Document And Entity Information
Document And Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 08, 2023 | Jun. 30, 2022 | |
Document Information Line Items | |||
Entity Registrant Name | CHICAGO ATLANTIC REAL ESTATE FINANCE, INC. | ||
Trading Symbol | REFI | ||
Document Type | 10-K | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Common Stock, Shares Outstanding | 18,081,731 | ||
Entity Public Float | $ 264.2 | ||
Amendment Flag | false | ||
Entity Central Index Key | 0001867949 | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Well-known Seasoned Issuer | No | ||
Document Period End Date | Dec. 31, 2022 | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Shell Company | false | ||
Entity Ex Transition Period | false | ||
ICFR Auditor Attestation Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Entity File Number | 001-41123 | ||
Entity Incorporation, State or Country Code | MD | ||
Entity Tax Identification Number | 86-3125132 | ||
Entity Address, Address Line One | 1680 Michigan Avenue | ||
Entity Address, Address Line Two | Suite 700 | ||
Entity Address, City or Town | Miami Beach | ||
Entity Address, State or Province | FL | ||
Entity Address, Postal Zip Code | 33139 | ||
City Area Code | (312) | ||
Local Phone Number | 809-7002 | ||
Title of 12(b) Security | Common Stock, par value $0.01 per share | ||
Security Exchange Name | NASDAQ | ||
Entity Interactive Data Current | Yes | ||
Auditor Firm ID | 243 | ||
Auditor Name | BDO USA, LLP | ||
Auditor Location | Chicago, Illinois |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Assets | ||
Loans held for investment | $ 339,273,538 | $ 196,984,566 |
Current expected credit loss reserve | (3,940,939) | (134,542) |
Loans held for investment at carrying value, net | 335,332,599 | 196,850,024 |
Cash | 5,715,827 | 80,248,526 |
Interest receivable | 1,204,412 | 197,735 |
Other receivables and assets, net | 1,018,212 | 874,170 |
Total Assets | 343,271,050 | 278,170,455 |
Liabilities | ||
Revolving loan | 58,000,000 | |
Dividend payable | 13,618,591 | 4,537,924 |
Management and incentive fees payable | 3,295,600 | 802,294 |
Interest reserve | 1,868,193 | 6,636,553 |
Related party payables | 1,397,515 | 1,902,829 |
Accounts payable and other liabilities | 1,058,128 | 212,887 |
Total Liabilities | 79,238,027 | 14,092,487 |
Commitments and contingencies (Note 8) | ||
Stockholders’ equity | ||
Common stock, par value $0.01 per share, 100,000,000 shares authorized and 17,766,936 and 17,453,553 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively | 176,859 | 173,551 |
Additional paid-in-capital | 268,995,848 | 264,081,977 |
Accumulated earnings (deficit) | (5,139,684) | (177,560) |
Total stockholders’ equity | 264,033,023 | 264,077,968 |
Total liabilities and stockholders’ equity | $ 343,271,050 | $ 278,170,455 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 17,766,936 | 17,453,553 |
Common stock, shares outstanding | 17,766,936 | 17,453,553 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 9 Months Ended | 12 Months Ended |
Dec. 30, 2021 | Dec. 31, 2022 | |
Revenues | ||
Interest income | $ 11,075,116 | $ 51,471,766 |
Interest expense | (75,861) | (2,614,138) |
Net interest income | 10,999,255 | 48,857,628 |
Expenses | ||
Management and incentive fees, net | 802,294 | 6,562,087 |
Provision for current expected credit losses | 147,949 | 3,887,405 |
General and administrative expense | 297,916 | 3,528,322 |
Professional fees | 57,458 | 2,151,714 |
Stock based compensation | 29,611 | 435,623 |
Organizational expense | 167,591 | |
Total expenses | 1,502,819 | 16,565,151 |
Net Income before income taxes | 9,496,436 | 32,292,477 |
Income tax expense | ||
Net Income | $ 9,496,436 | $ 32,292,477 |
Earnings per common share: | ||
Basic earnings per common share (in Dollars per share) | $ 1.47 | $ 1.83 |
Diluted earnings per common share (in Dollars per share) | $ 1.47 | $ 1.82 |
Weighted average number of common shares outstanding: | ||
Basic weighted average shares of common stock outstanding (in Shares) | 6,442,865 | 17,653,765 |
Diluted weighted average shares of common stock outstanding (in Shares) | 6,450,383 | 17,746,214 |
Consolidated Statements of Equi
Consolidated Statements of Equity - USD ($) | Total | Common Stock | Additional Paid-In-Capital | Accumulated Earnings (Deficit) |
Balance at Mar. 29, 2021 | ||||
Balance (in Shares) at Mar. 29, 2021 | ||||
Issuance of common stock in connection with sale of unregistered equity securities | $ 164,760,161 | $ 106,363 | 164,653,798 | |
Issuance of common stock in connection with sale of unregistered equity securities (in Shares) | 10,636,363 | |||
Issuance of common stock in connection with initial public offering and concurrent private placement, net of offering costs, underwriting discounts and commissions | 99,465,756 | $ 67,188 | 99,398,568 | |
Issuance of common stock in connection with initial public offering and concurrent private placement, net of offering costs, underwriting discounts and commissions (in Shares) | 6,718,750 | |||
Stock-based compensation | 29,611 | 29,611 | ||
Stock-based compensation (in Shares) | 98,440 | |||
Dividends declared on common shares | (9,673,996) | (9,673,996) | ||
Net income | 9,496,436 | 9,496,436 | ||
Balance at Dec. 31, 2021 | 264,077,968 | $ 173,551 | 264,081,977 | (177,560) |
Balance (in Shares) at Dec. 31, 2021 | 17,453,553 | |||
Issuance of common stock in connection with initial public offering and concurrent private placement, net of offering costs, underwriting discounts and commissions | 4,481,556 | $ 3,028 | 4,478,528 | |
Issuance of common stock in connection with initial public offering and concurrent private placement, net of offering costs, underwriting discounts and commissions (in Shares) | 302,800 | |||
Stock-based compensation | 448,773 | $ 280 | 435,343 | 13,150 |
Stock-based compensation (in Shares) | 10,583 | |||
Dividends declared on common shares | (37,267,751) | (37,267,751) | ||
Net income | 32,292,477 | 32,292,477 | ||
Balance at Dec. 31, 2022 | $ 264,033,023 | $ 176,859 | $ 268,995,848 | $ (5,139,684) |
Balance (in Shares) at Dec. 31, 2022 | 17,766,936 |
Consolidated Statements of Eq_2
Consolidated Statements of Equity (Parentheticals) - $ / shares | 9 Months Ended | 12 Months Ended |
Dec. 31, 2021 | Dec. 31, 2022 | |
Statement of Stockholders' Equity [Abstract] | ||
Dividends declared on common per shares | $ 1.34 | $ 2.1 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | 12 Months Ended |
Dec. 30, 2021 | Dec. 31, 2022 | |
Operating activities | ||
Net income | $ 9,496,436 | $ 32,292,477 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Accretion of deferred loan origination fees and other discounts | (595,872) | (2,874,706) |
Paid-in-kind interest | (798,019) | (6,920,388) |
Provision for current expected credit losses | 147,949 | 3,887,405 |
Amortization of deferred debt issuance costs | 75,861 | 563,464 |
Stock based compensation | 29,611 | 435,623 |
Changes in operating assets and liabilities: | ||
Interest receivable | (197,735) | (1,006,677) |
Other receivables and assets, net | (6,148) | (106,074) |
Interest reserve | (2,587,249) | (13,818,194) |
Related party payable | 1,294,686 | |
Management and incentive fees payable | 905,123 | 2,493,306 |
Accounts payable and accrued expenses | 199,480 | 764,233 |
Net cash provided by operating activities | 6,669,437 | 17,005,155 |
Cash flows from investing activities | ||
Issuance of and fundings of loans held for investment | (159,892,272) | (149,669,551) |
Proceeds from sales of loans held for investment | 4,872,232 | 6,696,777 |
Principal repayment of loans held for investment | 9,798,364 | 17,728,730 |
Net cash used in investing activities | (145,221,676) | (125,244,044) |
Cash flows from financing activities | ||
Proceeds from sale of common stock | 226,031,597 | 4,505,664 |
Proceeds from borrowings on revolving loan | 58,000,000 | |
Dividends paid to common shareholders | (5,136,072) | (28,173,934) |
Payment of deferred debt issuance costs | (943,883) | (501,040) |
Payment of deferred offering costs | (1,150,877) | (124,500) |
Net cash provided by financing activities | 218,800,765 | 33,706,190 |
Change in cash | 80,248,526 | (74,532,699) |
Cash, beginning of period | 80,248,526 | |
Cash, end of period | 80,248,526 | 5,715,827 |
Supplemental disclosure of non-cash financing and investing activity | ||
Loans acquired for issuance of shares of common stock | 39,345,197 | |
Interest reserve withheld from funding of loans held for investment | 9,223,802 | 9,049,834 |
OID withheld from funding of loans held for investment | 3,529,406 | 3,243,735 |
Dividends declared and not yet paid | 4,537,924 | 13,592,997 |
Supplemental information: | ||
Interest paid during the period | 1,660,993 | |
Income taxes paid during the period |
Organization and Description of
Organization and Description of Business | 12 Months Ended |
Dec. 31, 2022 | |
Organization and Description of Business [Abstract] | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Chicago Atlantic Real Estate Finance, Inc., and subsidiary (collectively the “Company”, “we”, or “our”), is a commercial mortgage real estate investment trust (“REIT”) incorporated in the state of Maryland on March 30, 2021. The Company elected to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2021. The Company generally will not be subject to United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to stockholders and complies with various other requirements as a REIT. The Company operates as one operating segment and its primary investment objective is to provide attractive, risk-adjusted returns for stockholders over time, primarily through consistent current income (dividends and distributions) and secondarily, through capital appreciation. The Company intends to achieve this objective by originating, structuring and investing in first mortgage loans and alternative structured financings secured by commercial real estate properties. The Company’s loan portfolio is primarily comprised of senior loans to state-licensed operators in the cannabis industry, secured by real estate, equipment, receivables, licenses and/or other assets of the borrowers to the extent permitted by applicable laws and regulations governing such borrowers. Following its formation on March 30, 2021, the Company engaged in a series of transactions through which it acquired an initial portfolio of senior secured loans and other real estate related assets (the “Initial Portfolio”), that were previously held by affiliated entities (the “Contribution Group”) of Chicago Atlantic Group, LLC (the “Sponsor”). On April 1, 2021, the Company entered into a contribution assignment and acceptance agreement with the members of the Contribution Group through which the Contribution Group contributed all or a portion of their interest in the Initial Portfolio in exchange for 635,194 shares of common stock in the Company. Loans in the Initial Portfolio were contributed at an aggregate amortized cost of approximately $9.8 million, along with a cash contribution of $97,976. Subsequently, the Company also acquired loans at amortized cost of $22,516,005 from affiliates of the Manager in exchange for issuance of 1,446,473 shares of common stock, as well as cash contributions of $125,517,500 to fund loans in exchange for 8,067,010 shares of common stock. Additionally, the Company acquired 100% of CAL from an affiliate of the Manager in exchange for the issuance of 481,259 shares of common stock. On December 10, 2021, the Company completed its initial public offering (“IPO”) in which it issued and sold 6,250,000 shares of its common stock at the public offering price of $16.00 per share. The Company received net proceeds of $92.9 million after deducting underwriting discounts and commissions and offering costs. Concurrent with the closing of the IPO, the Company sold 468,750 shares of its common stock at the public offering price of $16.00 per share in a private placement to John Mazarakis, the Company’s Executive Chairman, Anthony Cappell, the Company’s Chief Executive Officer, and Dr. Andreas Bodmeier, the Company’s Co-President. The aggregate purchase price of these shares was $7.5 million, and no underwriting discounts or commissions were paid in respect of these shares. Additionally, on December 10, 2021, the Compensation Committee of the Board approved restricted stock award grants of 98,440 shares of common stock. On January 5, 2022, the underwriters partially exercised their over-allotment option to purchase 302,800 shares of the Company’s common stock at a price of $16.00 per share, raising $4,844,800 in additional gross proceeds or $4,505,664 in net proceeds after underwriting commissions of $339,136, which is reflected as a reduction of additional paid-in capital on the consolidated statements of stockholders’ equity. The Company is externally managed by Chicago Atlantic REIT Manager, LLC (the “Manager”), a Delaware limited liability company, pursuant to the terms of the management agreement dated May 1, 2021, which extends for a three-year initial term set to expire on April 30, 2024 (the “Management Agreement”), by and among the Company and the Manager. After the initial term, the management agreement is automatically renewed for one-year periods unless the Company or the Manager elects not to renew in accordance with the terms of the Management Agreement. The Manager conducts substantially all of the Company’s operations and provides asset management services for its real estate investments. For its services, the Manager is entitled to management fees and incentive compensation, both defined in, and in accordance with the terms of, the Management Agreement (Note 7). All of the Company’s investment decisions are made by the investment committee of the Manager, subject to oversight by the Company’s board of directors (the “Board”). The Manager is wholly-owned by the Sponsor. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Our consolidated financial statements present the financial position, results of operations, and cash flows of Chicago Atlantic Real Estate Finance, Inc., and its wholly owned consolidated subsidiary, Chicago Atlantic Lincoln, LLC (“CAL”). All intercompany accounts and transactions have been eliminated in consolidation Use of Estimates in the Preparation of Consolidated Financial Statements The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant estimates include the provision for current expected credit losses. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. Interest expense was previously presented as an operating expense and has been reclassified as a reduction to net interest income on the consolidated statements of operations. General and administrative expense reimbursements due to the Manager, which were previously included in the line item management and incentive fees payable, have been reclassified into related party payables in the consolidated balance sheets. In addition, the general administrative expense reimbursements incurred by the Manager, which were previously included in the line item management and incentive fees, net, have been reclassified into general and administrative expense in the consolidated statements of operations Further, the line items other receivables and other assets as of December 31, 2021 have been reclassified to the line item other receivables and assets, net to conform to the current year presentation. These reclassifications do not result in any changes to previously reported total assets, stockholder’s equity, and net income. Cash Cash includes deposits with financial institutions. The Company’s cash held with financial institutions may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limits. Cash and short-term investments with an original maturity of three months or less when acquired are considered cash for the purpose of the consolidated balance sheet and consolidated statement of cash flows. Concentration of Credit Risks Financial instruments that may subject the Company to concentrations of credit risk consist primarily of cash , loans and interest receivable. The Company and the Manager seek to manage this credit risk relating to cash by monitoring the financial stability of the financial institutions and their ability to continue in business for the foreseeable future. Concentration of credit risk relating to loans and interest receivable are managed by the Company and the Manager through robust portfolio monitoring and performing due diligence prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate. Offering Costs Costs associated with the offering of common shares of the Company including, but not limited to legal, accounting, printing, and filing fees, including audit fees incurred directly related to the offering. Such costs are capitalized as incurred and are included in other assets in the consolidated balance sheets as of December 31, 2022 and 2021. Deferred offering costs will be charged to additional paid-in-capital upon the completion of an offering of the authorized common stock of the Company. Should an offering of the authorized common stock of the Company prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to operations. Deferred offering costs are included in Other receivables and assets, net within the consolidated balance sheets in the amount of $100,392 and $0 as of December 31, 2022 and December 31, 2021, respectively. Loans Held for Investment The Company originates commercial real estate (“CRE”) loans and related debt instruments that it has both the intent and ability to hold for the foreseeable future, so they are classified as held for investment. Loans that are held-for-investment are carried at their aggregate outstanding face amount, net of applicable (i) unamortized origination or acquisition premium and discounts, (ii) unamortized deferred fees and other direct loan origination costs, (iii) valuation allowance for credit losses and (iv) write-downs of uncollectible loans. The Company uses a method which approximates the effective interest method to amortize origination or acquisition premiums and discounts and deferred fees or other direct loan origination costs. Once the Company decides to sell loans, they may be transferred to held-for-sale and carried at the lower of cost or fair value. The Company’s loans are primarily collateralized by real estate, equipment, licenses and/or other collateral assets of borrowers. The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received. The Company monitors performance of its portfolio of loans held for investment under the following methodology: (1) borrower review, which evaluates each borrower’s financial condition including consideration of interest and principal payment history, ability to execute its business plan, and assessment of any alleged actual, threatened, or pending litigation; (2) economic review, which contemplates the value of underlying collateral (i.e. leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity); (3) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception; and (4) market review, which analyzes the collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective. Changes in other observable market data may be utilized in determining the immediate recognition of expected credit losses over the life of financial instruments. CECL Reserve The Company measures current expected credit losses (“CECL”) for loans held for investment based on Accounting Standards Codification (“ASC”) No. 326, Financial Instruments – Credit Losses Refer to “Note 3 – Loans Held for Investment, Net” for further information regarding the CECL Reserve. Fair Value Measurements Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or, in the absence of a principal market, in the most advantageous market for the asset or liability. The Company discloses the fair value of its financial assets and liabilities based on observable market information where available or on market participant assumptions. These assumptions are subjective in nature and involve matters of judgment and, therefore, fair values cannot always be determined with precision. When determining fair value, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of the fair value hierarchy as set forth in Financial Accounting Standards Board (“FASB”) ASC Topic 820 – Fair Value Measurement and Disclosure ● Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. ● Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. If inputs used to measure fair value fall into different levels of the fair value hierarchy, a loan’s level is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the instrument being measured. GAAP requires disclosure of fair value information about financial assets and liabilities, whether or not recognized in the consolidated financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by the Company’s management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial assets and liabilities could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced. The fair value of loans held for investment is discussed in Note 3. Excluding the aforementioned assets, the carrying values of these financial assets approximates fair value because of the short-term maturities of these assets. Equity-Based Compensation The Company accounts for equity-based compensation issued to employees of the Manager and its affiliates and the members the Board pursuant to the 2021 Omnibus Incentive Plan (the “2021 Plan”) under the fair value method. This method measures compensation cost at the date of grant based on the value of the award and recognizes the cost over the service period, which is usually the vesting period. Forfeitures are recognized as they occur. The fair value of equity-based compensation awards is based on the estimated fair value of the Company’s common stock, based on the Company’s stock price on grant date, and approved by the Board. Fair values of award grants also recognize any ongoing restrictions on the sale of securities. Debt Issuance Costs Debt issuance costs are presented as a direct deduction from the debt liability with the exception of debt issuances costs related to the Revolving Loan, consistent with debt discounts or premiums unless they relate to an undrawn line of credit, in which case they are amortized on a straight-line basis over the life of the line of credit. Unamortized debt issuance costs are subsequently expensed if the associated debt is repaid prior to maturity. Amortization of debt issuance costs are reported as interest expense in the consolidated statements of operations. As of December 31, 2022, the Company has unamortized debt issuance costs of $805,596 presented within Other receivables and assets, net on the Company’s consolidated balance sheets. Formation Transaction The Company commenced operations on March 30, 2021. The assets and liabilities constituting the Initial Portfolio were contributed at amortized cost on April 1, 2021 (the “Formation Transaction”). The fair values of the contributed cash and accrued interest approximated their carrying values because of the short-term nature of these instruments in relation to their origination date. The amortized cost of the contributed assets described above were agreed upon by the Contribution Group and used to determine the number of shares of common stock issued. Any purchase premiums or discounts are amortized over the expected life of the investment. The following table shows the par values, amortized cost and purchase premiums (discounts) of the Initial portfolio as of April 1, 2021: Par value Amortized Premium Assets Cash $ 97,976 $ 97,976 $ - Loans, held-for-investment, net 9,883,211 9,802,024 (81,187 ) Total contributions $ 9,981,187 $ 9,900,000 $ (81,187 ) Revenue Recognition Interest income is recognized on an accrual basis and is reported as an interest receivable until collected. Interest income is accrued based on the outstanding principal amount and the contractual terms of the loan. Original issue discount (“OID”), market discounts or premiums, and loan amendment fees for minor modifications (collectively, “Net Loan Fees”) are recorded as an adjustment to the amortized cost of the loan and accreted or amortized as an adjustment to interest income over the initial term of the respective loan using a method that approximates the effective interest method. When the Company receives a loan principal payment, the unamortized Net Loan Fees related to the paid principal is accelerated and recognized in interest income. Delayed draw loans may earn interest or unused fees on the undrawn portion of the loan, which is recognized as interest income in the period earned. Other fees, including prepayment fees and exit or success fees, are recognized as interest income when received. Certain of the Company’s loans contain a paid-in-kind interest income provision (“PIK interest”). The PIK interest, computed at the contractual rate specified in the applicable loan agreement, is added to the principal balance of the loan, rather than being paid in cash, and is generally collected upon repayment of the outstanding principal. Recognition of PIK interest includes assessments of collectability and may discontinue accrual of interest income, including PIK interest, when there is reasonable doubt that the interest income will be collected. To the extent required to maintain the Company’s status as a REIT, and/or to avoid incurring an excise tax, accrued income such as this may need to be distributed to stockholders in the form of dividends for the year earned, even though the Company has not yet collected the cash. Loans are generally placed on non-accrual status when principal or interest payments are past due 90 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments. Non-accrual loans are restored to accrual status when principal and interest payments are brought current, the borrower demonstrates sustained repayment performance, or the loan becomes well secured and is in the process of collection. The Company may make exceptions to placing a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. Interest Reserves The Company utilizes interest reserves on certain loans which are applied to future interest payments. Such reserves are established at the time of loan origination. The interest reserve is recorded as a liability as it represents unearned interest revenue. The interest reserve is relieved when the interest on the loan is earned, and interest income is recorded in the period when the interest is earned in accordance with the credit agreement. The interest payment is deducted from the interest reserve deposit balance on the date when the interest payment is due. The decision to establish an interest reserve is made during the underwriting process and considers the creditworthiness and expertise of the borrower, the feasibility of the project, and the debt coverage provided by the real estate and other pledged collateral. It is the Company’s policy to recognize income for this interest component as long as the borrower is progressing as originally projected and if there has been no deterioration in the financial condition of the borrower or the underlying project. The Company’s standard accounting policies for interest income recognition are applied to all loans, including those with interest reserves. Expenses Interest expense, in accordance with the Company’s financing agreements, is recorded on an accrual basis. General and administrative expenses, including professional fees, are expensed as incurred. Income Taxes The Company is a Maryland corporation and elected to be taxed as a REIT under the Code, commencing with its taxable year ended December 31, 2021. The Company believes that its method of operations will enable it to continue to qualify as a REIT. However, no assurances can be given that the Company’s beliefs or expectations will be fulfilled, since qualification as a REIT depends on the Company satisfying numerous asset, income and distribution tests which depends, in part, on the Company’s operating results. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distributes annually to its stockholders at least 90% of the Company’s REIT taxable income prior to the deduction for dividends paid. To the extent that the Company distributes less than 100% of its REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), the Company will pay tax at regular corporate rates on that undistributed portion. Furthermore, if the Company distributes less than the sum of 1) 85% of its ordinary income for the calendar year, 2) 95% of its capital gain net income for the calendar year, and 3) any undistributed shortfall from its prior calendar year (the “Required Distribution”) to its stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then it is required to pay a non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. The 90% distribution requirement does not require the distribution of net capital gains. However, if the Company elects to retain any of its net capital gain for any tax year, it must notify its stockholders and pay tax at regular corporate rates on the retained net capital gain. The stockholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain and receive an income tax credit for such amount. Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax. If it is determined that the Company’s estimated current year taxable income will be in excess of estimated dividend distributions (including capital gain dividend) for the current year from such income, the Company accrues excise tax on estimated excess taxable income as such taxable income is earned. The annual expense is calculated in accordance with applicable tax regulations. FASB ASC Topic 740, Income Taxes Earnings per Share The Company calculates basic earnings / (loss) per share by dividing net income / (loss) allocable to common stockholders for the period by the weighted average shares of common stock outstanding for that period. Diluted earnings / (loss) per share takes into effect any dilutive instruments, except when doing so would be anti-dilutive. As of December 31, 2022 and 2021, there were dilutive instruments relating to restricted shares. See Note 10 included in these consolidated financial statements for the earnings per share calculations. Recent Accounting Pronouncements In March 2022, the FASB issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures Financial Instruments—Credit Losses—Measured at Amortized Cost |
Loans Held For Investment, Net
Loans Held For Investment, Net | 12 Months Ended |
Dec. 31, 2022 | |
Loans Held For Investment, Net [Abstract] | |
LOANS HELD FOR INVESTMENT, NET | 3. LOANS HELD FOR INVESTMENT, NET As of December 31, 2022 and 2021, the Company’s portfolio was comprised of loans to 22 $351.4 $343.0 $160.2 As of December 31, 2022 and 2021, approximately 83.1% $281.6 The remaining 16.9% and 46.4%, respectively, of the portfolio was comprised of fixed rate loans that had a carrying value of approximately $57.7 $91.3 The following tables summarize the Company’s loans held for investment as of December 31, 2022 and 2021: As of December 31, 2022 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior Term Loans $ 343,029,334 $ (3,755,796 ) $ 339,273,538 2.2 Current expected credit loss reserve - - (3,940,939 ) Total loans held at carrying value, net $ 343,029,334 $ (3,755,796 ) $ 335,332,599 As of December 31, 2021 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior Term Loans $ 200,632,056 $ (3,647,490 ) $ 196,984,566 2.2 Current expected credit loss reserve - - (134,542 ) Total loans held at carrying value, net $ 200,632,056 $ (3,647,490 ) $ 196,850,024 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable. (2) Weighted average remaining life is calculated based on the carrying value of the loans as of December 31, 2022 and December 31, 2021, respectively. The following table presents changes in loans held at carrying value as of and for the year ended December 31, 2022 and the period ended December 31, 2021: Principal Original Issue Discount Current Expected Credit Loss Reserve Carrying Value Balance at December 31, 2021 $ 200,632,056 $ (3,647,490 ) $ (134,542 ) $ 196,850,024 New fundings 160,163,120 (3,243,735 ) - 156,919,385 Principal repayment of loans (17,728,730 ) - - (17,728,730 ) Accretion of original issue discount - 2,874,706 - 2,874,706 Sale of loans (6,957,500 ) 260,723 - (6,696,777 ) PIK Interest 6,920,388 - - 6,920,388 Current expected credit loss reserve - - (3,806,397 ) (3,806,397 ) Balance at December 31, 2022 $ 343,029,334 $ (3,755,796 ) $ (3,940,939 ) $ 335,332,599 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable. Principal Original Issue Discount Current Expected Credit Loss Reserve Carrying Value Balance at March 30, 2021 (inception) $ - $ - $ - $ - Loans contributed 40,191,921 (846,724 ) - 39,345,197 New fundings 174,445,480 (3,529,406 ) - 170,916,074 Principal repayment of loans (9,798,364 ) - - (9,798,364 ) Accretion of original issue discount - 595,872 - 595,872 Sale of loans (5,005,000 ) 132,768 (4,872,232 ) PIK Interest 798,019 - - 798,019 Provision for credit losses - - (134,542 ) (134,542 ) Balance at December 31, 2021 $ 200,632,056 $ (3,647,490 ) $ (134,542 ) $ 196,850,024 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable. A more detailed listing of the Company’s loans held at carrying value based on information available as of December 31, 2022, is as follows: Loan Location Outstanding Principal(1) Original Issue Premium/ Carrying Value(1) Contractual Interest Rate(4) Maturity Date(2) Payment Terms(3) Initial 1 Various (6) $ 30,000,000 $ (859,454 ) $ 29,140,546 P + 6.50% (5) 10/30/2026 I/O 10/27/2022 2 Michigan 37,283,861 (161,766 ) 37,122,095 P + 6.65% (5)(10) 12/31/2024 P&I 3/5/2021 3 Various (6) 20,809,353 (374,484 ) 20,434,869 13.91% (5) (9) 11/29/2024 P&I 3/25/2021 4 Arizona 12,849,490 - 12,849,490 18.72% (5)(7) 12/31/2023 P&I 4/19/2021 5 Massachusetts 1,856,000 - 1,856,000 P + 12.25% (5) 4/30/2025 P&I 4/19/2021 6 Pennsylvania 13,399,712 - 13,399,712 P + 10.75% (5) (8) 5/31/2025 P&I 5/28/2021 7 Michigan 4,359,375 (4,551 ) 4,354,824 P + 9.00% (5) 2/20/2024 P&I 8/20/2021 8 Various (6) 25,466,043 (245,186 ) 25,220,857 P + 6.00% (5) 6/30/2025 P&I 8/24/2021 9 West Virginia 10,086,382 (105,652 ) 9,980,730 18.75% PIK 9/1/2024 P&I 9/1/2021 10 Pennsylvania 15,775,542 - 15,775,542 P + 10.75% (5) 6/30/2024 P&I 9/3/2021 11 Michigan 274,406 - 274,406 11.00% 9/30/2024 P&I 9/20/2021 12 Maryland 32,645,784 (624,985 ) 32,020,799 P + 8.75% (5) 9/30/2024 I/O 9/30/2021 13 Various (6) 20,000,000 (184,743 ) 19,815,257 13.00% 10/31/2024 P&I 11/8/2021 14 Michigan 13,118,014 (124,859 ) 12,993,155 P + 6.00% (5) 11/1/2024 I/O 11/22/2021 15 Various (6) 5,194,167 - 5,194,167 P + 12.25% (5) 12/27/2026 P&I 12/27/2021 16 Michigan 3,787,852 (44,753 ) 3,743,099 P + 7.50% Cash (5) 12/29/2023 I/O 12/29/2021 17 Various (6) 7,387,500 (49,977 ) 7,337,523 P + 9.25% (5) 12/31/2024 P&I 12/30/2021 18 Florida 15,000,000 (262,318 ) 14,737,682 P + 4.75% (5) 1/31/2025 P&I 1/18/2022 19 Ohio 30,837,950 (422,837 ) 30,415,113 P + 8.25% (5) 2/28/2025 P&I 2/3/2022 20 Florida 20,483,947 (77,210 ) 20,406,737 11.00% Cash, 3% PIK 8/29/2025 P&I 3/11/2022 21 Missouri 17,337,220 (134,082 ) 17,203,138 11.00% Cash, 3% PIK 5/30/2025 P&I 5/9/2022 22 Illinois 5,076,736 (78,939 ) 4,997,797 P + 8.50% (5) 7/29/2026 P&I 7/1/2022 Current expected credit loss reserve - - (3,940,939 ) Total loans held at carry value $ 343,029,334 $ (3,755,796 ) $ 335,332,599 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discounts, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable. (2) Certain loans are subject to contractual extension options and may be subject to performance based on other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without a contractual prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications. (3) P&I = principal and interest. I/O = interest only. P&I loans may include interest only periods for a portion of the loan term. (4) P = Prime Rate and depicts floating rate loans that pay interest at the Prime Rate plus a specific percentage; “PIK” = paid-in-kind interest; subtotal represents weighted average interest rate. (5) This Loan is subject to Prime Rate floor based on the Prime Rate at the time of origination. (6) Loans with material collateral in multiple jurisdictions, namely multi-state operators, are disclosed as “various.” (7) The aggregate loan commitment to Loan #4 includes a $10.9 million initial commitment which has a base interest rate of 15.00% and a second commitment of $2.0 million which has an interest rate of 39%. The statistics presented reflect the weighted average of the terms under all advances for the total aggregate loan commitment. (8) Subject to adjustment not below 2% if borrower receives at least two consecutive quarters of positive cash flow after the closing date. (9) The aggregate loan commitment to Loan #3 includes a $15.9 million initial commitment which has a base interest rate of 13.625%, 2.75% PIK and a second commitment of $4.2 million which has an interest rate of 15.00%, 2.00% PIK. The statistics presented reflect the weighted average of the terms under all advances for the total aggregate loan commitment. (10) This Loan is subject to an interest rate cap. As of December 31, 2022, all loans are considered current and zero have been placed on non-accrual status. These loans are held for investment and are substantially secured by real estate, equipment, licenses and other assets of the borrowers to the extent permitted by the applicable laws and the regulations governing such borrowers. The aggregate fair value of the Company’s loan portfolio was $329,237,824 and $197,901,779, with gross unrecognized holding losses of $10,035,714 and gains of $917,213 as of December 31, 2022 and 2021, respectively. The fair values, which are classified as Level 3 in the fair value hierarchy, are estimated using discounted cash flow models based on current market inputs for similar types of arrangements. The primary sensitivity in these models is based on the selection of appropriate discount rates. Fluctuations in these assumptions could result in different estimates of fair value. The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of December 31, 2022. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values. As of December 31, 2022 Unobservable Input Fair Value Primary Valuation Techniques Input Estimated Range Weighted Average Senior term loans $ 329,237,824 Discounted cash flow Discount rate 11.36% - 24.79% 17.53 % Total Investments $ 329,237,824 Credit Quality Indicators The Company assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, payment history, real estate collateral coverage, property type, geographic and local market dynamics, financial performance, enterprise value of the portfolio company, loan structure and exit strategy, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows: Rating Definition 1 Very low risk 2 Low risk 3 Moderate/average risk 4 High risk/potential for loss: a loan that has a risk of realizing a principal loss 5 Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded The risk ratings are primarily based on historical data and current conditions specific to each portfolio company, as well as consideration of future economic conditions and each borrower’s estimated ability to meet debt service requirements. The declines in risk ratings shown in the following table from December 31, 2021 to December 31, 2022 consider borrower specific credit history and performance and quarterly re-evaluation of overall current macroeconomic conditions affecting its borrowers. As interest rates have increased due to rising rates from the Federal Reserve Board, it has impacted borrowers’ ability to service their debt obligations on a global scale. This decline in risk ratings had an effect on the level of the current expected credit loss reserve, though the loans continued to perform as expected. For approximately 82% of the portfolio, the fair value of the underlying real estate collateral exceeded the amounts outstanding under the loans as of December 31, 2022. The remaining approximately 18% of the portfolio, while not fully collateralized by real estate, was secured by other forms of collateral including equipment, receivables, licenses and/or other assets of the borrowers to the extent permitted by applicable laws and regulations governing such borrowers. As of December 31, 2022 and 2021, the carrying value, excluding the current expected credit loss reserve (the “CECL Reserve”), of the Company’s loans within each risk rating category by year of origination is as follows: As of December 31, 2022 As of December 31, 2021 Risk Rating 2022 2021 2020 2019 Total 2021 2020 2019 Total 1 $ - $ 274,406 $ - $ - $ 274,406 $ 135,076,307 $ 32,242,114 $ 590,384 $ 167,908,805 2 94,467,449 88,444,868 29,140,546 - 212,052,863 29,075,761 - - 29,075,761 3 30,415,113 83,131,444 - - 113,546,557 - - - - 4 - 13,399,712 - - 13,399,712 - - - - 5 - - - - - - - - - Total $ 124,882,562 $ 185,250,430 $ 29,140,546 $ - $ 339,273,538 $ 164,152,068 $ 32,242,114 $ 590,384 $ 196,984,566 (1) Amounts are presented by loan origination year with subsequent advances shown in the original year of origination. Real estate collateral coverage is also a significant credit quality indicator, and real estate collateral coverage, excluding the CECL Reserve, was as follows as of December 31, 2022 and December 31, 2021: As of December 31, 2022 Real Estate Collateral Coverage(1) < 1.0x 1.0x – 1.25x 1.25x – 1.5x 1.50x – 1.75x 1.75x – 2.0x > 2.0x Total Fixed-rate $ - $ - $ 20,406,737 $ 17,203,138 $ - $ 20,089,663 $ 57,699,538 Floating-rate 63,963,105 78,211,454 13,399,712 9,980,730 12,849,490 103,169,509 281,574,000 $ 63,963,105 $ 78,211,454 $ 33,806,449 $ 27,183,868 $ 12,849,490 $ 123,259,172 $ 339,273,538 As of December 31, 2021 Real Estate Collateral Coverage < 1.0 1.0 – 1.25 1.25 – 1.5 1.50 – 1.75 1.75 – 2.0 > 2.0 Total Fixed-rate $ 7,017,793 $ - $ 35,836,099 $ 3,086,298 $ - $ 45,373,778 $ 91,313,968 Floating-rate 8,925,068 18,022,518 - 30,029,953 32,377,087 16,315,972 105,670,598 $ 15,942,861 $ 18,022,518 $ 35,836,099 $ 33,116,251 $ 32,377,087 $ 61,689,750 $ 196,984,566 (1) Real estate collateral coverage is calculated based upon most recent third-party appraised values. CECL Reserve The Company records an allowance for current expected credit losses for its loans held for investment. The allowances are deducted from the gross carrying amount of the assets to present the net carrying value of the amounts expected to be collected on such assets. The Company estimates its CECL Reserve using among other inputs, third-party valuations, and a third-party probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan based on the risk profile for approximately three years after which we immediately revert to use of historical loss data. ASC 326 requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. The Company considers multiple datapoints and methodologies that may include likelihood of default and expected loss given default for each individual loan, valuations derived from discount cash flows (“DCF”), and other inputs including the risk rating of the loan, how recently the loan was originated compared to the measurement date, and expected prepayment, if applicable. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The Company evaluates its loans on a collective (pool) basis by aggregating on the basis of similar risk characteristics as explained below. We make the judgment that loans to cannabis-related borrowers that are fully collateralized by real estate exhibit similar risk characteristics and are evaluated as a pool. Further, loans that have no real estate collateral, but are secured by other forms of collateral, including equity pledges of the borrower, and otherwise have similar characteristics as those collateralized by real estate are evaluated as a pool. All other loans are analyzed individually, either because they operate in a different industry, may have a different risk profile, or maturities that extend beyond the forecast horizon for which we are able to derive reasonable and supportable forecasts. Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of the Company’s loan portfolio, and (iv) the Company’s current and future view of the macroeconomic environment. From time to time, the Company may consider loan-specific qualitative factors on certain loans to estimate its CECL Reserve, which may include (i) whether cash from the borrower’s operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan, and (iii) the liquidation value of collateral. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we may elect to apply a practical expedient, in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a CECL Reserve. To estimate the historic loan losses relevant to the Company’s portfolio, the Company evaluates its historical loan performance, which includes zero realized loan losses since the inception of its operations. Additionally, the Company analyzed its repayment history, noting it has limited “true” operating history, since the incorporation date of March 30, 2021. However, the Company’s Sponsor and its affiliates have had operations for the past three fiscal years and have made investments in similar loans that have similar characteristics including interest rate, collateral coverage, guarantees, and prepayment/make whole provisions, which fall into the pools identified above. Given the similarity of the structuring of the credit agreements for the loans in the Company’s portfolio to the loans originated by its Sponsor, management considered it appropriate to consider the past repayment history of loans originated by the Sponsor and its affiliates in determining the extent to which a CECL Reserve shall be recorded. In addition, the Company reviews each loan on a quarterly basis and evaluates the borrower’s ability to pay the monthly interest and principal, if required, as well as the loan-to-value (LTV) ratio. When evaluating qualitative factors that may indicate the need for a CECL Reserve, the Company forecasts losses considering a variety of factors. In considering the potential current expected credit loss, the Manager primarily considers significant inputs to the Company’s forecasting methods, which include (i) key loan-specific inputs such as the value of the real estate collateral, liens on equity (including the equity in the entity that holds the state-issued license to cultivate, process, distribute, or retail cannabis), presence of personal or corporate guarantees, among other credit enhancements, LTV ratio, rate type (fixed or floating) and IRR, loan-term, geographic location, and expected timing and amount of future loan fundings, (ii) performance against the underwritten business plan and the Company’s internal loan risk rating, and (iii) a macro-economic forecast. Estimating the enterprise value of our borrowers in order to calculate LTV ratios is often a significant estimate. The Manager utilizes a third-party valuation appraiser to assist with the Company’s valuation process primarily using comparable transactions to estimate enterprise value of its portfolio companies and supplement such analysis with a multiple-based approach to enterprise value to revenue multiples of publicly-traded comparable companies obtained from S&P Capital IQ as of December 31, 2022, to which the Manager may apply a private company discount based on the Company’s current borrower profile. Regarding real estate collateral, the Company generally cannot take the position of mortgagee-in-possession as long as the property is used by a cannabis operator, but it can request that the court appoint a receiver to manage and operate the subject real property until the foreclosure proceedings are completed. Additionally, while the Company cannot foreclose under state Uniform Commercial Code (“UCC”) and take title or sell equity in a licensed cannabis business, a potential purchaser of a delinquent or defaulted loan could. In order to estimate the future expected loan losses relevant to the Company’s portfolio, the Company utilizes historical market loan loss data obtained from a third-party database for commercial real estate loans, which the Company believes is a reasonably comparable and available data set to use as an input for its type of loans. The Company believes this dataset to be representative for future credit losses whilst considering that the cannabis industry is maturing, and consumer adoption, demand for production, and retail capacity are increasing akin to commercial real estate over time. For periods beyond the reasonable and supportable forecast period, the Company reverts back to historical loss data. All of the above assumptions, although made with the most available information at the time of the estimate, are subjective and actual activity may not follow the estimated schedule. These assumptions impact the future balances that the loss rate will be applied to and as such impact the Company’s CECL Reserve. As the Company acquires new loans and the Manager monitors loan and borrower performance, these estimates will be revised each period. Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value and loans receivable at carrying value as of and for the year ended December 31, 2022 and the period ended December 31, 2021 is presented in the table below. Outstanding (1) Unfunded (2) Total Balance at March 30, 2021 (inception) $ - $ - $ - Provision for current expected credit losses 134,542 13,407 147,949 Balance at December 31, 2021 $ 134,542 $ 13,407 $ 147,949 Outstanding (1) Unfunded (2) Total Balance at December 31, 2021 $ 134,542 $ 13,407 $ 147,949 Provision for current expected credit losses 3,806,397 81,008 3,887,405 Balance at December 31, 2022 $ 3,940,939 $ 94,415 $ 4,035,354 (1) As of December 31, 2022, the CECL Reserve related to outstanding balances on loans at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets. (2) As of December 31, 2022, the CECL Reserve related to unfunded commitments on loans at carrying value is recorded within accounts payable and accrued liabilities in the Company’s consolidated balance sheets. The Company has made an accounting policy election to exclude accrued interest receivable, ($1,204,412 and $197,735 as of December 31, 2022 and 2021, respectively) included in Interest Receivable on its consolidated balance sheet, from the amortized cost basis of the related loans held for investment in determining the CECL Reserve, as any uncollectible accrued interest receivable is written off in a timely manner. To date, the Company has had zero write-offs related to uncollectible interest receivable, but will discontinue accrual of interest on loans if deemed to be uncollectible, with any previously accrued uncollected interest on the loan charged to interest income in the same period. |
Interest Receivable
Interest Receivable | 12 Months Ended |
Dec. 31, 2022 | |
Interest Receivable [Abstract] | |
INTEREST RECEIVABLE | 4. INTEREST RECEIVABLE The following table summarizes the interest receivable by the Company as of December 31, 2022 and 2021: As of December 31, 2022 As of December 31, 2021 Interest receivable $ 1,203,330 $ 193,790 PIK interest receivable 1,082 - Unused fees receivable - 3,945 Total interest receivable $ 1,204,412 $ 197,735 The following table presents aging analyses of past due loans (including non-accrual loans) by class as of December 31, 2022: As of December 31, 2022 Current Loans (1) 31 - 60 Days Past Due 61 - 90 Days Past Due 90+ Days Past Due (and accruing) Non-Accrual Total Past Due Total Loans Senior term loan $ 1,203,088 $ 1,324 $ - $ $ - $ 1,324 $ 1,204,412 Total $ 1,203,088 $ 1,324 $ - $ - $ - $ 1,324 $ 1,204,412 (1) Loans 1-30 days past due are included in the current loans. As of December 31, 2022 and 2021, there were no loans with contractual principal payments greater than 30 days past due. |
Interest Reserve
Interest Reserve | 12 Months Ended |
Dec. 31, 2022 | |
Interest Reserve Abstract | |
INTEREST RESERVE | 5. INTEREST RESERVE At December 31, 2022 and 2021, the Company had three and nine loans, respectively, that included a prepaid interest reserve. The following table presents changes in interest reserves: As of December 31, 2022 As of December 31, 2021 Beginning reserves $ 6,636,553 $ - New reserves 9,049,834 9,223,802 Reserves disbursed (13,818,194 ) (2,587,249 ) Ending reserves $ 1,868,193 $ 6,636,553 |
Debt
Debt | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
DEBT | 6. DEBT In May 2021, in connection with the Company’s acquisition of its wholly-owned financing subsidiary, Chicago Atlantic Lincoln, LLC (“CAL”), the Company was assigned a secured revolving credit facility (the “Revolving Loan”). The Revolving Loan had an original aggregate borrowing base of up to $10,000,000 and bore interest, payable in cash in arrears, at a per annum rate equal to the greater of (x) Prime Rate plus 1.00% and (y) 4.75%. The Company incurred debt issuance costs of $100,000 related to the origination of the Revolving Loan, which were capitalized and are subsequently being amortized through maturity. The maturity date of the Revolving Loan was the earlier of (i) February 12, 2023 and (ii) the date on which the Revolving Loan is terminated pursuant to terms in the Revolving Loan Agreement. On December 16, 2021, CAL entered into an amended and restated Revolving Loan agreement (the “First Amendment and Restatement”). The First Amendment and Restatement increased the loan commitment from $10,000,000 to $45,000,000 and decreased the interest rate, from the greater of the (1) Prime Rate plus 1.00% and (2) 4.75% to the greater of (1) the Prime Rate plus the applicable margin and (2) 3.25%. The applicable margin is derived from a floating rate grid based upon the ratio of debt to equity of CAL and increases from 0% at a ratio of 0.25 to 1 to 1.25% at a ratio of 1.5 to 1. The First Amendment and Restatement also extended the maturity date from February 12, 2023 to the earlier of (i) December 16, 2023 and (ii) the date on which the Revolving Loan is terminated pursuant to the terms of the Revolving Loan agreement. The Company has the option to extend the initial term for an additional one-year term, provided no events of default exist and the Company provides the required notice of the extension pursuant to the First Amendment and Restatement. The Company incurred debt issuance costs of $859,500 related to the First Amendment and Restatement, which were capitalized and are subsequently being amortized through maturity. On May 12, 2022, CAL entered into a second amended and restated Revolving Loan agreement (the “Second Amendment and Restatement”). The Second Amendment and Restatement increased the loan commitment from $45,000,000 to $65,000,000. No other material terms of the Revolving Loan were modified as a result of the execution of the Second Amendment and Restatement. The Company incurred debt issuance costs of $177,261 related to the Second Amendment and Restatement, which were capitalized and are subsequently amortized through maturity. On November 7, 2022, CAL entered into a third amended and restated Revolving Loan agreement (the “Third Amendment and Restatement”). The Third Amendment and Restatement increased the loan commitment from $65,000,000 to $92,500,000. No other material terms of the Revolving Loan were modified as a result of the execution of the Third Amendment and Restatement. The Company incurred debt issuance costs of $323,779 related to the Third Amendment and Restatement, which were capitalized and are subsequently amortized through maturity. As of December 31, 2022 and 2021, unamortized debt issuance costs related to the Revolving Loan and the First, Second and Third Amendments and Restatements of $805,596 and $868,022, respectively, are recorded in other receivables and assets, net on the consolidated balance sheets. The Revolving Loan incurs unused fees at a rate of 0.25% per annum which began on July 1, 2022 pursuant to the Second Amendment and Restatement. Additionally, during the year ended December 31, 2022, the Company borrowed $58.0 million against the Revolving Loan, which incurred an effective interest rate of 7.75% including the unused fee rate of 0.25%, and $34.5 million available under the Revolving Loan. The Third Amendment and Restatement provides for certain affirmative covenants, including requiring us to deliver financial information and any notices of default, and conducting business in the normal course. Additionally, the Company must comply with certain financial covenants including: (1) maximum capital expenditures of $150,000, (2) maintaining a debt service coverage ratio greater than 1.35 to 1, and (3) maintaining a leverage ratio less than 1.50 to 1. As of December 31, 2022, we were in compliance with all financial covenants with respect to the Revolving Loan. Subsequent to December 31, 2022, the Company executed an amendment to the Revolving Loan, which among other modifications, extended the contractual maturity date to December 16, 2024. See Note 13 for further information. The fair value of the Revolving Loan, which is classified as Level 2 in the fair value hierarchy, approximates the carrying value as it bears a market rate of interest that is reset frequently. The following table reflects a summary of interest expense incurred during the year ended December 31, 2022. There was no interest expense incurred during the period ended December 31, 2021. Year Period from March 30, 2021 (inception) December 31, December 31, Interest expense $ 2,024,299 $ - Unused fee expense 26,375 - Amortization of deferred financing costs 563,464 75,861 Total interest expense $ 2,614,138 $ 75,861 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 7. RELATED PARTY TRANSACTIONS Management Agreement Pursuant to the Management Agreement, the Manager will manage the loans and day-to-day operations of the Company, subject at all times to the further terms and conditions set forth in the Management Agreement and such further limitations or parameters as may be imposed from time to time by the Company’s Board. The Manager is entitled to receive base management fees (the “Base Management Fee”) that are calculated and payable quarterly in arrears, in an amount equal to 0.375% of the Company’s Equity, determined as of the last day of each such quarter; reduced by an amount equal to 50% of the pro rata amount of origination fees earned and paid to the Manager during the applicable quarter for loans that were originated on the Company’s behalf by the Manager or affiliates of the Manager (“Outside Fees”). For the year ended December 31, 2022 and the period ended December 31, 2021, the Base Management Fee payable was reduced by Outside Fees in the amount of $1,291,451 and $187,028, respectively. In addition to the Base Management Fee, the Manager is entitled to receive incentive compensation (the “Incentive Compensation” or “Incentive Fees”) under the Management Agreement. Under the Management Agreement, the Company will pay Incentive Fees to the Manager based upon the Company’s achievement of targeted levels of Core Earnings. “Core Earnings” is defined in the Management Agreement as, for a given period, the net income (loss) for such period, computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) the Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between the Manager and the members of the Compensation Committee of the Board, each of whom are Independent Directors, and approved by a majority of the members of the Compensation Committee. Incentive compensation for the year ended December 31, 2022 was $3,778,812. Pursuant to Fee Waiver Letter Agreements executed by the Manager, dated June 30, 2021 and September 30, 2021, all Base Management Fees that would have been payable to the Manager for the period from May 1, 2021 to September 30, 2021 were voluntarily waived and are not subject to recoupment at a later date. Additionally, Pursuant to Fee Waiver Letter Agreement executed by the Manager, dated December 31, 2021, all Incentive Compensation that would have been payable to the Manager for the period from October 1, 2021 to December 31, 2021 were voluntarily waived and are not subject to recoupment at a later date. The Company shall pay all of its costs and expenses and shall reimburse the Manager or its affiliates for expenses of the Manager and its affiliates paid or incurred on behalf of the Company, excepting only those expenses that are specifically the responsibility of the Manager pursuant to the Management Agreement. We reimburse our Manager or its affiliates, as applicable, for the Company’s fair and equitable allocable share of the compensation, including annual base salary, bonus, any related withholding taxes and employee benefits, paid to (i) subject to review by the Compensation Committee of the Board, the Manager’s personnel serving as an officer of the Company, based on the percentage of his or her time spent devoted to the Company’s affairs and (ii) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance, and other non-investment personnel of the Manager and its affiliates who spend all or a portion of their time managing the Company’s affairs, with the allocable share of the compensation of such personnel described in this clause (ii) being as reasonably determined by the Manager to appropriately reflect the amount of time spent devoted by such personnel to our affairs. For the period from October 1, 2021 to December 31, 2021, the Manager agreed to waive a portion of reimbursable expenses incurred in the amount of $116,464, which were voluntarily waived and are not subject to recoupment at a later date. The following table summarizes the related party fees and expenses incurred by the Company and amounts payable to the Manager for the year ended December 31, 2022 and the period ended December 31, 2021. For the Period from Affiliate Payments Management fees earned $ 4,074,725 $ 989,322 Less: Outside fees earned (1,291,451 ) (187,028 ) Base management fee, net 2,783,274 802,294 Incentive fees 3,778,813 - Total management and incentive fees earned 6,562,087 802,294 General and administrative expenses reimbursable to Manager 3,137,861 102,829 Total $ 9,699,948 $ 905,123 General administrative expenses reimbursable to the Manager are included in the related party payables line item of the consolidated balance sheets as of December 31, 2022 and 2021. Amounts payable to the Manager as of December 31, 2022 and 2021 were approximately $5.0 million and $0.9 million, respectively, which included bonuses accrued for fiscal year 2022 which are not reimbursed to the Manager until paid. Co-Investments in Loans From time to time, the Company may co-invest with other investment vehicles managed by its affiliates, in accordance with the Manager’s co-investment allocation policies. The Company is not obligated to provide, nor has it provided, any financial support to the other managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment in any such loan. As of and for the year ended December 31, 2022 and the period ended December 31, 2021, 15 and ten of the Company’s loans were co-invested by affiliates of the Company, respectively. In connection with investments in loans, the Company may receive the option to assign the right (the “Assigned Right”) to acquire warrants and/or equity of the borrower. The Company may sell the Assigned Right, and the sale may be to an affiliate of the Company. During the year ended December 31, 2022 and the period from March 30, 2021 to December 31, 2021, the Company neither received r sold any Assigned Right. The proceeds from the sale of Assigned Rights are accounted for as additional original issue discount and accreted over the life of the related loans. During the period ended December 31, 2021, the Company advanced $20,000,000 to the Borrower of Loan #12. The Company noted that a member of our Sponsor is a voting board member to the Borrower of Loan #12, and we evaluated the nature of such transaction in accordance with the guidance set forth in FASB ASC Topic 850, Related Party Disclosures (“ASC 850”), noting no material conflict of interest. On October 1, 2021, the Company assigned $14.0 million of unfunded commitment in Loan #12 and $5.0 million of unfunded commitment in Loan #8 to an affiliate. Further, on October 3, 2021, the Company sold $5.0 million of principal related to the second tranche of Loan #1 to an affiliate at an amortized cost, plus accrued interest of $4.9 million. In addition, two private funds affiliated with the Manager purchased 1,093,750 shares in the IPO at the initial public offering price, for an aggregate purchase price of $17.5 million. The founders of the Manager own the general partner of each of the private funds that invested in the IPO and are responsible for making investment decisions on behalf of each such fund. As of December 31, 2021, the Company had $1.8 million due to an affiliate of its Manager in relation to Loan #14 that was settled subsequent to year end. On July 8, 2022, the Company sold a senior secured loan to an affiliate under common control. The selling price of approximately $6.7 million was approved by the Audit Committee of the Board. The fair value approximated the carrying value of the loan plus accrued and unpaid interest. On August 4, 2022, the Company assigned $10.0 million of unfunded commitment of a senior secured loan to an affiliate. Loans Acquired From Affiliates As a result of the Formation Transaction, the Company acquired loans at amortized cost and cash of $9,802,024 and $97,976, respectively, from affiliates of the Manager in exchange for issuance of 635,194 shares of common stock. Subsequently, the Company also acquired loans at amortized cost of $22,516,005 from affiliates of the Manager in exchange for issuance of 1,446,473 shares of common stock, as well as cash contributions of $125,517,500 to fund loans in exchange for 8,067,010 shares of common stock. Additionally, the Company acquired 100% of CAL from an affiliate of the Manager in exchange for issuance of 481,259 shares of common stock. The Company accounted for the transaction as an asset acquisition pursuant to ASC 805-50 rather than as a business combination. Substantially all of the fair value of the assets acquired are concentrated in a group of similarly identifiable loan assets, and as such, do not constitute a business as defined by GAAP. The financial position and results of operations of CAL are consolidated into the consolidated financial statements of the Company. CAL held $305.9 million and $10.7 million of loans held at carrying value as of December 31, 2022 and 2021, respectively. On December 15, 2021, the Company acquired $10.0 million of additional interests in senior secured loans in the third tranche of Loan #1 from an affiliate at a purchase price, which equaled amortized cost, of $9.74 million. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 8. COMMITMENTS AND CONTINGENCIES Off-Balance Sheet Arrangements Off-balance sheet commitments may consist of unfunded commitments on delayed draw term loans. We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, the Company has not guaranteed any obligations of unconsolidated entities or entered into any commitment to provide additional funding to any such entities. The Company has the ability to assign funding commitments to other affiliated portfolio companies pending the approval of the respective board of directors for the respective affiliated portfolio company. As of December 31, 2022 and 2021, the Company had the following commitments to fund various existing loans. As of As of Total original loan commitments $ 351,367,706 $ 235,063,593 Less: drawn commitments $ (336,323,706 ) $ (200,359,026 ) Total undrawn commitments $ 15,044,000 $ 34,704,567 Refer to “Note 3 – Loans Held for Investment, Net” for further information regarding the CECL Reserve attributed to unfunded commitments. The following table summarizes our material commitments as of December 31, 2022: Total 2023 2024 2025 2026 2027 Thereafter Undrawn commitments $ 15,044,000 $ 2,400,000 $ 7,000,000 $ 1,644,000 $ 4,000,000 $ - $ - Revolving loan (1) 58,000,000 58,000,000 - - - - - Total $ 73,044,000 $ 60,400,000 $ 7,000,000 $ 1,644,000 $ 4,000,000 $ - $ - (1) Subsequent to December 31, 2022, the maturity date of the Revolving Loan was extended. See Note 13 for further information Other Contingencies The Company from time to time may be a party to litigation in the normal course of business. As of December 31, 2022, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations. The Company’s ability to grow or maintain its business depends, in part, on state laws pertaining to the cannabis industry. New laws that are adverse to the Company’s portfolio companies may be enacted, and current favorable state or national laws or enforcement guidelines relating to cultivation, production, and distribution of cannabis may be modified or eliminated in the future, which would impede the Company’s ability to grow and could materially and adversely affect its business. Management’s plan to mitigate risks include monitoring the legal landscape as deemed appropriate. Also, should a loan default or otherwise be seized, the Company may be prohibited from owning cannabis assets and thus could not take possession of collateral, in which case the Company would look to sell the loan, provide consent to allow the borrower to sell the real estate to a third party, institute a foreclosure proceeding to have the real estate sold or evict the tenant, have the cannabis operations removed from the property and take title to the underlying real estate, each of which may result in the Company realizing a loss on the transaction. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2022 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS’ EQUITY | 9. STOCKHOLDERS’ EQUITY Common Stock During the period from March 30, 2021 (inception) to December 31, 2021, the Company issued 10,636,363 shares of its common stock pursuant to transactions that were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. On October 21, 2021, the Board approved a 6,427-for-one stock split of the Company’s common stock. All common shares and per share information presented in the consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis for all periods presented, including reclassifying an amount equal to the increase in par value of common stock from additional paid-in capital. There was no change in the par value of the Company’s common stock. On December 10, 2021, the Company completed its IPO of 6,250,000 shares of its common stock at a price of $16.00 per share, raising $100,000,000 in gross proceeds. The underwriting commission of $7,000,000 is reflected as a reduction of additional paid-in capital on the consolidated statements of stockholders’ equity. The Company incurred approximately $1,265,877 of expenses in connection with the IPO, which is reflected as a reduction in additional paid-in capital. The net proceeds to the Company totaled approximately $91,734,123. Concurrent with the closing of the IPO, the Company sold 468,750 shares of its common stock at the public offering price of $16.00 per share in a private placement to John Mazarakis, the Company’s Executive Chairman, Anthony Cappell, the Company’s Chief Executive Officer, and Dr. Andreas Bodmeier, the Company’s Co-President. Gross proceeds received were $7,500,000, and no underwriting discounts or commissions were paid in respect of these shares. On January 5, 2022, the underwriters partially exercised their over-allotment option to purchase 302,800 shares of the Company’s common stock at a price of $16.00 per share, raising $4,844,800 in additional gross proceeds or $4,505,664 in net proceeds after underwriting commissions of $339,136, which is reflected as a reduction of additional paid-in capital on the consolidated statements of stockholders’ equity. Equity Incentive Plan The Company has established the 2021 Plan. The Board authorized the adoption of the 2021 Plan and the Compensation Committee of the Board approved restricted stock award grants of 98,440 shares of common stock during the period ended December 31, 2021. The Compensation Committee appointed by the Board administers the 2021 Plan. The 2021 Plan authorizes stock options, stock appreciation rights, restricted stock, stock bonuses, stock units and other forms of awards granted or denominated in the Company’s common stock. The 2021 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash. The Company has, and currently intends to continue to grant restricted stock awards to participants in the 2021 Plan, but it may also grant any other type of award available under the 2021 Plan in the future. Persons eligible to receive awards under the 2021 Plan include the Company’s officers and employees of the Manager and its affiliates or officers and employees of the Company’s subsidiaries, if any, the members of the Board, and certain consultants and other service providers. On December 31, 2022, restricted stock award grants of 24,880 shares of common stock were granted to members of the Board with a vesting period of three years. Pursuant to each respective award agreement, restricted stock awards (“RSA’s”) generally vest either quarterly or annually over a one to three year period beginning on the first anniversary of the date of the grant. Upon vesting, the vested restricted stock awards are exchanged for an equal number of the Company’s common stock. As of December 31, 2022 and 2021, the maximum number of shares of the Company common stock that may be delivered pursuant to awards under the 2021 Plan (the “Share Limit”) equals 8.50% of the issued and outstanding shares of the Company’s common stock on a fully-diluted basis following the completion of the IPO. Shares that are subject to or underlie awards that expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2021 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2021 Plan. There were 14,297 shares forfeited during the year ended December 31, 2022 and no shares were forfeited during the period ended December 31, 2021. As individual awards and options become fully vested, stock-based compensation expense is adjusted to recognize actual forfeitures as they occur. Shares that are exchanged by a participant or withheld by us as full or partial payment in connection with any award granted under the 2021 Plan, as well as any shares exchanged by a participant or withheld by the Company to satisfy tax withholding obligations related to any award granted under the 2021 Plan, will not be counted against the Share Limit and will again be available for subsequent awards under the 2021 Plan. To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the Share Limit and will again be available for subsequent awards under the 2021 Plan. Based on the closing market price of our common stock on December 31, 2022, the aggregate intrinsic value of our restricted stock awards was as follows: As of December 31, Outstanding Vested Aggregate intrinsic value $ 797,881 $ 422,548 The following table summarizes the restricted stock activity for the Company’s directors and officers and employees of the Manager as of December 31, 2022 and 2021. As of Grant Date Fair Value per Share As of Grant Date Fair Value per Share Unvested at December 31, 2021 98,440 $ 16.00 98,440 $ 16.00 Granted 24,880 $ 15.07 - $ - Vested (28,039 ) $ 16.00 - $ - Forfeited (14,297 ) $ 16.00 - $ - Balance 80,984 $ 15.71 98,440 $ 16.00 Restricted stock compensation expense is based on the Company’s stock price at the date of the grant and is amortized over the vesting period. Forfeitures are recognized as they occur. The share-based compensation expense for the Company was $435,623 and $29,611 for the year ended December 31, 2022 and the period ended December 31, 2021, respectively. The unamortized share-based compensation expense for the Company was approximately $1.3 million and $1.6 million as of December 31, 2022 and December 31, 2021, respectively, which the Company expects to recognize over a remaining weighted-average term of 2.22 years. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | 10. EARNINGS PER SHARE The following information sets forth the computations of basic earnings per common share for the year ended December 31, 2022 and the period ended December 31, 2021: For the year ended Period from Net income/(loss) attributable to common stockholders $ 32,292,477 $ 9,496,436 Divided by: Basic weighted average shares of common stock outstanding 17,653,765 6,442,865 Diluted weighted average shares of common stock outstanding 17,746,214 6,450,383 Basic earnings per common share $ 1.83 $ 1.47 Diluted earnings per common share $ 1.82 $ 1.47 There were no anti-dilutive shares excluded from the computations of earnings per common share. |
Income Tax
Income Tax | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAX | 11. INCOME TAX The income tax provision for the Company was $0 for the year ended December 31, 2022 and the period ended December 31, 2021. For the year ended December 31, 2022 and the period ended December 31, 2021, the Company incurred no expense for United States federal excise tax. If it is determined that the Company’ estimated current year taxable income will be in excess of estimated dividend distributions (including capital gain dividend) for the current year from such income, the Company will accrue taxes on estimated excess taxable income as such taxable income is earned. The annual expense is calculated in accordance with applicable tax regulations. As of December 31, 2022 and 2021, the Company does not have any unrecognized tax benefits and does not expect that to change in the next 12 months. |
Dividends and Distributions
Dividends and Distributions | 12 Months Ended |
Dec. 31, 2022 | |
Dividends And Distributions Abstract | |
DIVIDENDS AND DISTRIBUTIONS | 12. DIVIDENDS AND DISTRIBUTIONS The following table summarizes the Company’s dividends declared during the year ended December 31, 2022 and the period ended December 31, 2021: Record Payment Common Share Taxable Return of Section 199A Dividends Regular cash dividend 3/31/2022 4/14/2022 $ 0.40 $ 0.40 $ - $ 0.40 Regular cash dividend 6/30/2022 7/15/2022 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/30/2022 10/14/2022 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/30/2022 1/13/2023 $ 0.47 $ 0.47 $ - $ 0.47 Special cash dividend 12/30/2022 1/13/2023 $ 0.29 $ 0.29 $ - $ 0.29 Total cash dividend $ 2.10 $ 2.10 $ - $ 2.10 Record Payment Common Share Taxable Return of Section 199A Dividends Regular cash dividend 6/30/2021 7/15/2021 $ 0.29 $ 0.29 $ - $ 0.29 Regular cash dividend 9/30/2021 10/20/2021 $ 0.51 $ 0.51 $ - $ 0.51 Regular cash dividend 12/31/2021 1/14/2022 $ 0.26 $ 0.26 $ - $ 0.26 Total cash dividend $ 1.06 $ 1.06 $ - $ 1.06 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2022 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 13. SUBSEQUENT EVENTS Normal Course of Business Operations During the period from January 1, 2023 through February 28, 2023, the Company funded one loan amounting to approximately $11.3 million in loan principal to one new portfolio companies, two loan advances amounting to approximately $19.2 million in loan principal to existing portfolio companies, and one loan paydown of approximately $18.3 million in loan principal for an existing portfolio company. Payment of Dividend On December 15, 2022, the Company declared a cash dividend of $0.47 per share of its common stock, related to the fourth quarter of 2022, which was paid on January 13, 2023, to shareholders of record as of the close of business on December 30, 2022. The total amount of the cash dividend payment was approximately $8.3 million. Also on December 15, 2022, the Company declared a special cash dividend of $0.29, which was paid on January 13, 2023, to shareholders of record as of the close of business on December 30, 2022. The total amount of the special cash dividend payment was approximately $5.1 million. Revolving Loan During the period January 1, 2023 through February 28, 2023, the Company drew $22.5 million on the Revolving Loan. On February 27, 2023, the Company entered into the First Amendment to the Third Amended and Restated Loan and Security Agreement. This amendment extended the contractual maturity date of the Revolving Loan until December 16, 2024. The Company retained its option to extend the initial term for an additional one-year period, provided no events of default exist and the Company provides 365 days’ notice of the extension pursuant to this amendment. Stock Issuance On February 15, 2023, the Company completed a registered direct offering of 395,779 shares of common stock at a price of $15.16 per share, raising net proceeds of approximately $6 million. The Company sold shares of common stock directly, without the use of underwriters or placement agents, to institutional investors registered pursuant to its effective shelf registration statement. |
Accounting Policies, by Policy
Accounting Policies, by Policy (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Our consolidated financial statements present the financial position, results of operations, and cash flows of Chicago Atlantic Real Estate Finance, Inc., and its wholly owned consolidated subsidiary, Chicago Atlantic Lincoln, LLC (“CAL”). All intercompany accounts and transactions have been eliminated in consolidation |
Use of Estimates in the Preparation of Consolidated Financial Statements | Use of Estimates in the Preparation of Consolidated Financial Statements The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant estimates include the provision for current expected credit losses. |
Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. Interest expense was previously presented as an operating expense and has been reclassified as a reduction to net interest income on the consolidated statements of operations. General and administrative expense reimbursements due to the Manager, which were previously included in the line item management and incentive fees payable, have been reclassified into related party payables in the consolidated balance sheets. In addition, the general administrative expense reimbursements incurred by the Manager, which were previously included in the line item management and incentive fees, net, have been reclassified into general and administrative expense in the consolidated statements of operations Further, the line items other receivables and other assets as of December 31, 2021 have been reclassified to the line item other receivables and assets, net to conform to the current year presentation. These reclassifications do not result in any changes to previously reported total assets, stockholder’s equity, and net income. |
Cash | Cash Cash includes deposits with financial institutions. The Company’s cash held with financial institutions may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limits. Cash and short-term investments with an original maturity of three months or less when acquired are considered cash for the purpose of the consolidated balance sheet and consolidated statement of cash flows. |
Concentration of Credit Risks | Concentration of Credit Risks Financial instruments that may subject the Company to concentrations of credit risk consist primarily of cash , loans and interest receivable. The Company and the Manager seek to manage this credit risk relating to cash by monitoring the financial stability of the financial institutions and their ability to continue in business for the foreseeable future. Concentration of credit risk relating to loans and interest receivable are managed by the Company and the Manager through robust portfolio monitoring and performing due diligence prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate. |
Offering Costs | Offering Costs Costs associated with the offering of common shares of the Company including, but not limited to legal, accounting, printing, and filing fees, including audit fees incurred directly related to the offering. Such costs are capitalized as incurred and are included in other assets in the consolidated balance sheets as of December 31, 2022 and 2021. Deferred offering costs will be charged to additional paid-in-capital upon the completion of an offering of the authorized common stock of the Company. Should an offering of the authorized common stock of the Company prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to operations. Deferred offering costs are included in Other receivables and assets, net within the consolidated balance sheets in the amount of $100,392 and $0 as of December 31, 2022 and December 31, 2021, respectively. |
Loans Held for Investment | Loans Held for Investment The Company originates commercial real estate (“CRE”) loans and related debt instruments that it has both the intent and ability to hold for the foreseeable future, so they are classified as held for investment. Loans that are held-for-investment are carried at their aggregate outstanding face amount, net of applicable (i) unamortized origination or acquisition premium and discounts, (ii) unamortized deferred fees and other direct loan origination costs, (iii) valuation allowance for credit losses and (iv) write-downs of uncollectible loans. The Company uses a method which approximates the effective interest method to amortize origination or acquisition premiums and discounts and deferred fees or other direct loan origination costs. Once the Company decides to sell loans, they may be transferred to held-for-sale and carried at the lower of cost or fair value. The Company’s loans are primarily collateralized by real estate, equipment, licenses and/or other collateral assets of borrowers. The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received. The Company monitors performance of its portfolio of loans held for investment under the following methodology: (1) borrower review, which evaluates each borrower’s financial condition including consideration of interest and principal payment history, ability to execute its business plan, and assessment of any alleged actual, threatened, or pending litigation; (2) economic review, which contemplates the value of underlying collateral (i.e. leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity); (3) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception; and (4) market review, which analyzes the collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective. Changes in other observable market data may be utilized in determining the immediate recognition of expected credit losses over the life of financial instruments. |
CECL Reserve | CECL Reserve The Company measures current expected credit losses (“CECL”) for loans held for investment based on Accounting Standards Codification (“ASC”) No. 326, Financial Instruments – Credit Losses Refer to “Note 3 – Loans Held for Investment, Net” for further information regarding the CECL Reserve. |
Fair Value Measurements | Fair Value Measurements Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or, in the absence of a principal market, in the most advantageous market for the asset or liability. The Company discloses the fair value of its financial assets and liabilities based on observable market information where available or on market participant assumptions. These assumptions are subjective in nature and involve matters of judgment and, therefore, fair values cannot always be determined with precision. When determining fair value, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of the fair value hierarchy as set forth in Financial Accounting Standards Board (“FASB”) ASC Topic 820 – Fair Value Measurement and Disclosure ● Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. ● Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. If inputs used to measure fair value fall into different levels of the fair value hierarchy, a loan’s level is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the instrument being measured. GAAP requires disclosure of fair value information about financial assets and liabilities, whether or not recognized in the consolidated financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by the Company’s management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial assets and liabilities could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced. The fair value of loans held for investment is discussed in Note 3. Excluding the aforementioned assets, the carrying values of these financial assets approximates fair value because of the short-term maturities of these assets. |
Equity-Based Compensation | Equity-Based Compensation The Company accounts for equity-based compensation issued to employees of the Manager and its affiliates and the members the Board pursuant to the 2021 Omnibus Incentive Plan (the “2021 Plan”) under the fair value method. This method measures compensation cost at the date of grant based on the value of the award and recognizes the cost over the service period, which is usually the vesting period. Forfeitures are recognized as they occur. The fair value of equity-based compensation awards is based on the estimated fair value of the Company’s common stock, based on the Company’s stock price on grant date, and approved by the Board. Fair values of award grants also recognize any ongoing restrictions on the sale of securities. |
Debt Issuance Costs | Debt Issuance Costs Debt issuance costs are presented as a direct deduction from the debt liability with the exception of debt issuances costs related to the Revolving Loan, consistent with debt discounts or premiums unless they relate to an undrawn line of credit, in which case they are amortized on a straight-line basis over the life of the line of credit. Unamortized debt issuance costs are subsequently expensed if the associated debt is repaid prior to maturity. Amortization of debt issuance costs are reported as interest expense in the consolidated statements of operations. As of December 31, 2022, the Company has unamortized debt issuance costs of $805,596 presented within Other receivables and assets, net on the Company’s consolidated balance sheets. |
Formation Transaction | Formation Transaction The Company commenced operations on March 30, 2021. The assets and liabilities constituting the Initial Portfolio were contributed at amortized cost on April 1, 2021 (the “Formation Transaction”). The fair values of the contributed cash and accrued interest approximated their carrying values because of the short-term nature of these instruments in relation to their origination date. The amortized cost of the contributed assets described above were agreed upon by the Contribution Group and used to determine the number of shares of common stock issued. Any purchase premiums or discounts are amortized over the expected life of the investment. The following table shows the par values, amortized cost and purchase premiums (discounts) of the Initial portfolio as of April 1, 2021: Par value Amortized Premium Assets Cash $ 97,976 $ 97,976 $ - Loans, held-for-investment, net 9,883,211 9,802,024 (81,187 ) Total contributions $ 9,981,187 $ 9,900,000 $ (81,187 ) |
Revenue Recognition | Revenue Recognition Interest income is recognized on an accrual basis and is reported as an interest receivable until collected. Interest income is accrued based on the outstanding principal amount and the contractual terms of the loan. Original issue discount (“OID”), market discounts or premiums, and loan amendment fees for minor modifications (collectively, “Net Loan Fees”) are recorded as an adjustment to the amortized cost of the loan and accreted or amortized as an adjustment to interest income over the initial term of the respective loan using a method that approximates the effective interest method. When the Company receives a loan principal payment, the unamortized Net Loan Fees related to the paid principal is accelerated and recognized in interest income. Delayed draw loans may earn interest or unused fees on the undrawn portion of the loan, which is recognized as interest income in the period earned. Other fees, including prepayment fees and exit or success fees, are recognized as interest income when received. Certain of the Company’s loans contain a paid-in-kind interest income provision (“PIK interest”). The PIK interest, computed at the contractual rate specified in the applicable loan agreement, is added to the principal balance of the loan, rather than being paid in cash, and is generally collected upon repayment of the outstanding principal. Recognition of PIK interest includes assessments of collectability and may discontinue accrual of interest income, including PIK interest, when there is reasonable doubt that the interest income will be collected. To the extent required to maintain the Company’s status as a REIT, and/or to avoid incurring an excise tax, accrued income such as this may need to be distributed to stockholders in the form of dividends for the year earned, even though the Company has not yet collected the cash. Loans are generally placed on non-accrual status when principal or interest payments are past due 90 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments. Non-accrual loans are restored to accrual status when principal and interest payments are brought current, the borrower demonstrates sustained repayment performance, or the loan becomes well secured and is in the process of collection. The Company may make exceptions to placing a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. |
Interest Reserves | Interest Reserves The Company utilizes interest reserves on certain loans which are applied to future interest payments. Such reserves are established at the time of loan origination. The interest reserve is recorded as a liability as it represents unearned interest revenue. The interest reserve is relieved when the interest on the loan is earned, and interest income is recorded in the period when the interest is earned in accordance with the credit agreement. The interest payment is deducted from the interest reserve deposit balance on the date when the interest payment is due. The decision to establish an interest reserve is made during the underwriting process and considers the creditworthiness and expertise of the borrower, the feasibility of the project, and the debt coverage provided by the real estate and other pledged collateral. It is the Company’s policy to recognize income for this interest component as long as the borrower is progressing as originally projected and if there has been no deterioration in the financial condition of the borrower or the underlying project. The Company’s standard accounting policies for interest income recognition are applied to all loans, including those with interest reserves. |
Expenses | Expenses Interest expense, in accordance with the Company’s financing agreements, is recorded on an accrual basis. General and administrative expenses, including professional fees, are expensed as incurred. |
Income Taxes | Income Taxes The Company is a Maryland corporation and elected to be taxed as a REIT under the Code, commencing with its taxable year ended December 31, 2021. The Company believes that its method of operations will enable it to continue to qualify as a REIT. However, no assurances can be given that the Company’s beliefs or expectations will be fulfilled, since qualification as a REIT depends on the Company satisfying numerous asset, income and distribution tests which depends, in part, on the Company’s operating results. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distributes annually to its stockholders at least 90% of the Company’s REIT taxable income prior to the deduction for dividends paid. To the extent that the Company distributes less than 100% of its REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), the Company will pay tax at regular corporate rates on that undistributed portion. Furthermore, if the Company distributes less than the sum of 1) 85% of its ordinary income for the calendar year, 2) 95% of its capital gain net income for the calendar year, and 3) any undistributed shortfall from its prior calendar year (the “Required Distribution”) to its stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then it is required to pay a non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. The 90% distribution requirement does not require the distribution of net capital gains. However, if the Company elects to retain any of its net capital gain for any tax year, it must notify its stockholders and pay tax at regular corporate rates on the retained net capital gain. The stockholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain and receive an income tax credit for such amount. Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax. If it is determined that the Company’s estimated current year taxable income will be in excess of estimated dividend distributions (including capital gain dividend) for the current year from such income, the Company accrues excise tax on estimated excess taxable income as such taxable income is earned. The annual expense is calculated in accordance with applicable tax regulations. FASB ASC Topic 740, Income Taxes |
Earnings per Share | Earnings per Share The Company calculates basic earnings / (loss) per share by dividing net income / (loss) allocable to common stockholders for the period by the weighted average shares of common stock outstanding for that period. Diluted earnings / (loss) per share takes into effect any dilutive instruments, except when doing so would be anti-dilutive. As of December 31, 2022 and 2021, there were dilutive instruments relating to restricted shares. See Note 10 included in these consolidated financial statements for the earnings per share calculations. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2022, the FASB issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures Financial Instruments—Credit Losses—Measured at Amortized Cost |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Schedule of the par values, amortized cost and purchase premiums (discounts) | Par value Amortized Premium Assets Cash $ 97,976 $ 97,976 $ - Loans, held-for-investment, net 9,883,211 9,802,024 (81,187 ) Total contributions $ 9,981,187 $ 9,900,000 $ (81,187 ) |
Loans Held For Investment, Net
Loans Held For Investment, Net (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Loans Held For Investment, Net [Abstract] | |
Schedule of loans held for investment | As of December 31, 2022 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior Term Loans $ 343,029,334 $ (3,755,796 ) $ 339,273,538 2.2 Current expected credit loss reserve - - (3,940,939 ) Total loans held at carrying value, net $ 343,029,334 $ (3,755,796 ) $ 335,332,599 As of December 31, 2021 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior Term Loans $ 200,632,056 $ (3,647,490 ) $ 196,984,566 2.2 Current expected credit loss reserve - - (134,542 ) Total loans held at carrying value, net $ 200,632,056 $ (3,647,490 ) $ 196,850,024 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable. (2) Weighted average remaining life is calculated based on the carrying value of the loans as of December 31, 2022 and December 31, 2021, respectively. |
Schedule of changes in loans held at carrying value | Principal Original Issue Discount Current Expected Credit Loss Reserve Carrying Value Balance at December 31, 2021 $ 200,632,056 $ (3,647,490 ) $ (134,542 ) $ 196,850,024 New fundings 160,163,120 (3,243,735 ) - 156,919,385 Principal repayment of loans (17,728,730 ) - - (17,728,730 ) Accretion of original issue discount - 2,874,706 - 2,874,706 Sale of loans (6,957,500 ) 260,723 - (6,696,777 ) PIK Interest 6,920,388 - - 6,920,388 Current expected credit loss reserve - - (3,806,397 ) (3,806,397 ) Balance at December 31, 2022 $ 343,029,334 $ (3,755,796 ) $ (3,940,939 ) $ 335,332,599 Principal Original Issue Discount Current Expected Credit Loss Reserve Carrying Value Balance at March 30, 2021 (inception) $ - $ - $ - $ - Loans contributed 40,191,921 (846,724 ) - 39,345,197 New fundings 174,445,480 (3,529,406 ) - 170,916,074 Principal repayment of loans (9,798,364 ) - - (9,798,364 ) Accretion of original issue discount - 595,872 - 595,872 Sale of loans (5,005,000 ) 132,768 (4,872,232 ) PIK Interest 798,019 - - 798,019 Provision for credit losses - - (134,542 ) (134,542 ) Balance at December 31, 2021 $ 200,632,056 $ (3,647,490 ) $ (134,542 ) $ 196,850,024 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable. |
Schedule of loans held at carrying value based on information | Loan Location Outstanding Principal(1) Original Issue Premium/ Carrying Value(1) Contractual Interest Rate(4) Maturity Date(2) Payment Terms(3) Initial 1 Various (6) $ 30,000,000 $ (859,454 ) $ 29,140,546 P + 6.50% (5) 10/30/2026 I/O 10/27/2022 2 Michigan 37,283,861 (161,766 ) 37,122,095 P + 6.65% (5)(10) 12/31/2024 P&I 3/5/2021 3 Various (6) 20,809,353 (374,484 ) 20,434,869 13.91% (5) (9) 11/29/2024 P&I 3/25/2021 4 Arizona 12,849,490 - 12,849,490 18.72% (5)(7) 12/31/2023 P&I 4/19/2021 5 Massachusetts 1,856,000 - 1,856,000 P + 12.25% (5) 4/30/2025 P&I 4/19/2021 6 Pennsylvania 13,399,712 - 13,399,712 P + 10.75% (5) (8) 5/31/2025 P&I 5/28/2021 7 Michigan 4,359,375 (4,551 ) 4,354,824 P + 9.00% (5) 2/20/2024 P&I 8/20/2021 8 Various (6) 25,466,043 (245,186 ) 25,220,857 P + 6.00% (5) 6/30/2025 P&I 8/24/2021 9 West Virginia 10,086,382 (105,652 ) 9,980,730 18.75% PIK 9/1/2024 P&I 9/1/2021 10 Pennsylvania 15,775,542 - 15,775,542 P + 10.75% (5) 6/30/2024 P&I 9/3/2021 11 Michigan 274,406 - 274,406 11.00% 9/30/2024 P&I 9/20/2021 12 Maryland 32,645,784 (624,985 ) 32,020,799 P + 8.75% (5) 9/30/2024 I/O 9/30/2021 13 Various (6) 20,000,000 (184,743 ) 19,815,257 13.00% 10/31/2024 P&I 11/8/2021 14 Michigan 13,118,014 (124,859 ) 12,993,155 P + 6.00% (5) 11/1/2024 I/O 11/22/2021 15 Various (6) 5,194,167 - 5,194,167 P + 12.25% (5) 12/27/2026 P&I 12/27/2021 16 Michigan 3,787,852 (44,753 ) 3,743,099 P + 7.50% Cash (5) 12/29/2023 I/O 12/29/2021 17 Various (6) 7,387,500 (49,977 ) 7,337,523 P + 9.25% (5) 12/31/2024 P&I 12/30/2021 18 Florida 15,000,000 (262,318 ) 14,737,682 P + 4.75% (5) 1/31/2025 P&I 1/18/2022 19 Ohio 30,837,950 (422,837 ) 30,415,113 P + 8.25% (5) 2/28/2025 P&I 2/3/2022 20 Florida 20,483,947 (77,210 ) 20,406,737 11.00% Cash, 3% PIK 8/29/2025 P&I 3/11/2022 21 Missouri 17,337,220 (134,082 ) 17,203,138 11.00% Cash, 3% PIK 5/30/2025 P&I 5/9/2022 22 Illinois 5,076,736 (78,939 ) 4,997,797 P + 8.50% (5) 7/29/2026 P&I 7/1/2022 Current expected credit loss reserve - - (3,940,939 ) Total loans held at carry value $ 343,029,334 $ (3,755,796 ) $ 335,332,599 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discounts, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable. (2) Certain loans are subject to contractual extension options and may be subject to performance based on other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without a contractual prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications. (3) P&I = principal and interest. I/O = interest only. P&I loans may include interest only periods for a portion of the loan term. (4) P = Prime Rate and depicts floating rate loans that pay interest at the Prime Rate plus a specific percentage; “PIK” = paid-in-kind interest; subtotal represents weighted average interest rate. (5) This Loan is subject to Prime Rate floor based on the Prime Rate at the time of origination. (6) Loans with material collateral in multiple jurisdictions, namely multi-state operators, are disclosed as “various.” (7) The aggregate loan commitment to Loan #4 includes a $10.9 million initial commitment which has a base interest rate of 15.00% and a second commitment of $2.0 million which has an interest rate of 39%. The statistics presented reflect the weighted average of the terms under all advances for the total aggregate loan commitment. (8) Subject to adjustment not below 2% if borrower receives at least two consecutive quarters of positive cash flow after the closing date. (9) The aggregate loan commitment to Loan #3 includes a $15.9 million initial commitment which has a base interest rate of 13.625%, 2.75% PIK and a second commitment of $4.2 million which has an interest rate of 15.00%, 2.00% PIK. The statistics presented reflect the weighted average of the terms under all advances for the total aggregate loan commitment. (10) This Loan is subject to an interest rate cap. |
Schedule of significant unobservable inputs | As of December 31, 2022 Unobservable Input Fair Value Primary Valuation Techniques Input Estimated Range Weighted Average Senior term loans $ 329,237,824 Discounted cash flow Discount rate 11.36% - 24.79% 17.53 % Total Investments $ 329,237,824 |
Schedule of risk rating | Rating Definition 1 Very low risk 2 Low risk 3 Moderate/average risk 4 High risk/potential for loss: a loan that has a risk of realizing a principal loss 5 Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded (1) Amounts are presented by loan origination year with subsequent advances shown in the original year of origination. |
Schedule of carrying value of loans held for investment | As of December 31, 2022 As of December 31, 2021 Risk Rating 2022 2021 2020 2019 Total 2021 2020 2019 Total 1 $ - $ 274,406 $ - $ - $ 274,406 $ 135,076,307 $ 32,242,114 $ 590,384 $ 167,908,805 2 94,467,449 88,444,868 29,140,546 - 212,052,863 29,075,761 - - 29,075,761 3 30,415,113 83,131,444 - - 113,546,557 - - - - 4 - 13,399,712 - - 13,399,712 - - - - 5 - - - - - - - - - Total $ 124,882,562 $ 185,250,430 $ 29,140,546 $ - $ 339,273,538 $ 164,152,068 $ 32,242,114 $ 590,384 $ 196,984,566 (1) Amounts are presented by loan origination year with subsequent advances shown in the original year of origination. |
Schedule of real estate collateral coverage | As of December 31, 2022 Real Estate Collateral Coverage(1) < 1.0x 1.0x – 1.25x 1.25x – 1.5x 1.50x – 1.75x 1.75x – 2.0x > 2.0x Total Fixed-rate $ - $ - $ 20,406,737 $ 17,203,138 $ - $ 20,089,663 $ 57,699,538 Floating-rate 63,963,105 78,211,454 13,399,712 9,980,730 12,849,490 103,169,509 281,574,000 $ 63,963,105 $ 78,211,454 $ 33,806,449 $ 27,183,868 $ 12,849,490 $ 123,259,172 $ 339,273,538 As of December 31, 2021 Real Estate Collateral Coverage < 1.0 1.0 – 1.25 1.25 – 1.5 1.50 – 1.75 1.75 – 2.0 > 2.0 Total Fixed-rate $ 7,017,793 $ - $ 35,836,099 $ 3,086,298 $ - $ 45,373,778 $ 91,313,968 Floating-rate 8,925,068 18,022,518 - 30,029,953 32,377,087 16,315,972 105,670,598 $ 15,942,861 $ 18,022,518 $ 35,836,099 $ 33,116,251 $ 32,377,087 $ 61,689,750 $ 196,984,566 (1) Real estate collateral coverage is calculated based upon most recent third-party appraised values. |
Schedule of activity related to the CECL Reserve for outstanding balances | Outstanding (1) Unfunded (2) Total Balance at March 30, 2021 (inception) $ - $ - $ - Provision for current expected credit losses 134,542 13,407 147,949 Balance at December 31, 2021 $ 134,542 $ 13,407 $ 147,949 Outstanding (1) Unfunded (2) Total Balance at December 31, 2021 $ 134,542 $ 13,407 $ 147,949 Provision for current expected credit losses 3,806,397 81,008 3,887,405 Balance at December 31, 2022 $ 3,940,939 $ 94,415 $ 4,035,354 (1) As of December 31, 2022, the CECL Reserve related to outstanding balances on loans at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets. (2) As of December 31, 2022, the CECL Reserve related to unfunded commitments on loans at carrying value is recorded within accounts payable and accrued liabilities in the Company’s consolidated balance sheets. |
Interest Receivable (Tables)
Interest Receivable (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Interest Receivable [Abstract] | |
Schedule of summarizes the interest receivable | As of December 31, 2022 As of December 31, 2021 Interest receivable $ 1,203,330 $ 193,790 PIK interest receivable 1,082 - Unused fees receivable - 3,945 Total interest receivable $ 1,204,412 $ 197,735 |
Schedule of including non-accrual loans | As of December 31, 2022 Current Loans (1) 31 - 60 Days Past Due 61 - 90 Days Past Due 90+ Days Past Due (and accruing) Non-Accrual Total Past Due Total Loans Senior term loan $ 1,203,088 $ 1,324 $ - $ $ - $ 1,324 $ 1,204,412 Total $ 1,203,088 $ 1,324 $ - $ - $ - $ 1,324 $ 1,204,412 (1) Loans 1-30 days past due are included in the current loans. |
Interest Reserve (Tables)
Interest Reserve (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Interest Reserve Abstract | |
Schedule of changes in interest reserves | As of December 31, 2022 As of December 31, 2021 Beginning reserves $ 6,636,553 $ - New reserves 9,049,834 9,223,802 Reserves disbursed (13,818,194 ) (2,587,249 ) Ending reserves $ 1,868,193 $ 6,636,553 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of summary of interest expense incurred during period | Year Period from March 30, 2021 (inception) December 31, December 31, Interest expense $ 2,024,299 $ - Unused fee expense 26,375 - Amortization of deferred financing costs 563,464 75,861 Total interest expense $ 2,614,138 $ 75,861 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions [Abstract] | |
Schedule of summarizes the related party costs | For the Period from Affiliate Payments Management fees earned $ 4,074,725 $ 989,322 Less: Outside fees earned (1,291,451 ) (187,028 ) Base management fee, net 2,783,274 802,294 Incentive fees 3,778,813 - Total management and incentive fees earned 6,562,087 802,294 General and administrative expenses reimbursable to Manager 3,137,861 102,829 Total $ 9,699,948 $ 905,123 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of commitments to fund various existing loans | As of As of Total original loan commitments $ 351,367,706 $ 235,063,593 Less: drawn commitments $ (336,323,706 ) $ (200,359,026 ) Total undrawn commitments $ 15,044,000 $ 34,704,567 |
Schedule of material commitments | Total 2023 2024 2025 2026 2027 Thereafter Undrawn commitments $ 15,044,000 $ 2,400,000 $ 7,000,000 $ 1,644,000 $ 4,000,000 $ - $ - Revolving loan (1) 58,000,000 58,000,000 - - - - - Total $ 73,044,000 $ 60,400,000 $ 7,000,000 $ 1,644,000 $ 4,000,000 $ - $ - (1) Subsequent to December 31, 2022, the maturity date of the Revolving Loan was extended. See Note 13 for further information |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Stockholders' Equity Note [Abstract] | |
Schedule of restricted stock awards | As of December 31, Outstanding Vested Aggregate intrinsic value $ 797,881 $ 422,548 |
Schedule of restricted stock activity | As of Grant Date Fair Value per Share As of Grant Date Fair Value per Share Unvested at December 31, 2021 98,440 $ 16.00 98,440 $ 16.00 Granted 24,880 $ 15.07 - $ - Vested (28,039 ) $ 16.00 - $ - Forfeited (14,297 ) $ 16.00 - $ - Balance 80,984 $ 15.71 98,440 $ 16.00 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of basic earnings per common share | For the year ended Period from Net income/(loss) attributable to common stockholders $ 32,292,477 $ 9,496,436 Divided by: Basic weighted average shares of common stock outstanding 17,653,765 6,442,865 Diluted weighted average shares of common stock outstanding 17,746,214 6,450,383 Basic earnings per common share $ 1.83 $ 1.47 Diluted earnings per common share $ 1.82 $ 1.47 |
Dividends and Distributions (Ta
Dividends and Distributions (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Dividends And Distributions Abstract | |
Schedule of dividends declared | Record Payment Common Share Taxable Return of Section 199A Dividends Regular cash dividend 3/31/2022 4/14/2022 $ 0.40 $ 0.40 $ - $ 0.40 Regular cash dividend 6/30/2022 7/15/2022 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/30/2022 10/14/2022 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/30/2022 1/13/2023 $ 0.47 $ 0.47 $ - $ 0.47 Special cash dividend 12/30/2022 1/13/2023 $ 0.29 $ 0.29 $ - $ 0.29 Total cash dividend $ 2.10 $ 2.10 $ - $ 2.10 Record Payment Common Share Taxable Return of Section 199A Dividends Regular cash dividend 6/30/2021 7/15/2021 $ 0.29 $ 0.29 $ - $ 0.29 Regular cash dividend 9/30/2021 10/20/2021 $ 0.51 $ 0.51 $ - $ 0.51 Regular cash dividend 12/31/2021 1/14/2022 $ 0.26 $ 0.26 $ - $ 0.26 Total cash dividend $ 1.06 $ 1.06 $ - $ 1.06 |
Organization and Description _2
Organization and Description of Business (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Jan. 05, 2022 | Dec. 10, 2021 | Apr. 30, 2021 | Dec. 31, 2022 | |
Organization and Description of Business (Details) [Line Items] | ||||
Exchange shares of common stock (in Shares) | 635,194 | |||
Aggregate amortized cost | $ 9,800,000 | |||
Cash | $ 97,976 | |||
Companies acquired loans description | Subsequently, the Company also acquired loans at amortized cost of $22,516,005 from affiliates of the Manager in exchange for issuance of 1,446,473 shares of common stock, as well as cash contributions of $125,517,500 to fund loans in exchange for 8,067,010 shares of common stock. Additionally, the Company acquired 100% of CAL from an affiliate of the Manager in exchange for the issuance of 481,259 shares of common stock. | |||
Offering price per share (in Dollars per share) | $ 16 | |||
Aggregate sold shares (in Shares) | 468,750 | |||
Aggregate purchase price | $ 17,500,000 | |||
Restricted stock award grants (in Shares) | 98,440 | |||
Underwriters shares purchase (in Shares) | 302,800 | |||
Common stock price par value (in Dollars per share) | $ 16 | |||
Additional gross proceeds | $ 4,844,800 | |||
Additional net proceeds | 4,505,664 | |||
Underwriting commissions | $ 339,136 | |||
IPO [Member] | ||||
Organization and Description of Business (Details) [Line Items] | ||||
Common stock sold shares (in Shares) | 6,250,000 | |||
Offering price per share (in Dollars per share) | $ 16 | |||
Net proceeds | $ 92,900,000 | |||
Aggregate purchase price | $ 7,500,000 | |||
Initial Portfolio [Member] | ||||
Organization and Description of Business (Details) [Line Items] | ||||
Exchange shares of common stock (in Shares) | 635,194 | |||
Cash | $ 97,976 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Accounting Policies [Abstract] | ||
Other receivables (in Dollars) | $ 100,392 | |
Assets net (in Dollars) | $ 0 | |
Debt issuance costs (in Dollars) | $ 805,596 | |
Stockholders percentage | 90% | |
Distributes percentage | 100% | |
Percentage of ordinary income | 85% | |
Percentage of capital gain net income | 95% | |
Percentage of non-deductible excise tax equal | 4% | |
Percentage of distribution requirement | 90% | |
Percentage of excise tax | 4% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - Schedule of the par values, amortized cost and purchase premiums (discounts) | Dec. 31, 2022 USD ($) |
Par value [Member] | |
Assets | |
Cash | $ 97,976 |
Loans, held-for-investment, net | 9,883,211 |
Total contributions | 9,981,187 |
Amortized Cost [Member] | |
Assets | |
Cash | 97,976 |
Loans, held-for-investment, net | 9,802,024 |
Total contributions | 9,900,000 |
Premium (Discount) [Member] | |
Assets | |
Loans, held-for-investment, net | (81,187) |
Total contributions | $ (81,187) |
Loans Held For Investment, Ne_2
Loans Held For Investment, Net (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Loans Held For Investment, Net (Details) [Line Items] | ||
Portfolio comprised loans | $ 21 | |
Aggregate loan commitments | ||
Outstanding principal | 200,600,000 | |
Fund amount | 174,400,000 | |
Principal loan | $ 0 | $ 40,200,000 |
Floating rate loans percentage | 53.40% | |
Loan carrying value | ||
Portfolio percentage | 16.90% | 46.40% |
Fixed rate loans | ||
Interest rate | 2% | |
Loan interest rate | 39% | |
Aggregate fair value | $ 329,237,824 | 197,901,779 |
Unrecognized holding gain | 10,035,714 | 917,213 |
Accrued interest receivable | $ 1,204,412 | 197,735 |
Maximum [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Floating rate loans percentage | 82% | |
Minimum [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Floating rate loans percentage | 18% | |
Fair value discount rate | ||
London Inter-bank [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Loan carrying value | $ 106,700,000 | |
PIK Initial Rate [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Aggregate loan | $ 15,900,000 | |
Twenty-one [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Outstanding principal | 235,100,000 | |
Base Three [Member] | Loans [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Aggregate loan | $ 10,900,000 | |
Interest rate | 15% | |
Second Commitment [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Aggregate loan | $ 2,000,000 | |
Two Consecutive [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Borrower percentage | 2% | |
Base Ten [Member] | One Commitment [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Interest rate | 13.625% | |
PIK [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Interest rate | 2.75% | |
PIK Equal Rate [Member] | ||
Loans Held For Investment, Net (Details) [Line Items] | ||
Aggregate loan | $ 4,200,000 | |
Interest rate | 15% |
Loans Held For Investment, Ne_3
Loans Held For Investment, Net (Details) - Schedule of loans held for investment - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | ||
Loans Held For Investment, Net (Details) - Schedule of loans held for investment [Line Items] | |||
Total loans held at carrying value, Outstanding Principal | [1] | $ 343,029,334 | $ 200,632,056 |
Total loans held at carrying value, Original Issue Discount | (3,755,796) | (3,647,490) | |
Total loans held at carrying value, Carrying Value | [1] | 335,332,599 | 196,850,024 |
Senior Term Loans [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of loans held for investment [Line Items] | |||
Total loans held at carrying value, Outstanding Principal | [1] | 343,029,334 | 200,632,056 |
Total loans held at carrying value, Original Issue Discount | (3,755,796) | (3,647,490) | |
Total loans held at carrying value, Carrying Value | [1] | $ 339,273,538 | $ 196,984,566 |
Total loans held at carrying value, Weighted Average Remaining Life (Years) | [2] | 2 years 2 months 12 days | 2 years 2 months 12 days |
Current expected credit loss reserve [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of loans held for investment [Line Items] | |||
Total loans held at carrying value, Outstanding Principal | [1] | ||
Total loans held at carrying value, Original Issue Discount | |||
Total loans held at carrying value, Carrying Value | [1] | $ (3,940,939) | $ (134,542) |
[1]The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable.[2]Weighted average remaining life is calculated based on the carrying value of the loans as of December 31, 2022 and December 31, 2021, respectively. |
Loans Held For Investment, Ne_4
Loans Held For Investment, Net (Details) - Schedule of changes in loans held at carrying value - USD ($) | 9 Months Ended | 12 Months Ended |
Dec. 31, 2021 | Dec. 31, 2022 | |
Principal [Member] | ||
Debt Instrument [Line Items] | ||
Principal, Beginning | $ 200,632,056 | |
Principal, Ending | 200,632,056 | 343,029,334 |
Principal Loans contributed | 40,191,921 | |
Principal New fundings | 174,445,480 | 160,163,120 |
Principal repayment of loans | (9,798,364) | (17,728,730) |
Principal Accretion of original issue discount | ||
Principal Sale of loans | (5,005,000) | (6,957,500) |
Principal PIK Interest | 798,019 | 6,920,388 |
Principal Provision for credit losses | ||
Principal Current expected credit loss reserve | ||
Original Issue Discount [Member] | ||
Debt Instrument [Line Items] | ||
Original Issue Discount, Beginning | (3,647,490) | |
Original Issue Discount, Ending | (3,647,490) | (3,755,796) |
Original Issue Discount Loans contributed | (846,724) | |
Original Issue Discount New fundings | (3,529,406) | (3,243,735) |
Original Issue Discount Principal repayment of loans | ||
Original Issue Discount Accretion of original issue discount | 595,872 | 2,874,706 |
Original Issue Discount Sale of loans | 132,768 | 260,723 |
Original Issue Discount PIK Interest | ||
Original Issue Discount Provision for credit losses | ||
Original Issue Discount Current expected credit loss reserve | ||
Current expected credit loss reserve [Member] | ||
Debt Instrument [Line Items] | ||
Current Expected Credit Loss Reserve, Beginning | (134,542) | |
Current Expected Credit Loss Reserve, Ending | (134,542) | (3,940,939) |
Current Expected Credit Loss Reserve Loans contributed | ||
Current Expected Credit Loss Reserve New fundings | ||
Current Expected Credit Loss Reserve Principal repayment of loans | ||
Current Expected Credit Loss Reserve Accretion of original issue discount | ||
Current Expected Credit Loss Reserve Sale of loans | ||
Current Expected Credit Loss Reserve PIK Interest | ||
Current Expected Credit Loss Reserve Provision for credit losses | (134,542) | |
Current Expected Credit Loss Reserve Current expected credit loss reserve | (3,806,397) | |
Carrying Value [Member] | ||
Debt Instrument [Line Items] | ||
Carrying Value, Beginning | 196,850,024 | |
Carrying Value, Ending | 196,850,024 | 335,332,599 |
Carrying Value Loans contributed | 39,345,197 | |
Carrying Value New fundings | 170,916,074 | 156,919,385 |
Carrying Value Principal repayment of loans | (9,798,364) | (17,728,730) |
Carrying Value Accretion of original issue discount | 595,872 | 2,874,706 |
Carrying Value Sale of loans | (4,872,232) | (6,696,777) |
Carrying Value PIK Interest | 798,019 | 6,920,388 |
Carrying Value Provision for credit losses | $ (134,542) | |
Carrying Value Current expected credit loss reserve | $ (3,806,397) |
Loans Held For Investment, Ne_5
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information | 12 Months Ended | |
Dec. 31, 2022 USD ($) | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Outstanding Principal | $ 343,029,334 | [1] |
Original Issue Premium/(Discount) | (3,755,796) | |
Carrying Value | $ 335,332,599 | [1] |
Various [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Various(6) | [2] |
Outstanding Principal | $ 30,000,000 | [1] |
Original Issue Premium/(Discount) | (859,454) | |
Carrying Value | $ 29,140,546 | [1] |
Contractual Interest Rate | P + 6.50%(5) | [3],[4] |
Maturity Date | 10/30/2026 | [5] |
Payment Terms | I/O | [6] |
Initial Funding Date | 10/27/2022 | [1] |
Michigan [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Michigan | |
Outstanding Principal | $ 37,283,861 | [1] |
Original Issue Premium/(Discount) | (161,766) | |
Carrying Value | $ 37,122,095 | [1] |
Contractual Interest Rate | P + 6.65%(5)(10) Cash, 4.25% PIK | [3] |
Maturity Date | 12/31/2024 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 3/5/2021 | [1] |
Various [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Various(6) | |
Outstanding Principal | $ 20,809,353 | [1] |
Original Issue Premium/(Discount) | (374,484) | |
Carrying Value | $ 20,434,869 | [1] |
Contractual Interest Rate | 13.91%(5) Cash, 2.59% PIK(9) | [3],[4],[7] |
Maturity Date | 11/29/2024 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 3/25/2021 | [1] |
Arizona [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Arizona | |
Outstanding Principal | $ 12,849,490 | [1] |
Original Issue Premium/(Discount) | ||
Carrying Value | $ 12,849,490 | [1] |
Contractual Interest Rate | 18.72%(5)(7) | [3],[8] |
Maturity Date | 12/31/2023 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 4/19/2021 | [1] |
Massachusetts [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Massachusetts | |
Outstanding Principal | $ 1,856,000 | [1] |
Original Issue Premium/(Discount) | ||
Carrying Value | $ 1,856,000 | [1] |
Contractual Interest Rate | P + 12.25%(5) | [3] |
Maturity Date | 4/30/2025 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 4/19/2021 | [1] |
Pennsylvania [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Pennsylvania | |
Outstanding Principal | $ 13,399,712 | [1] |
Original Issue Premium/(Discount) | ||
Carrying Value | $ 13,399,712 | [1] |
Contractual Interest Rate | P + 10.75%(5) Cash, 4% PIK(8) | [3],[9] |
Maturity Date | 5/31/2025 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 5/28/2021 | [1] |
Michigan [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Michigan | |
Outstanding Principal | $ 4,359,375 | [1] |
Original Issue Premium/(Discount) | (4,551) | |
Carrying Value | $ 4,354,824 | [1] |
Contractual Interest Rate | P + 9.00%(5) | [3] |
Maturity Date | 2/20/2024 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 8/20/2021 | [1] |
Various [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Various(6) | |
Outstanding Principal | $ 25,466,043 | [1] |
Original Issue Premium/(Discount) | (245,186) | |
Carrying Value | $ 25,220,857 | [1] |
Contractual Interest Rate | P + 6.00%(5) Cash, 2.5% PIK | [3] |
Maturity Date | 6/30/2025 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 8/24/2021 | [1] |
West Virginia [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | West Virginia | |
Outstanding Principal | $ 10,086,382 | [1] |
Original Issue Premium/(Discount) | (105,652) | |
Carrying Value | $ 9,980,730 | [1] |
Contractual Interest Rate | 18.75% PIK | [3] |
Maturity Date | 9/1/2024 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 9/1/2021 | [1] |
Pennsylvania [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Pennsylvania | |
Outstanding Principal | $ 15,775,542 | [1] |
Original Issue Premium/(Discount) | ||
Carrying Value | $ 15,775,542 | [1] |
Contractual Interest Rate | P + 10.75%(5) Cash, 6% PIK | [3] |
Maturity Date | 6/30/2024 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 9/3/2021 | [1] |
Michigan [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Michigan | |
Outstanding Principal | $ 274,406 | [1] |
Original Issue Premium/(Discount) | ||
Carrying Value | $ 274,406 | [1] |
Contractual Interest Rate | 11.00% | [3] |
Maturity Date | 9/30/2024 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 9/20/2021 | [1] |
Maryland [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Maryland | |
Outstanding Principal | $ 32,645,784 | [1] |
Original Issue Premium/(Discount) | (624,985) | |
Carrying Value | $ 32,020,799 | [1] |
Contractual Interest Rate | P + 8.75%(5) Cash, 2% PIK | [3] |
Maturity Date | 9/30/2024 | [5] |
Payment Terms | I/O | [6] |
Initial Funding Date | 9/30/2021 | [1] |
Various [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Various(6) | |
Outstanding Principal | $ 20,000,000 | [1] |
Original Issue Premium/(Discount) | (184,743) | |
Carrying Value | $ 19,815,257 | [1] |
Contractual Interest Rate | 13.00% | [3] |
Maturity Date | 10/31/2024 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 11/8/2021 | [1] |
Michigan [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Michigan | |
Outstanding Principal | $ 13,118,014 | [1] |
Original Issue Premium/(Discount) | (124,859) | |
Carrying Value | $ 12,993,155 | [1] |
Contractual Interest Rate | P + 6.00%(5) Cash, 1.5% PIK | [3] |
Maturity Date | 11/1/2024 | [5] |
Payment Terms | I/O | [6] |
Initial Funding Date | 11/22/2021 | [1] |
Various [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Various(6) | |
Outstanding Principal | $ 5,194,167 | [1] |
Original Issue Premium/(Discount) | ||
Carrying Value | $ 5,194,167 | [1] |
Contractual Interest Rate | P + 12.25%(5) Cash, 2.5% PIK | [3] |
Maturity Date | 12/27/2026 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 12/27/2021 | [1] |
Michigan [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Michigan | |
Outstanding Principal | $ 3,787,852 | [1] |
Original Issue Premium/(Discount) | (44,753) | |
Carrying Value | $ 3,743,099 | [1] |
Contractual Interest Rate | P + 7.50% Cash(5), 5% PIK | [3] |
Maturity Date | 12/29/2023 | [5] |
Payment Terms | I/O | [6] |
Initial Funding Date | 12/29/2021 | [1] |
Various [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Various(6) | |
Outstanding Principal | $ 7,387,500 | [1] |
Original Issue Premium/(Discount) | (49,977) | |
Carrying Value | $ 7,337,523 | [1] |
Contractual Interest Rate | P + 9.25%(5) | [3] |
Maturity Date | 12/31/2024 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 12/30/2021 | [1] |
Florida [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Florida | |
Outstanding Principal | $ 15,000,000 | [1] |
Original Issue Premium/(Discount) | (262,318) | |
Carrying Value | $ 14,737,682 | [1] |
Contractual Interest Rate | P + 4.75%(5) | [3] |
Maturity Date | 1/31/2025 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 1/18/2022 | [1] |
Ohio [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Ohio | |
Outstanding Principal | $ 30,837,950 | [1] |
Original Issue Premium/(Discount) | (422,837) | |
Carrying Value | $ 30,415,113 | [1] |
Contractual Interest Rate | P + 8.25%(5) Cash, 3% PIK | [3] |
Maturity Date | 2/28/2025 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 2/3/2022 | [1] |
Florida [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Florida | |
Outstanding Principal | $ 20,483,947 | [1] |
Original Issue Premium/(Discount) | (77,210) | |
Carrying Value | $ 20,406,737 | [1] |
Contractual Interest Rate | 11.00% Cash, 3% PIK | [3] |
Maturity Date | 8/29/2025 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 3/11/2022 | [1] |
Missouri [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Missouri | |
Outstanding Principal | $ 17,337,220 | [1] |
Original Issue Premium/(Discount) | (134,082) | |
Carrying Value | $ 17,203,138 | [1] |
Contractual Interest Rate | 11.00% Cash, 3% PIK | [3] |
Maturity Date | 5/30/2025 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 5/9/2022 | [1] |
Illinois [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Location | Illinois | |
Outstanding Principal | $ 5,076,736 | [1] |
Original Issue Premium/(Discount) | (78,939) | |
Carrying Value | $ 4,997,797 | [1] |
Contractual Interest Rate | P + 8.50%(5) Cash, 3% PIK | [3] |
Maturity Date | 7/29/2026 | [5] |
Payment Terms | P&I | [6] |
Initial Funding Date | 7/1/2022 | [1] |
Current expected credit loss reserve [Member] | ||
Loans Held For Investment, Net (Details) - Schedule of loans held at carrying value based on information [Line Items] | ||
Outstanding Principal | [1] | |
Original Issue Premium/(Discount) | ||
Carrying Value | $ (3,940,939) | [1] |
[1] The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discounts, deferred loan fees and other upfront fees. Outstanding principal balance includes capitalized PIK interest, if applicable. Loans with material collateral in multiple jurisdictions, namely multi-state operators, are disclosed as “various.” Certain loans are subject to contractual extension options and may be subject to performance based on other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without a contractual prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications. P&I = principal and interest. I/O = interest only. P&I loans may include interest only periods for a portion of the loan term. The aggregate loan commitment to Loan #3 includes a $15.9 million initial commitment which has a base interest rate of 13.625%, 2.75% PIK and a second commitment of $4.2 million which has an interest rate of 15.00%, 2.00% PIK. The statistics presented reflect the weighted average of the terms under all advances for the total aggregate loan commitment. The aggregate loan commitment to Loan #4 includes a $10.9 million initial commitment which has a base interest rate of 15.00% and a second commitment of $2.0 million which has an interest rate of 39%. The statistics presented reflect the weighted average of the terms under all advances for the total aggregate loan commitment. Subject to adjustment not below 2% if borrower receives at least two consecutive quarters of positive cash flow after the closing date. |
Loans Held For Investment, Ne_6
Loans Held For Investment, Net (Details) - Schedule of significant unobservable inputs | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Fair Value (in Dollars) | $ 329,237,824 |
Primary Valuation Techniques | Discounted cash flow |
Input | Discount rate |
Weighted Average | 17.53% |
Minimum [Member] | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Estimated Range | 11.36% |
Maximum [Member] | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Estimated Range | 24.79% |
Loans Held For Investment, Ne_7
Loans Held For Investment, Net (Details) - Schedule of risk rating | 12 Months Ended |
Dec. 31, 2022 | |
Risk Rating One [Member] | |
Loans Held For Investment, Net (Details) - Schedule of risk rating [Line Items] | |
Risk rating | Very low risk |
Risk Rating Two [Member] | |
Loans Held For Investment, Net (Details) - Schedule of risk rating [Line Items] | |
Risk rating | Low risk |
Risk Rating Three [Member] | |
Loans Held For Investment, Net (Details) - Schedule of risk rating [Line Items] | |
Risk rating | Moderate/average risk |
Risk Rating Four [Member] | |
Loans Held For Investment, Net (Details) - Schedule of risk rating [Line Items] | |
Risk rating | High risk/potential for loss: a loan that has a risk of realizing a principal loss |
Risk Rating Five [Member] | |
Loans Held For Investment, Net (Details) - Schedule of risk rating [Line Items] | |
Risk rating | Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded |
Loans Held For Investment, Ne_8
Loans Held For Investment, Net (Details) - Schedule of carrying value of loans held for investment - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule of Investments [Line Items] | ||
Risk Rating 1 | $ 274,406 | $ 167,908,805 |
Risk Rating 2 | 212,052,863 | 29,075,761 |
Risk Rating 3 | 113,546,557 | |
Risk Rating 4 | 13,399,712 | |
Risk Rating 5 | ||
Total | 339,273,538 | 196,984,566 |
2022 [Member] | ||
Schedule of Investments [Line Items] | ||
Risk Rating 1 | ||
Risk Rating 2 | 94,467,449 | |
Risk Rating 3 | 30,415,113 | |
Risk Rating 4 | ||
Risk Rating 5 | ||
Total | 124,882,562 | |
2021 [Member] | ||
Schedule of Investments [Line Items] | ||
Risk Rating 1 | 274,406 | 135,076,307 |
Risk Rating 2 | 88,444,868 | 29,075,761 |
Risk Rating 3 | 83,131,444 | |
Risk Rating 4 | 13,399,712 | |
Risk Rating 5 | ||
Total | 185,250,430 | 164,152,068 |
2019 [Member] | ||
Schedule of Investments [Line Items] | ||
Risk Rating 1 | 590,384 | |
Risk Rating 2 | ||
Risk Rating 3 | ||
Risk Rating 4 | ||
Risk Rating 5 | ||
Total | 590,384 | |
2020 [Member] | ||
Schedule of Investments [Line Items] | ||
Risk Rating 1 | 32,242,114 | |
Risk Rating 2 | 29,140,546 | |
Risk Rating 3 | ||
Risk Rating 4 | ||
Risk Rating 5 | ||
Total | $ 29,140,546 | $ 32,242,114 |
Loans Held For Investment, Ne_9
Loans Held For Investment, Net (Details) - Schedule of real estate collateral coverage - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | [1] | Dec. 31, 2021 | |
1.0x [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of real estate collateral coverage [Line Items] | |||
Fixed-rate | $ 7,017,793 | ||
Floating-rate | 63,963,105 | 8,925,068 | |
Net real estate collateral coverage | 63,963,105 | 15,942,861 | |
1.0 - 1.25 [member] | |||
Loans Held For Investment, Net (Details) - Schedule of real estate collateral coverage [Line Items] | |||
Fixed-rate | |||
Floating-rate | 78,211,454 | 18,022,518 | |
Net real estate collateral coverage | 78,211,454 | 18,022,518 | |
1.25x - 1.5x [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of real estate collateral coverage [Line Items] | |||
Fixed-rate | 20,406,737 | 35,836,099 | |
Floating-rate | 13,399,712 | ||
Net real estate collateral coverage | 33,806,449 | 35,836,099 | |
1.50x - 1.75x [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of real estate collateral coverage [Line Items] | |||
Fixed-rate | 17,203,138 | 3,086,298 | |
Floating-rate | 9,980,730 | 30,029,953 | |
Net real estate collateral coverage | 27,183,868 | 33,116,251 | |
1.75x - 2.0x [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of real estate collateral coverage [Line Items] | |||
Fixed-rate | |||
Floating-rate | 12,849,490 | 32,377,087 | |
Net real estate collateral coverage | 12,849,490 | 32,377,087 | |
> 2.0x [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of real estate collateral coverage [Line Items] | |||
Fixed-rate | 20,089,663 | 45,373,778 | |
Floating-rate | 103,169,509 | 16,315,972 | |
Net real estate collateral coverage | 123,259,172 | 61,689,750 | |
Total [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of real estate collateral coverage [Line Items] | |||
Fixed-rate | 57,699,538 | 91,313,968 | |
Floating-rate | 281,574,000 | 105,670,598 | |
Net real estate collateral coverage | $ 339,273,538 | $ 196,984,566 | |
[1] Real estate collateral coverage is calculated based upon most recent third-party appraised values. |
Loans Held For Investment, N_10
Loans Held For Investment, Net (Details) - Schedule of activity related to the CECL Reserve for outstanding balances - USD ($) | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2022 | ||
Loans Held For Investment, Net (Details) - Schedule of activity related to the CECL Reserve for outstanding balances [Line Items] | |||
Balance | $ 147,949 | ||
Balance | 147,949 | 4,035,354 | |
Provision for current expected credit losses | 147,949 | 3,887,405 | |
Outstanding [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of activity related to the CECL Reserve for outstanding balances [Line Items] | |||
Balance | [1] | 134,542 | |
Balance | [1] | 134,542 | 3,940,939 |
Provision for current expected credit losses | [1] | 134,542 | 3,806,397 |
Unfunded [Member] | |||
Loans Held For Investment, Net (Details) - Schedule of activity related to the CECL Reserve for outstanding balances [Line Items] | |||
Balance | [2] | 13,407 | |
Balance | [2] | 13,407 | 94,415 |
Provision for current expected credit losses | [2] | $ 13,407 | $ 81,008 |
[1]As of December 31, 2022, the CECL Reserve related to outstanding balances on loans at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.[2]As of December 31, 2022, the CECL Reserve related to unfunded commitments on loans at carrying value is recorded within accounts payable and accrued liabilities in the Company’s consolidated balance sheets. |
Interest Receivable (Details) -
Interest Receivable (Details) - Schedule of summarizes the interest receivable - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule Of Summarizes The Interest Receivable Abstract | ||
Interest receivable | $ 1,203,330 | $ 193,790 |
PIK interest receivable | 1,082 | |
Unused fees receivable | 3,945 | |
Total interest receivable | $ 1,204,412 | $ 197,735 |
Interest Receivable (Details)_2
Interest Receivable (Details) - Schedule of including non-accrual loans | 12 Months Ended | |
Dec. 31, 2022 USD ($) | ||
Interest Receivable (Details) - Schedule of including non-accrual loans [Line Items] | ||
Senior term loan | $ 1,204,412 | |
Total | 1,204,412 | |
Current Loans [Member] | ||
Interest Receivable (Details) - Schedule of including non-accrual loans [Line Items] | ||
Senior term loan | 1,203,088 | [1] |
Total | 1,203,088 | [1] |
31 - 60 Days Past Due [Member] | ||
Interest Receivable (Details) - Schedule of including non-accrual loans [Line Items] | ||
Senior term loan | 1,324 | |
Total | 1,324 | |
61 - 90 Days Past Due [Member] | ||
Interest Receivable (Details) - Schedule of including non-accrual loans [Line Items] | ||
Senior term loan | ||
Total | ||
Non-Accrual [Member] | ||
Interest Receivable (Details) - Schedule of including non-accrual loans [Line Items] | ||
Senior term loan | ||
Total | ||
Total Past Due [Member] | ||
Interest Receivable (Details) - Schedule of including non-accrual loans [Line Items] | ||
Senior term loan | 1,324 | |
Total | 1,324 | |
90+ Days Past Due (and accruing) [Member] | ||
Interest Receivable (Details) - Schedule of including non-accrual loans [Line Items] | ||
Total | ||
[1] Loans 1-30 days past due are included in the current loans. |
Interest Reserve (Details) - Sc
Interest Reserve (Details) - Schedule of changes in interest reserves - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Schedule Of Changes In Interest Reserves Abstract | ||
Beginning reserves | $ 6,636,553 | |
New reserves | 9,049,834 | 9,223,802 |
Reserves disbursed | (13,818,194) | (2,587,249) |
Ending reserves | $ 1,868,193 | $ 6,636,553 |
Debt (Details)
Debt (Details) - USD ($) | 12 Months Ended | ||||||
Nov. 07, 2022 | Jul. 02, 2022 | May 12, 2022 | Dec. 16, 2021 | May 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Debt (Details) [Line Items] | |||||||
Borrowing amount | $ 10,000,000 | $ 58,000,000 | |||||
Incurred debt issuance costs | $ 177,261 | $ 100,000 | 859,500 | ||||
Debt to equity, description | On December 16, 2021, CAL entered into an amended and restated Revolving Loan agreement (the “First Amendment and Restatement”). The First Amendment and Restatement increased the loan commitment from $10,000,000 to $45,000,000 and decreased the interest rate, from the greater of the (1) Prime Rate plus 1.00% and (2) 4.75% to the greater of (1) the Prime Rate plus the applicable margin and (2) 3.25%. The applicable margin is derived from a floating rate grid based upon the ratio of debt to equity of CAL and increases from 0% at a ratio of 0.25 to 1 to 1.25% at a ratio of 1.5 to 1. The First Amendment and Restatement also extended the maturity date from February 12, 2023 to the earlier of (i) December 16, 2023 and (ii) the date on which the Revolving Loan is terminated pursuant to the terms of the Revolving Loan agreement. | ||||||
Incurred debt issuance costs | $ 323,779 | ||||||
Unamortized debt issuance costs | $ 805,596 | $ 868,022 | |||||
Incurred effective interest rate | 7.75% | ||||||
Unused fee rate | 0.25% | ||||||
Revolving loan | $ 34,500,000 | ||||||
Debt description | Additionally, the Company must comply with certain financial covenants including: (1) maximum capital expenditures of $150,000, (2) maintaining a debt service coverage ratio greater than 1.35 to 1, and (3) maintaining a leverage ratio less than 1.50 to 1. As of December 31, 2022, we were in compliance with all financial covenants with respect to the Revolving Loan. | ||||||
Minimum [Member] | |||||||
Debt (Details) [Line Items] | |||||||
Prime rate plus percentage | 1% | ||||||
Loan commitment | 65,000,000 | 45,000,000 | |||||
Maximum [Member] | |||||||
Debt (Details) [Line Items] | |||||||
Prime rate plus percentage | 4.75% | ||||||
Loan commitment | $ 92,500,000 | $ 65,000,000 | |||||
Revolving Loan [Member] | |||||||
Debt (Details) [Line Items] | |||||||
Unused fees rate | 0.25% |
Debt (Details) - Schedule of su
Debt (Details) - Schedule of summary of interest expense incurred during period - USD ($) | 9 Months Ended | 12 Months Ended |
Dec. 31, 2021 | Dec. 31, 2022 | |
Schedule Of Summary Of Interest Expense Incurred During Period Abstract | ||
Interest expense | $ 2,024,299 | |
Unused fee expense | 26,375 | |
Amortization of deferred financing costs | $ 75,861 | 563,464 |
Total interest expense | $ 75,861 | $ 2,614,138 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||
Jul. 08, 2022 | Dec. 15, 2021 | Oct. 03, 2021 | Oct. 01, 2021 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Aug. 04, 2022 | |
Related Party Transactions (Details) [Line Items] | ||||||||
Management fees, percentage | 0.375% | |||||||
Origination fees, percentage | 50% | |||||||
Management fees payable | $ 1,291,451 | $ 187,028 | ||||||
Incentive fee | 3,778,812 | |||||||
Management incurred expenses | $ 116,464 | |||||||
Accounts payable | 900,000 | $ 5,000,000 | 900,000 | |||||
Advanced loan | 20,000,000 | 20,000,000 | ||||||
Company loan | $ 14,000,000 | |||||||
Unfunded commitment in Loan | $ 5,000,000 | |||||||
Loan sales | $ 5,000,000 | |||||||
Accrued interest | $ 4,900,000 | |||||||
Share purchase (in Shares) | 1,093,750 | |||||||
Aggregate purchase price | $ 17,500,000 | |||||||
Loan sales | 1,800,000 | |||||||
Unfunded commitment | $ 10,000,000 | |||||||
Loans amortized cost | $ 9,740,000 | 9,802,024 | ||||||
Amortized cash | $ 97,976 | |||||||
Issuance shares of common stock (in Shares) | 635,194 | |||||||
Company acquired loans description | Subsequently, the Company also acquired loans at amortized cost of $22,516,005 from affiliates of the Manager in exchange for issuance of 1,446,473 shares of common stock, as well as cash contributions of $125,517,500 to fund loans in exchange for 8,067,010 shares of common stock. | |||||||
Exchange shares of common stock (in Shares) | 481,259 | |||||||
Loans held at carrying value | $ 10,700,000 | $ 305,900,000 | $ 10,700,000 | |||||
Companies acquired loans | $ 10,000,000 | |||||||
Equity Method Investment [Member] | ||||||||
Related Party Transactions (Details) [Line Items] | ||||||||
Ownership percentage | 100% | |||||||
Level 3 [Member] | ||||||||
Related Party Transactions (Details) [Line Items] | ||||||||
Selling price | $ 6,700,000 |
Related Party Transactions (D_2
Related Party Transactions (Details) - Schedule of summarizes the related party costs - USD ($) | 9 Months Ended | 12 Months Ended |
Dec. 31, 2021 | Dec. 31, 2022 | |
Schedule Of Summarizes The Related Party Costs Abstract | ||
Management fees earned | $ 989,322 | $ 4,074,725 |
Less: Outside fees earned | (187,028) | (1,291,451) |
Base management fee, net | 802,294 | 2,783,274 |
Incentive fees | 3,778,813 | |
Total management and incentive fees earned | 802,294 | 6,562,087 |
General and administrative expenses reimbursable to Manager | 102,829 | 3,137,861 |
Total | $ 905,123 | $ 9,699,948 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - Schedule of commitments to fund various existing loans - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Commitments and Contingencies (Details) - Schedule of commitments to fund various existing loans [Line Items] | ||
Total original loan commitments | $ 351,367,706 | $ 235,063,593 |
Less: drawn commitments | (336,323,706) | (200,359,026) |
Total undrawn commitments | $ 15,044,000 | $ 34,704,567 |
Commitments and Contingencies_3
Commitments and Contingencies (Details) - Schedule of material commitments | Dec. 31, 2022 USD ($) | |
Commitments and Contingencies (Details) - Schedule of material commitments [Line Items] | ||
Total | $ 73,044,000 | |
2023 | 60,400,000,000,000 | |
2024 | 7,000,000,000,000 | |
2025 | 1,644,000,000,000 | |
2026 | 4,000,000,000,000 | |
2027 | ||
Thereafter | ||
Commitments [Member] | ||
Commitments and Contingencies (Details) - Schedule of material commitments [Line Items] | ||
Total | 15,044,000 | |
2023 | 2,400,000,000,000 | |
2024 | 7,000,000,000,000 | |
2025 | 1,644,000,000,000 | |
2026 | 4,000,000,000,000 | |
2027 | ||
Thereafter | ||
Revolving Loan [Member] | ||
Commitments and Contingencies (Details) - Schedule of material commitments [Line Items] | ||
Total | 58,000,000 | [1] |
2023 | 58,000,000,000,000 | [1] |
2024 | [1] | |
2025 | [1] | |
2026 | [1] | |
2027 | [1] | |
Thereafter | [1] | |
[1] Subsequent to December 31, 2022, the maturity date of the Revolving Loan was extended. See Note 13 for further information |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |||
Jan. 05, 2022 | Dec. 10, 2021 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Stockholders' Equity Note [Abstract] | |||||
Shares issued (in Shares) | 10,636,363 | ||||
Common stock shares issued (in Shares) | 6,250,000 | ||||
Common stock per share (in Dollars per share) | $ 16 | ||||
IPO gross proceeds | $ 100,000,000 | ||||
Underwriting commission | $ 339,136 | 7,000,000 | |||
Expenses | 1,265,877 | ||||
Net proceeds | 4,505,664 | $ 91,734,123 | |||
Sold shares of common stock (in Shares) | 468,750 | ||||
Offering price, per share (in Dollars per share) | $ 16 | ||||
Gross proceeds | $ 7,500,000 | ||||
Purchase shares (in Shares) | 302,800 | ||||
Common stock price | $ 16 | ||||
Additional gross proceeds | $ 4,844,800 | ||||
Restricted common stock shares (in Shares) | 98,440 | ||||
Granted to members (in Shares) | 24,880 | ||||
Issued and outstanding shares percentage | 8.50% | 8.50% | |||
Shares forfeited (in Shares) | 14,297 | ||||
Share-based compensation expense | $ 435,623 | $ 29,611 | |||
Unamortized share-based compensation expense | $ 1,300 | $ 1,600,000 | |||
Weighted-average term | 2 years 2 months 19 days | 2 years 2 months 19 days |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - Schedule of restricted stock awards | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Schedule Of Restricted Stock Awards Abstract | |
Aggregate intrinsic value, Outstanding | $ 797,881 |
Aggregate intrinsic value, Vested | $ 422,548 |
Stockholders' Equity (Details_2
Stockholders' Equity (Details) - Schedule of restricted stock activity - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Schedule Of Restricted Stock Activity Abstract | ||
Restricted stock activity, Unvested , Beginning | 98,440 | 98,440 |
Weighted- Average Exercise Price Unvested , Beginning | $ 16 | $ 16 |
Restricted stock activity, Granted | 24,880 | |
Weighted- Average Exercise Price, Granted | $ 15.07 | |
Restricted stock activity, Vested | (28,039) | |
Weighted- Average Exercise Price, Vested | $ 16 | |
Restricted stock activity, Forfeited | (14,297) | |
Weighted- Average Exercise Price, Forfeited | $ 16 | |
Restricted stock activity, Unvested , ending | 80,984 | 98,440 |
Weighted- Average Exercise Price, Unvested , ending | $ 15.71 | $ 16 |
Earnings Per Share (Details) -
Earnings Per Share (Details) - Schedule of basic earnings per common share - USD ($) | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2021 | Dec. 30, 2021 | Dec. 31, 2022 | |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||
Net income/(loss) attributable to common stockholders | $ 9,496,436 | $ 32,292,477 | |
Divided by: | |||
Basic weighted average shares of common stock outstanding | 6,442,865 | 6,442,865 | 17,653,765 |
Diluted weighted average shares of common stock outstanding | 6,450,383 | 6,450,383 | 17,746,214 |
Basic earnings per common share | $ 1.47 | $ 1.47 | $ 1.83 |
Diluted earnings per common share | $ 1.47 | $ 1.47 | $ 1.82 |
Income Tax (Details)
Income Tax (Details) | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Income Tax Disclosure [Abstract] | |
Income tax provision | $ 0 |
Dividends and Distributions (De
Dividends and Distributions (Details) - Schedule of dividends declared - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Regular cash dividend [Member] | ||
Dividends and Distributions (Details) - Schedule of dividends declared [Line Items] | ||
Record Date | Mar. 31, 2022 | Jun. 30, 2021 |
Payment Date | Apr. 14, 2022 | Jul. 15, 2021 |
Common Share Distribution Amount | $ 0.4 | $ 0.29 |
Taxable Ordinary Income | $ 0.4 | $ 0.29 |
Return of Capital (in Dollars) | ||
Section 199A Dividends | $ 0.4 | $ 0.29 |
Regular cash dividend One [Member] | ||
Dividends and Distributions (Details) - Schedule of dividends declared [Line Items] | ||
Record Date | Jun. 30, 2022 | Sep. 30, 2021 |
Payment Date | Jul. 15, 2022 | Oct. 20, 2021 |
Common Share Distribution Amount | $ 0.47 | $ 0.51 |
Taxable Ordinary Income | $ 0.47 | $ 0.51 |
Return of Capital (in Dollars) | ||
Section 199A Dividends | $ 0.47 | $ 0.51 |
Regular cash dividend Two [Member] | ||
Dividends and Distributions (Details) - Schedule of dividends declared [Line Items] | ||
Record Date | Sep. 30, 2022 | Dec. 31, 2021 |
Payment Date | Oct. 14, 2022 | Jan. 14, 2022 |
Common Share Distribution Amount | $ 0.47 | $ 0.26 |
Taxable Ordinary Income | $ 0.47 | $ 0.26 |
Return of Capital (in Dollars) | ||
Section 199A Dividends | $ 0.47 | $ 0.26 |
Regular cash dividend Three [Member] | ||
Dividends and Distributions (Details) - Schedule of dividends declared [Line Items] | ||
Record Date | Dec. 30, 2022 | |
Payment Date | Jan. 13, 2023 | |
Common Share Distribution Amount | $ 0.47 | |
Taxable Ordinary Income | $ 0.47 | |
Return of Capital (in Dollars) | ||
Section 199A Dividends | $ 0.47 | |
Special cash dividend [Member] | ||
Dividends and Distributions (Details) - Schedule of dividends declared [Line Items] | ||
Record Date | Dec. 30, 2022 | |
Payment Date | Jan. 13, 2023 | |
Common Share Distribution Amount | $ 0.29 | |
Taxable Ordinary Income | $ 0.29 | |
Return of Capital (in Dollars) | ||
Section 199A Dividends | $ 0.29 | |
Total cash dividend [Member] | ||
Dividends and Distributions (Details) - Schedule of dividends declared [Line Items] | ||
Common Share Distribution Amount | 2.1 | 1.06 |
Taxable Ordinary Income | $ 2.1 | $ 1.06 |
Return of Capital (in Dollars) | ||
Section 199A Dividends | $ 2.1 | $ 1.06 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | 2 Months Ended | |||
Feb. 15, 2023 | Dec. 15, 2022 | Feb. 28, 2023 | Dec. 31, 2022 | |
Subsequent Events (Details) [Line Items] | ||||
Cash dividend per share (in Dollars per share) | $ 470,000 | |||
Cash dividend payment | $ 8,300,000 | |||
Special cash dividend (in Dollars per share) | $ 0.29 | |||
Special cash dividend payment | $ 5,100,000 | |||
Revolving Loan | $ 34,500,000 | |||
Price per share (in Dollars per share) | $ 15.16 | |||
Net proceeds | $ 6 | |||
Subsequent Event [Member] | ||||
Subsequent Events (Details) [Line Items] | ||||
Loan paydown | $ 18,300,000 | |||
Revolving loan description | During the period January 1, 2023 through February 28, 2023, the Company drew $22.5 million on the Revolving Loan. | |||
Revolving Loan | $ 22,500,000 | |||
Offering cost | $ 395,779 | |||
One loan [Member] | Subsequent Event [Member] | ||||
Subsequent Events (Details) [Line Items] | ||||
Principal loan | 11,300,000 | |||
Two loan [Member] | Subsequent Event [Member] | ||||
Subsequent Events (Details) [Line Items] | ||||
Principal loan | $ 19,200,000 |