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Risk Management
−Removed: To the extent consistent with maintaining our REIT qualification and our exemption from registration under the Investment Company Act, we seek to manage risk exposure by closely monitoring our portfolio and actively managing financing, interest rate, credit, prepayment and convexity (a measure of the sensitivity of the duration of a loan to changes in interest rates) risks associated with holding our portfolio.
+Added: To the extent consistent with maintaining our REIT qualification and our exemption from registration under the 1940 Act, we seek to manage risk exposure by closely monitoring our portfolio and actively managing financing, interest rate, credit, prepayment and convexity (a measure of the sensitivity of the duration of a loan to changes in interest rates) risks associated with holding our portfolio.
Generally, with the guidance and experience of our Manager:
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We may carry our loans at fair value or carrying value in our consolidated balance sheet.
−Removed: As of June 30, 2025 and December 31, 2024, one loan held for investment was carried at fair value within loans held at fair value in our consolidated balance sheets, respectively, with changes in fair value recorded through earnings.
+Added: As of September 30, 2025 and December 31, 2024, one loan held for investment was carried at fair value within loans held at fair value in our consolidated balance sheets, respectively, with changes in fair value recorded through earnings.
We evaluate our loans on a quarterly basis and fair value is determined by our Board through its independent Audit and Valuation Committee.
−Removed: We use an independent third-party valuation firm to provide input in the valuation of all of our unquoted investments, which we consider along with other various subjective and objective factors in making our evaluations.
+Added: We use an independent third-party valuation firm to provide input in the valuation of all of our
+Added: unquoted investments, which we consider along with other various subjective and objective factors in making our evaluations.
Our loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to borrowers.
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however, this is mitigated to the extent our loans bear interest at a floating rate.
−Removed: As of June 30, 2025, a decrease of 50 bps or increase of 50 bps of the market yield would have resulted in a change in unrealized gain (loss) of approximately $0.3 million and $(0.3) million, respectively.
−Removed: As of June 30, 2025, we had eight floating-rate loans, representing approximately 42% of our portfolio based on aggregate outstanding principal balances.
+Added: As of September 30, 2025, a decrease of 50 bps or increase of 50 bps of the market yield would have resulted in a change in unrealized gain (loss) of approximately $0.3 million and $(0.3) million, respectively.
+Added: As of September 30, 2025, we had seven floating-rate loans, representing approximately 38% of our portfolio based on aggregate outstanding principal balances.
These floating benchmark rates included one-month SOFR quoted at 4.1% and subject to a weighted average floor of 4.3% based on outstanding principal.
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These are assets in which the loans may be subject to periodic and lifetime interest rate caps and floors, which limit the amount by which the asset’s interest yield may change during any given period.
−Removed: However, our borrowing costs pursuant to our financing agreements may not be subject to similar restrictions.
+Added: However, our borrowing costs pursuant to our financing agreements may not be subject to similar
+Added: restrictions.
Therefore, in a period of increasing interest rates, interest rate costs on our borrowings could increase without limitation by caps, while the interest-rate yields on our floating-rate assets would effectively be limited.
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Credit risk will also be addressed through our Manager’s ongoing review, and loans will be monitored for variance from expected prepayments, defaults, severities, losses and cash flow on a quarterly basis.
−Removed: Other than the acquisition of our initial portfolio of loans and certain loan commitments relating to Private Company A, we, through our Manager, have originated substantially all of our loans and intend to continue to originate our loans, but
−Removed: we have previously and may in the future acquire loans from time to time.
−Removed: Our Investment Guidelines are not subject to any limits or proportions with respect to the mix of target investments that we make or that we may in the future acquire other than as necessary to maintain our exemption from registration under the Investment Company Act and our qualification as a REIT.
+Added: Other than the acquisition of our initial portfolio of loans and certain loan commitments relating to Private Company A, we, through our Manager, have originated substantially all of our loans and intend to continue to originate our loans, but we have previously and may in the future acquire loans from time to time.
+Added: Our Investment Guidelines are not subject to any limits or proportions with respect to the mix of target investments that we make or that we may in the future acquire other than as necessary to maintain our exemption from registration under the 1940 Act and our qualification as a REIT.
Our investment decisions will depend on prevailing market conditions and may change over time in response to opportunities available in different interest rate, economic and credit environments.
As a result, we cannot predict the percentage of our capital that will be invested in any individual target investment at any given time.
−Removed: Our loan portfolio as of June 30, 2025 was concentrated with the top three borrowers representing approximately 46.3% of the aggregate outstanding principal balances and approximately 42.3% of the total loan commitments.
+Added: Our loan portfolio as of September 30, 2025 was concentrated with the top three borrowers representing approximately 49.5% of the aggregate outstanding principal balances and approximately 45.4% of the total loan commitments.
Additionally, the industry is experiencing significant consolidation, which we expect to increase, among cannabis operations and certain of our borrowers may combine, increasing the concentration of our borrower portfolio with those consolidated operators.
−Removed: Our largest credit facility represented approximately 21.9% of the aggregate outstanding principal balances of our portfolio and approximately 19.8% of our total loan commitments as of June 30, 2025.
+Added: Our largest credit facility represented approximately 23.7% of the aggregate outstanding principal balances of our portfolio and approximately 21.2% of our total loan commitments as of September 30, 2025.
The borrower under this credit facility is a Subsidiary of Private Company G, a multi-state operator with real estate assets in several states, certain of which have been included as collateral in connection with the senior term loan.
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We placed Subsidiary of Private Company G on nonaccrual status effective December 1, 2023 and previously during various periods in 2023.
−Removed: As of June 30, 2025, the loan with Subsidiary of Private Company G had an outstanding principal amount of approximately $78.9 million and an amortized cost of approximately $77.4 million, respectively.
−Removed: During the three and six months ended June 30, 2025, we recognized interest income of zero and approximately $0.7 million related to this loan, which was received in cash.
+Added: As of September 30, 2025, the loan with Subsidiary of Private
+Added: Company G had an outstanding principal amount of approximately $78.9 million and an amortized cost of approximately $77.4 million, respectively.
+Added: During the three and nine months ended September 30, 2025, we recognized interest income of zero and approximately $0.7 million related to this loan, which was received in cash.
As full recovery of principal and accrued interest is doubtful, future cash receipts received in accordance with terms of the forbearance agreement are accounted for under the cost recovery method.
−Removed: During the three and six months ended June 30, 2025, approximately $0.3 million and $0.3 million of contractual interest payments were received and applied as a reduction to this loan’s amortized cost, respectively.
+Added: During the three and nine months ended September 30, 2025, zero and $0.3 million of contractual interest payments were received and applied as a reduction to this loan’s amortized cost, respectively.
We primarily provide loans to companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against our borrowers of the federal illegality of cannabis, our borrowers’ inability to renew or otherwise maintain their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and we could lose all or part of any of our loans.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.