federal income tax, provided that we meet certain distribution and other requirements. We are subject to certain state and local taxes, certain of which amounts are or will be reported as income taxes in our condensed consolidated statements of operations. |
Weighted Average Common Shares
Weighted Average Common Shares | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Weighted Average Common Shares | Weighted Average Common Shares We calculate net income per common share - basic using the two class method. We calculate net income per common share - diluted using the more dilutive of the two class or treasury stock method. Unvested share awards are considered participating securities and the related impact on earnings are considered when calculating net income per common share - basic and net income per common share - diluted. The calculation of net income per common share - basic and diluted is as follows (amounts in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Numerators: Net income $ 7,473 $ 5,176 $ 19,920 $ 20,880 Net income attributable to unvested share awards (56) (33) (161) (133) Net income used in calculating net income per common share - basic and diluted $ 7,417 $ 5,143 $ 19,759 $ 20,747 Denominators: Weighted average common shares outstanding - basic and diluted 14,640 14,551 14,609 14,526 Net income per common share - basic and diluted $ 0.51 $ 0.35 $ 1.35 $ 1.43 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies As of September 30, 2023, we had unfunded loan commitments of $45,182 related to our loans held for investment that are not reflected in our condensed consolidated balance sheets. These unfunded loan commitments had a weighted average initial maturity of 1.1 years as of September 30, 2023. See Note 3 for further information related to our loans held for investment. As of September 30, 2023, we had estimated unspent lease related costs of $474. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying condensed consolidated financial statements are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, or our 2022 Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim periods have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the accompanying condensed consolidated financial statements include the allowance for credit losses, the valuation of real estate owned and the fair value of financial instruments. |
Reclassifications | Certain prior year amounts have been reclassified to conform to current year presentation. |
Recent Accounting Pronouncements | On January 1, 2023, we adopted Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments - Credit Losses (Topic 326) : Measurement of Credit Losses on Financial Instruments , which replaces the “incurred loss” model for recognizing credit losses with a forward-looking “expected loss” model that generally will result in the earlier recognition of credit losses. The measurement of current expected credit losses, or CECL, is based upon historical experience, current conditions, and reasonable and supportable forecasts incorporating forward-looking information that affect the collectability of the reported amount. ASU No. 2016-13 is applicable to financial assets measured at amortized cost and off-balance sheet credit exposures, such as unfunded loan commitments. The allowance for credit losses required under ASU No. 2016-13 is a valuation account that is deducted from the related loans’ amortized cost basis in our condensed consolidated balance sheets. Our loans typically include commitments to fund incremental proceeds to borrowers over the life of the loan; these future funding commitments are also subject to the CECL model. The allowance for credit losses related to unfunded loan commitments is included in accounts payable, accrued liabilities and other liabilities in our condensed consolidated balance sheets. Given the lack of historical loss data related to our loan portfolio, we elected to estimate our expected losses using an analytical model that considers the likelihood of default and loss given default for each individual loan. This analytical model incorporates data from a third party database with historical loan loss information for commercial mortgage-backed securities, or CMBS, and commercial real estate, or CRE, loans since 1998. We estimate the allowance for credit losses for our loan portfolio, including unfunded loan commitments, at the individual loan level. Significant inputs to the model include certain loan specific data, such as loan to value, or LTV, property type, geographic location, occupancy, vintage year, remaining loan term, net operating income, expected timing and amounts of future loan fundings, and macroeconomic forecast assumptions, including the performance of CRE assets, unemployment rates, interest rates and other factors. We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period, followed by a straight-line reversion period to average historical losses. Average historical losses are established using a population of third party historical loss data that approximates our portfolio as of the measurement date. We evaluate the estimated allowance for each of our loans individually and we consider our internal loan risk rating as the primary credit quality indicator underlying our assessment. If a loan is determined to be collateral dependent (because the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral property) and the borrower is experiencing financial difficulties, but foreclosure is not probable, we may elect to apply a practical expedient to determine the loan's allowance for credit losses by comparing the collateral's fair value, less costs to sell, if applicable, to the amortized cost basis of the loan. For collateral-dependent loans for which foreclosure is probable, the related allowance for credit losses is determined using the fair value, less costs to sell, if applicable, of the collateral compared to the loan's amortized cost. Upon adoption of ASU No. 2016-13 using the modified retrospective transition method and, based on our loan portfolio, the then current economic environment and expectations for future conditions, we recorded a cumulative-effect adjustment reducing our cumulative net income in our condensed consolidated balance sheets by $6,595, establishing an allowance for credit losses of $4,893 with respect to our then outstanding loans held for investment and increasing accounts payable, accrued liabilities and other liabilities by $1,702 with respect to our then unfunded loan commitments. No reserve for loan losses or allowance for credit losses was recognized within our consolidated financial statements prior to our adoption of ASU No. 2016-13. Concurrent with our adoption of ASU No. 2016-13, on January 1, 2023, we adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures , which eliminated the guidance for and recognitions of troubled debt restructurings for all entities that adopted ASU No. 2016-13. Instead, an entity must determine whether a modification results in a new loan or continuation of an existing loan under Accounting Standards Codification, or ASC, 310, Receivables (Topic 310). If a borrower is experiencing financial difficulty, enhanced disclosures are required. ASU No. 2022-02 also requires disclosure of current period gross write offs by year of origination. The adoption of ASU No. 2022-02 using the prospective transition method did not have a material impact on our condensed consolidated financial statements. See Note 2 to our Consolidated Financial Statements included in Part IV, Item 15 of our 2022 Annual Report for further information regarding our measurement of reserves for loan losses prior to our adoption of ASU No. 2016-13 and our internal loan risk rating policy. |
Loans Held for Investment, net
Loans Held for Investment, net (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Receivables [Abstract] | |
Schedule of Loans | The table below provides overall statistics for our loan portfolio as of September 30, 2023 and December 31, 2022: As of September 30, 2023 As of December 31, 2022 Number of loans 26 27 Total loan commitments $ 720,397 $ 727,562 Unfunded loan commitments (1) $ 45,182 $ 49,007 Principal balance $ 675,215 $ 678,555 Carrying value $ 667,848 $ 669,929 Weighted average coupon rate 9.21 % 8.07 % Weighted average all in yield (2) 9.66 % 8.57 % Weighted average floor 1.09 % 0.62 % Weighted average maximum maturity (years) (3) 2.8 3.3 Weighted average risk rating 2.9 2.9 (1) Unfunded loan commitments are primarily used to finance property improvements and leasing capital and are generally funded over the term of the loan. (2) All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion. (3) Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions. The tables below represent our loan activities during the three months ended September 30, 2023 and 2022: Principal Balance Deferred Fees and Other Items Amortized Cost Balance at June 30, 2023 $ 634,920 $ (5,395) $ 629,525 Additional funding 919 — 919 Originations 41,550 (528) 41,022 Repayments (2,174) — (2,174) Net amortization of deferred fees — 762 762 Purchase discount accretion — 1,075 1,075 Balance at September 30, 2023 $ 675,215 $ (4,086) $ 671,129 Principal Balance Deferred Fees and Other Items Amortized Cost Balance at June 30, 2022 $ 682,285 $ (12,100) $ 670,185 Additional funding 4,267 — 4,267 Originations 38,440 (510) 37,930 Repayments (19,532) (115) (19,647) Net amortization of deferred fees — 823 823 Purchase discount accretion — 1,596 1,596 Balance at September 30, 2022 $ 705,460 $ (10,306) $ 695,154 The tables below represent our loan activities during the nine months ended September 30, 2023 and 2022: Principal Balance Deferred Fees and Other Items Amortized Cost Balance at December 31, 2022 $ 678,555 $ (8,626) $ 669,929 Additional funding 4,943 (14) 4,929 Originations 79,050 (1,012) 78,038 Repayments (71,468) (175) (71,643) Transfer to real estate owned (15,865) (95) (15,960) Net amortization of deferred fees — 2,529 2,529 Purchase discount accretion — 3,307 3,307 Balance at September 30, 2023 $ 675,215 $ (4,086) $ 671,129 Principal Balance Deferred Fees and Other Items Amortized Cost Balance at December 31, 2021 $ 590,590 $ (19,810) $ 570,780 Additional funding 12,497 — 12,497 Originations 181,244 (1,979) 179,265 Repayments (78,871) (619) (79,490) Net amortization of deferred fees — 2,935 2,935 Purchase discount accretion — 9,167 9,167 Balance at September 30, 2022 $ 705,460 $ (10,306) $ 695,154 The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Property Type Number of Loans Amortized Cost Percentage of Value Number of Loans Amortized Cost Percentage of Value Office (1) 9 $ 225,027 34 % 11 $ 252,796 38 % Multifamily 8 224,878 33 % 8 197,229 29 % Retail 4 110,815 17 % 4 109,248 16 % Industrial (1) 4 93,346 14 % 4 110,656 17 % Hotel 1 17,063 2 % — — — % 26 $ 671,129 100 % 27 $ 669,929 100 % (1) As of December 31, 2022, one loan investment secured by a mixed use property consisting of office space and an industrial warehouse in Aurora, IL was classified as office for the purpose of counting the number of loans in our portfolio because the majority of the square footage of the property consisted of office space. The amortized cost of this loan investment was reflected in office and industrial based on the fair value of the building at the time of origination relative to the total fair value of the property. During the nine months ended September 30, 2023, our loan investment in Aurora, IL was repaid. September 30, 2023 December 31, 2022 Geographic Location Number of Loans Amortized Cost Percentage of Value Number of Loans Amortized Cost Percentage of Value Midwest 8 $ 229,263 34 % 9 $ 251,208 37 % South 7 196,554 29 % 6 166,616 25 % West 8 155,826 24 % 8 146,837 22 % East 3 89,486 13 % 4 105,268 16 % 26 $ 671,129 100 % 27 $ 669,929 100 % |
Schedule of Carrying Value Excluding Allowance of Credit Losses | As of September 30, 2023 and December 31, 2022, the amortized cost of our loan portfolio within each internal risk rating by year of origination was as follows: September 30, 2023 Risk Rating Number of Loans Percentage of Portfolio 2023 2022 2021 Prior Total 1 — — % $ — $ — $ — $ — $ — 2 6 22 % — 42,044 33,063 74,308 149,415 3 17 63 % 78,349 129,895 201,968 9,179 419,391 4 3 15 % — 36,735 65,588 — 102,323 5 — — % — — — — — 26 100 % $ 78,349 $ 208,674 $ 300,619 $ 83,487 $ 671,129 December 31, 2022 Risk Rating Number of Loans Percentage of Portfolio 2022 2021 2020 Prior Total 1 1 1 % $ — $ — $ 9,708 $ — $ 9,708 2 6 20 % — 65,902 68,740 — 134,642 3 17 65 % 169,516 235,602 — 28,998 434,116 4 3 14 % 36,506 39,314 — 15,643 91,463 5 — — % — — — — — 27 100 % $ 206,022 $ 340,818 $ 78,448 $ 44,641 $ 669,929 |
Schedule of Changes to Allowance for Credit Loss | The tables below represent the changes to the allowance for credit losses during the three and nine months ended September 30, 2023: Loans Held for Investment, net Unfunded Loan Commitments Total Balance at June 30, 2023 $ 4,201 $ 1,725 $ 5,926 (Reversal of) provision for credit losses (1,660) 322 (1,338) Recoveries 740 — 740 Balance at September 30, 2023 $ 3,281 $ 2,047 $ 5,328 Loans Held for Investment, net Unfunded Loan Commitments Total Balance at December 31, 2022 $ — $ — $ — Cumulative-effect adjustment upon adoption of ASU No. 2016-13 4,893 1,702 6,595 (Reversal of) provision for credit losses (1,644) 345 (1,299) Write offs (708) — (708) Recoveries 740 — 740 Balance at September 30, 2023 $ 3,281 $ 2,047 $ 5,328 |
Real Estate Owned (Tables)
Real Estate Owned (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Banking and Thrift, Interest [Abstract] | |
Summarizes the Estimated Consideration Transferred and Liabilities Assumed | We accounted for the acquisition as an asset acquisition and allocated the fair value of the assumed assets and liabilities on the acquisition date as follows: Acquisition Date Fair Value Land Buildings and Improvements Acquired Real Estate Leases June 2023 $ 14,800 $ 2,880 $ 7,325 $ 4,595 |
Secured Financing Agreements (T
Secured Financing Agreements (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | The table below summarizes our Secured Financing Facilities as of September 30, 2023 and December 31, 2022: Debt Obligation Weighted Average Collateral Maximum Facility Size Principal Balance Carrying Value Coupon Rate (1) Remaining Maturity (years) (2) Principal Balance September 30, 2023: Citibank Master Repurchase Facility $ 215,000 $ 136,730 $ 136,539 7.38 % 0.6 $ 199,509 UBS Master Repurchase Facility 205,000 141,558 141,314 7.55 % 0.8 195,467 BMO Facility 150,000 101,027 100,595 7.25 % 1.5 135,978 Wells Fargo Master Repurchase Facility 125,000 95,551 94,889 7.41 % 1.4 127,011 Total/weighted average $ 695,000 $ 474,866 $ 473,337 7.41 % 1.0 $ 657,965 December 31, 2022: Citibank Master Repurchase Facility $ 215,000 $ 150,647 $ 150,360 6.34 % 1.1 $ 205,234 UBS Master Repurchase Facility 192,000 144,437 143,887 6.48 % 1.1 198,254 BMO Facility 150,000 111,105 110,473 6.22 % 2.2 148,476 Wells Fargo Master Repurchase Facility 125,000 67,426 66,801 6.23 % 2.1 89,008 Total/weighted average $ 682,000 $ 473,615 $ 471,521 6.34 % 1.5 $ 640,972 (1) The weighted average coupon rate is determined using the Secured Overnight Financing Rate, or SOFR, plus a spread ranging from 1.83% to 2.70%, as applicable, for the respective borrowings under our Secured Financing Facilities as of the applicable date. (2) The weighted average remaining maturity is determined using the current maturity date of our corresponding loan investments, assuming no borrower loan extension options have been exercised. As of September 30, 2023, our Citibank Master Repurchase Facility, UBS Master Repurchase Facility and Wells Fargo Master Repurchase Facility mature on March 15, 2025, February 18, 2025 and March 11, 2025, respectively. Our BMO Facility matures at various dates based on the respective underlying loans held for investment. |
Schedule of Maturities of Long-term Debt | As of September 30, 2023, our outstanding borrowings under our Secured Financing Facilities had the following remaining maturities: Year Principal Payments on 2023 $ 66,482 2024 235,076 2025 173,308 2026 and thereafter — $ 474,866 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The table below provides information regarding financial assets and liabilities not carried at fair value in our condensed consolidated balance sheets: September 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Financial assets Loans held for investment $ 667,848 $ 673,667 $ 669,929 $ 679,911 Financial liabilities Secured Financing Facilities $ 473,337 $ 473,836 $ 471,521 $ 471,362 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Schedule of Distributions Declared and Paid | For the nine months ended September 30, 2023, we declared and paid regular quarterly distributions to common shareholders, using cash on hand, as follows: Record Date Payment Date Distribution per Share Total Distribution January 23, 2023 February 16, 2023 $ 0.35 $ 5,147 April 24, 2023 May 18, 2023 0.35 5,148 July 24, 2023 August 17, 2023 0.35 5,160 $ 1.05 $ 15,455 |
Weighted Average Common Shares
Weighted Average Common Shares (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Weighted Average Number of Common Shares | The calculation of net income per common share - basic and diluted is as follows (amounts in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Numerators: Net income $ 7,473 $ 5,176 $ 19,920 $ 20,880 Net income attributable to unvested share awards (56) (33) (161) (133) Net income used in calculating net income per common share - basic and diluted $ 7,417 $ 5,143 $ 19,759 $ 20,747 Denominators: Weighted average common shares outstanding - basic and diluted 14,640 14,551 14,609 14,526 Net income per common share - basic and diluted $ 0.51 $ 0.35 $ 1.35 $ 1.43 |
Recently Adopted Accounting P_2
Recently Adopted Accounting Pronouncements (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Jun. 30, 2023 | Dec. 31, 2022 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for credit losses | $ 3,281 | $ 0 | |
Total | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for credit losses | 5,328 | $ 5,926 | 0 |
Loans Held for Investment, net | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for credit losses | 3,281 | 4,201 | 0 |
Unfunded Loan Commitments | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for credit losses | $ 2,047 | $ 1,725 | 0 |
Cumulative-effect adjustment upon adoption of ASU No. 2016-13 | Total | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for credit losses | 6,595 | ||
Cumulative-effect adjustment upon adoption of ASU No. 2016-13 | Loans Held for Investment, net | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for credit losses | 4,893 | ||
Cumulative-effect adjustment upon adoption of ASU No. 2016-13 | Unfunded Loan Commitments | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for credit losses | $ 1,702 |
Loans Held for Investment, ne_2
Loans Held for Investment, net - Loan Portfolio Statistics (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2023 USD ($) loan | Dec. 31, 2022 USD ($) loan | Jun. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Jun. 30, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Receivables [Abstract] | ||||||
Number of loans | loan | 26 | 27 | ||||
Total loan commitments | $ 720,397 | $ 727,562 | ||||
Unfunded loan commitments | 45,182 | 49,007 | ||||
Principal balance | 675,215 | 678,555 | $ 634,920 | $ 705,460 | $ 682,285 | $ 590,590 |
Carrying value | $ 667,848 | $ 669,929 | ||||
Weighted average coupon rate | 9.21% | 8.07% | ||||
Weighted average all in yield | 9.66% | 8.57% | ||||
Weighted average floor | 1.09% | 0.62% | ||||
Weighted average maximum maturity (years) | 2 years 9 months 18 days | 3 years 3 months 18 days | ||||
Weighted average risk rating | 2.9 | 2.9 |
Loans Held for Investment, ne_3
Loans Held for Investment, net - Loan Activity (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Principal Balance | ||||
Beginning balance | $ 634,920 | $ 682,285 | $ 678,555 | $ 590,590 |
Additional funding | 919 | 4,267 | 4,943 | 12,497 |
Originations | 41,550 | 38,440 | 79,050 | 181,244 |
Repayments | (2,174) | (19,532) | (71,468) | (78,871) |
Principal, transfer to real estate owned | (15,865) | |||
Ending balance | 675,215 | 705,460 | 675,215 | 705,460 |
Deferred Fees and Other Items | ||||
Beginning balance | (5,395) | (12,100) | (8,626) | (19,810) |
Additional funding | 0 | 0 | (14) | 0 |
Originations | (528) | (510) | (1,012) | (1,979) |
Repayments | 0 | (115) | (175) | (619) |
Transfer to real estate owned | (95) | |||
Net amortization of deferred fees | 762 | 823 | 2,529 | 2,935 |
Purchase discount accretion | 1,075 | 1,596 | 3,307 | 9,167 |
Ending balance | (4,086) | (10,306) | (4,086) | (10,306) |
Amortized Cost | ||||
Beginning balance | 629,525 | 670,185 | 669,929 | 570,780 |
Additional funding | 919 | 4,267 | 4,929 | 12,497 |
Originations | 41,022 | 37,930 | 78,038 | 179,265 |
Repayments | (2,174) | (19,647) | (71,643) | (79,490) |
Transfer to real estate owned | (15,960) | |||
Net amortization of deferred fees | 762 | 823 | 2,529 | 2,935 |
Purchase discount accretion | 1,075 | 1,596 | 3,307 | 9,167 |
Ending balance | $ 671,129 | $ 695,154 | $ 671,129 | $ 695,154 |
Loans Held for Investment, ne_4
Loans Held for Investment, net - Loan Portfolio (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2023 USD ($) loan | Dec. 31, 2022 USD ($) loan | Jun. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Jun. 30, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 26 | 27 | ||||
Amortized Cost | $ | $ 671,129 | $ 669,929 | $ 629,525 | $ 695,154 | $ 670,185 | $ 570,780 |
Percentage of Value | 100% | 100% | ||||
Midwest | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 8 | 9 | ||||
Amortized Cost | $ | $ 229,263 | $ 251,208 | ||||
Percentage of Value | 34% | 37% | ||||
South | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 7 | 6 | ||||
Amortized Cost | $ | $ 196,554 | $ 166,616 | ||||
Percentage of Value | 29% | 25% | ||||
West | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 8 | 8 | ||||
Amortized Cost | $ | $ 155,826 | $ 146,837 | ||||
Percentage of Value | 24% | 22% | ||||
East | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 3 | 4 | ||||
Amortized Cost | $ | $ 89,486 | $ 105,268 | ||||
Percentage of Value | 13% | 16% | ||||
Office | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 9 | 11 | ||||
Amortized Cost | $ | $ 225,027 | $ 252,796 | ||||
Percentage of Value | 34% | 38% | ||||
Multifamily | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 8 | 8 | ||||
Amortized Cost | $ | $ 224,878 | $ 197,229 | ||||
Percentage of Value | 33% | 29% | ||||
Retail | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 4 | 4 | ||||
Amortized Cost | $ | $ 110,815 | $ 109,248 | ||||
Percentage of Value | 17% | 16% | ||||
Industrial | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 4 | 4 | ||||
Amortized Cost | $ | $ 93,346 | $ 110,656 | ||||
Percentage of Value | 14% | 17% | ||||
Hotel | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of Loans | loan | 1 | 0 | ||||
Amortized Cost | $ | $ 17,063 | $ 0 | ||||
Percentage of Value | 2% | 0% |
Loans Held for Investment, ne_5
Loans Held for Investment, net - Loan Risk Ratings Carrying Value (Details) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 USD ($) loan | Dec. 31, 2022 USD ($) loan | |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||
Number of Loans | loan | 26 | 27 |
Percentage of Portfolio | 100% | 100% |
Year one | $ 78,349 | $ 206,022 |
Year two | 208,674 | 340,818 |
Year three | 300,619 | 78,448 |
Prior | 83,487 | 44,641 |
Loans held for investment | $ 671,129 | $ 669,929 |
1 | ||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||
Number of Loans | loan | 0 | 1 |
Percentage of Portfolio | 0% | 1% |
Year one | $ 0 | $ 0 |
Year two | 0 | 0 |
Year three | 0 | 9,708 |
Prior | 0 | 0 |
Loans held for investment | $ 0 | $ 9,708 |
2 | ||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||
Number of Loans | loan | 6 | 6 |
Percentage of Portfolio | 22% | 20% |
Year one | $ 0 | $ 0 |
Year two | 42,044 | 65,902 |
Year three | 33,063 | 68,740 |
Prior | 74,308 | 0 |
Loans held for investment | $ 149,415 | $ 134,642 |
3 | ||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||
Number of Loans | loan | 17 | 17 |
Percentage of Portfolio | 63% | 65% |
Year one | $ 78,349 | $ 169,516 |
Year two | 129,895 | 235,602 |
Year three | 201,968 | 0 |
Prior | 9,179 | 28,998 |
Loans held for investment | $ 419,391 | $ 434,116 |
4 | ||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||
Number of Loans | loan | 3 | 3 |
Percentage of Portfolio | 15% | 14% |
Year one | $ 0 | $ 36,506 |
Year two | 36,735 | 39,314 |
Year three | 65,588 | 0 |
Prior | 0 | 15,643 |
Loans held for investment | $ 102,323 | $ 91,463 |
5 | ||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||
Number of Loans | loan | 0 | 0 |
Percentage of Portfolio | 0% | 0% |
Year one | $ 0 | $ 0 |
Year two | 0 | 0 |
Year three | 0 | 0 |
Prior | 0 | 0 |
Loans held for investment | $ 0 | $ 0 |
Loans Held for Investment, ne_6
Loans Held for Investment, net - Narrative (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Aug. 31, 2023 USD ($) | Jun. 30, 2023 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) | |
Financing Receivable, Allowance for Credit Loss [Line Items] | |||||||
Weighted average risk rating | 2.9 | 2.9 | 2.9 | ||||
Reversal of credit losses | $ 1,338 | $ 0 | $ 1,299 | $ 0 | |||
Amortize cost | 671,129 | 671,129 | $ 669,929 | ||||
Financing receivable, reversal of accrued interest | 88 | ||||||
PENNSYLVANIA | |||||||
Financing Receivable, Allowance for Credit Loss [Line Items] | |||||||
Reversal of credit losses | 740 | ||||||
2 | |||||||
Financing Receivable, Allowance for Credit Loss [Line Items] | |||||||
Amortize cost | 149,415 | 149,415 | $ 134,642 | ||||
Office | MISSOURI | |||||||
Financing Receivable, Allowance for Credit Loss [Line Items] | |||||||
Proceeds from outstanding principal amount | $ 5,000 | ||||||
Financing receivable, extended maturity period | 6 months | ||||||
Office | OHIO | |||||||
Financing Receivable, Allowance for Credit Loss [Line Items] | |||||||
Proceeds from outstanding principal amount | $ 2,000 | ||||||
Financing receivable, extended maturity period | 1 year | ||||||
Office | 2 | MISSOURI | |||||||
Financing Receivable, Allowance for Credit Loss [Line Items] | |||||||
Amortize cost | 23,988 | 23,988 | |||||
Office | 2 | OHIO | |||||||
Financing Receivable, Allowance for Credit Loss [Line Items] | |||||||
Amortize cost | $ 20,690 | $ 20,690 |
Loans Held for Investment, ne_7
Loans Held for Investment, net - Provision for Credit Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Beginning balance | $ 0 | |||
(Reversal of) provision for credit losses | $ (1,338) | $ 0 | (1,299) | $ 0 |
Ending balance | 3,281 | 3,281 | ||
Loans Held for Investment, net | ||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Beginning balance | 4,201 | 0 | ||
(Reversal of) provision for credit losses | (1,660) | (1,644) | ||
Recoveries | 740 | 740 | ||
Write offs | (708) | |||
Ending balance | 3,281 | 3,281 | ||
Loans Held for Investment, net | Cumulative-effect adjustment upon adoption of ASU No. 2016-13 | ||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Beginning balance | 4,893 | |||
Unfunded Loan Commitments | ||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Beginning balance | 1,725 | 0 | ||
(Reversal of) provision for credit losses | 322 | 345 | ||
Recoveries | 0 | 0 | ||
Write offs | 0 | |||
Ending balance | 2,047 | 2,047 | ||
Unfunded Loan Commitments | Cumulative-effect adjustment upon adoption of ASU No. 2016-13 | ||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Beginning balance | 1,702 | |||
Total | ||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Beginning balance | 5,926 | 0 | ||
(Reversal of) provision for credit losses | (1,338) | (1,299) | ||
Recoveries | 740 | 740 | ||
Write offs | (708) | |||
Ending balance | $ 5,328 | 5,328 | ||
Total | Cumulative-effect adjustment upon adoption of ASU No. 2016-13 | ||||
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Beginning balance | $ 6,595 |
Real Estate Owned - Narrative (
Real Estate Owned - Narrative (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | |
Jun. 30, 2023 | Sep. 30, 2023 | Jun. 30, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | |
Real Estate [Line Items] | |||||
Real estate owned | $ 11,705,000 | $ 11,705,000 | $ 0 | ||
Other assets related to real estate owned | 5,290,000 | 5,290,000 | 0 | ||
Acquired real estate leases, net | 4,337,000 | 4,337,000 | |||
Real Estate Investment, Other, Straight Line Rent Receivable | $ 362,000 | $ 362,000 | |||
Real Estate Lease, Weighted Average Remaining Lease Term | 7 years 4 months 24 days | 7 years 4 months 24 days | |||
Accrued expenses and other liabilities related to real estate owned | $ 762,000 | $ 762,000 | $ 0 | ||
Straight line rent adjustments | 295,000 | 362,000 | |||
Loans Held for Investment, net | |||||
Real Estate [Line Items] | |||||
Recoveries | $ 740,000 | $ 740,000 | |||
Office Property, Yardley, PA | |||||
Real Estate [Line Items] | |||||
Real estate owned | $ 15,960,000 | $ 15,960,000 | |||
Real estate owned, fair value of property, including cash | 1,742,000 | 1,742,000 | |||
Net working capital | 550,000 | 550,000 | |||
Real estate owned, estimated cost to sell | 740,000 | 740,000 | |||
Real estate owned, estimated cost to sell by | 708,000 | ||||
Real estate owned, allowance for credit losses | 1,335,000 | ||||
Real estate owned, decrease to provision for credit losses | 627,000 | ||||
Outstanding commitments for lease related cost | $ 2,258,000 | $ 2,258,000 |
Real Estate Owned - Schedule of
Real Estate Owned - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) $ in Thousands | Jun. 30, 2023 USD ($) |
Banking and Thrift, Interest [Abstract] | |
Fair Value | $ 14,800 |
Land | 2,880 |
Buildings and Improvements | 7,325 |
Acquired Real Estate Leases | $ 4,595 |
Secured Financing Agreements -
Secured Financing Agreements - Narrative (Details) - USD ($) $ in Thousands | Oct. 27, 2023 | Sep. 30, 2023 |
Debt Instrument [Line Items] | ||
Principal Balance | $ 474,866 | |
Subsequent Event | ||
Debt Instrument [Line Items] | ||
Principal Balance | $ 446,461 |
Secured Financing Agreements _2
Secured Financing Agreements - Schedule of Long-term Debt Instruments (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2023 | Dec. 31, 2022 | Aug. 31, 2023 | |
Debt Instrument [Line Items] | |||
Principal Balance | $ 474,866 | ||
Total/weighted average | |||
Debt Instrument [Line Items] | |||
Maximum Facility Size | 695,000 | $ 682,000 | |
Principal Balance | 474,866 | 473,615 | |
Carrying Value | $ 473,337 | $ 471,521 | |
Coupon Rate | 7.41% | 6.34% | |
Remaining Maturity (years) | 1 year | 1 year 6 months | |
Principal Balance | $ 657,965 | $ 640,972 | |
Total/weighted average | Minimum | SOFR | |||
Debt Instrument [Line Items] | |||
Coupon Rate | 1.83% | 1.83% | |
Total/weighted average | Maximum | SOFR | |||
Debt Instrument [Line Items] | |||
Coupon Rate | 2.70% | 2.70% | |
Citibank Master Repurchase Facility | Master Repurchase Facility | |||
Debt Instrument [Line Items] | |||
Maximum Facility Size | $ 215,000 | $ 215,000 | |
Principal Balance | 136,730 | 150,647 | |
Carrying Value | $ 136,539 | $ 150,360 | |
Coupon Rate | 7.38% | 6.34% | |
Remaining Maturity (years) | 7 months 6 days | 1 year 1 month 6 days | |
Principal Balance | $ 199,509 | $ 205,234 | |
UBS Master Repurchase Facility | Master Repurchase Facility | |||
Debt Instrument [Line Items] | |||
Maximum Facility Size | 205,000 | 192,000 | $ 205,000 |
Principal Balance | 141,558 | 144,437 | |
Carrying Value | $ 141,314 | $ 143,887 | |
Coupon Rate | 7.55% | 6.48% | |
Remaining Maturity (years) | 9 months 18 days | 1 year 1 month 6 days | |
Principal Balance | $ 195,467 | $ 198,254 | |
BMO Facility | Master Repurchase Facility | |||
Debt Instrument [Line Items] | |||
Maximum Facility Size | 150,000 | 150,000 | |
Principal Balance | 101,027 | 111,105 | |
Carrying Value | $ 100,595 | $ 110,473 | |
Coupon Rate | 7.25% | 6.22% | |
Remaining Maturity (years) | 1 year 6 months | 2 years 2 months 12 days | |
Principal Balance | $ 135,978 | $ 148,476 | |
Wells Fargo Master Repurchase Facility | Wells Fargo Master Repurchase Facility | |||
Debt Instrument [Line Items] | |||
Maximum Facility Size | 125,000 | 125,000 | |
Principal Balance | 95,551 | 67,426 | |
Carrying Value | $ 94,889 | $ 66,801 | |
Coupon Rate | 7.41% | 6.23% | |
Remaining Maturity (years) | 1 year 4 months 24 days | 2 years 1 month 6 days | |
Principal Balance | $ 127,011 | $ 89,008 |
Secured Financing Agreements _3
Secured Financing Agreements - Schedule of Maturities of Long-term Debt (Details) - Total/weighted average $ in Thousands | Sep. 30, 2023 USD ($) |
Debt Instrument [Line Items] | |
2023 | $ 66,482 |
2024 | 235,076 |
2025 | 173,308 |
2026 and thereafter | 0 |
Total | $ 474,866 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) - Level III - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Carrying Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loans held for investment | $ 667,848 | $ 669,929 |
Secured Financing Facilities | 473,337 | 471,521 |
Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loans held for investment | 673,667 | 679,911 |
Secured Financing Facilities | $ 473,836 | $ 471,362 |
Shareholders' Equity - Narrativ
Shareholders' Equity - Narrative (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||||||||||
Oct. 12, 2023 USD ($) $ / shares | Sep. 13, 2023 USD ($) shares | Aug. 17, 2023 USD ($) $ / shares | Jul. 24, 2023 $ / shares | May 23, 2023 USD ($) trustee shares | May 18, 2023 USD ($) $ / shares | Apr. 24, 2023 $ / shares | Feb. 16, 2023 USD ($) $ / shares | Jan. 23, 2023 $ / shares | Sep. 30, 2023 USD ($) | Jun. 30, 2023 USD ($) | Mar. 31, 2023 USD ($) | Sep. 30, 2022 USD ($) | Jun. 30, 2022 USD ($) | Mar. 31, 2022 USD ($) | Sep. 30, 2023 USD ($) $ / shares shares | |
Class of Stock [Line Items] | ||||||||||||||||
Share repurchases (in shares) | shares | 13,257 | |||||||||||||||
Share repurchases | $ | $ 101 | $ 24 | $ 13 | $ 96 | $ 138 | |||||||||||
Distribution per share, paid (in dollars per share) | $ / shares | $ 0.35 | $ 0.35 | $ 0.35 | $ 1.05 | ||||||||||||
Distribution per share, declared (in dollars per share) | $ / shares | $ 0.35 | $ 0.35 | $ 0.35 | $ 1.05 | ||||||||||||
Distributions | $ | $ 5,160 | $ 5,148 | $ 5,147 | $ 5,160 | $ 5,148 | $ 5,147 | $ 3,660 | $ 3,649 | $ 3,649 | $ 15,455 | ||||||
Subsequent Event | ||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||
Distribution per share, paid (in dollars per share) | $ / shares | $ 350 | |||||||||||||||
Distribution per share, declared (in dollars per share) | $ / shares | $ 350 | |||||||||||||||
Distributions | $ | $ 5,185 | |||||||||||||||
Restricted Stock | Trustee Compensation Arrangements | ||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||
Number of trustees | trustee | 7 | |||||||||||||||
Shares granted (in shares) | shares | 80,000 | 6,000 | ||||||||||||||
Grants in period | $ | $ 876 | $ 387 |
Shareholders' Equity - Schedule
Shareholders' Equity - Schedule of Distributions (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||||||
Aug. 17, 2023 | Jul. 24, 2023 | May 18, 2023 | Apr. 24, 2023 | Feb. 16, 2023 | Jan. 23, 2023 | Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | |
Equity [Abstract] | |||||||||||||
Distribution per share, declared (in dollars per share) | $ 0.35 | $ 0.35 | $ 0.35 | $ 1.05 | |||||||||
Distribution per share, paid (in dollars per share) | $ 0.35 | $ 0.35 | $ 0.35 | $ 1.05 | |||||||||
Total Distribution | $ 5,160 | $ 5,148 | $ 5,147 | $ 5,160 | $ 5,148 | $ 5,147 | $ 3,660 | $ 3,649 | $ 3,649 | $ 15,455 |
Management Agreement with Tre_2
Management Agreement with Tremont (Details) | Sep. 30, 2023 employee |
Related Party Transactions [Abstract] | |
Number of employees | 0 |
Quarterly base management fee (as a percent) | 0.375% |
Annualized base management fee (as a percent) | 1.50% |
Related Person Transactions (De
Related Person Transactions (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Jan. 01, 2023 | May 11, 2022 | Jul. 31, 2023 | Sep. 30, 2023 | Sep. 30, 2023 | |
The RMR Group Inc | |||||
Related Party Transaction [Line Items] | |||||
Property management agreement, termination notice period | 30 days | ||||
Affiliated Entity | Chief Financial Officer | |||||
Related Party Transaction [Line Items] | |||||
Number of shares with accelerated vesting (in shares) | 3,648 | ||||
RMR Group | |||||
Related Party Transaction [Line Items] | |||||
Real estate owned, property management and construction supervision fees | $ 8 | $ 8 | |||
Management Services | Diane Portnoy | Tremont Realty Advisors LLC | |||||
Related Party Transaction [Line Items] | |||||
Shares purchased (in shares) | 882,407 | ||||
Aggregate purchase price | $ 9,469 | ||||
Management Services | Tremont Realty Advisors LLC | |||||
Related Party Transaction [Line Items] | |||||
Shares owned (in shares) | 1,708,058 | 1,708,058 | |||
Outstanding common shares (as a percent) | 13.40% | 13.40% | |||
Property Management Services | The RMR Group Inc | |||||
Related Party Transaction [Line Items] | |||||
Property management fee, percent fee | 3% | ||||
Construction Supervision Services | The RMR Group Inc | |||||
Related Party Transaction [Line Items] | |||||
Property management fee, percent fee | 5% |
Weighted Average Common Share_2
Weighted Average Common Shares (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Numerators: | ||||||||
Net income | $ 7,473 | $ 4,644 | $ 7,803 | $ 5,176 | $ 4,578 | $ 11,126 | $ 19,920 | $ 20,880 |
Net income attributable to unvested share awards | (56) | (33) | (161) | (133) | ||||
Net income used in calculating net income per common share, basic | 7,417 | 5,143 | 19,759 | 20,747 | ||||
Net income used in calculating net income per common share, diluted | $ 7,417 | $ 5,143 | $ 19,759 | $ 20,747 | ||||
Denominators: | ||||||||
Weighted average common shares outstanding - basic (in shares) | 14,640 | 14,551 | 14,609 | 14,526 | ||||
Weighted average common shares outstanding - diluted (in shares) | 14,640 | 14,551 | 14,609 | 14,526 | ||||
Net income per common share - basic (in dollars per share) | $ 0.51 | $ 0.35 | $ 1.35 | $ 1.43 | ||||
Net income per common share - diluted (in dollars per share) | $ 0.51 | $ 0.35 | $ 1.35 | $ 1.43 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Other Commitments [Line Items] | ||
Unfunded loan commitments | $ 45,182 | $ 49,007 |
Weighted average maximum maturity (in years) | 2 years 9 months 18 days | 3 years 3 months 18 days |
Unspent leasing related obligation | $ 474 | |
Unfunded Commitments | ||
Other Commitments [Line Items] | ||
Weighted average maximum maturity (in years) | 1 year 1 month 6 days |