Management’s Overview

The company is an externally advised and managed company that invests in notes receivable collateralized by income-producing properties in the Southern United States. The company’s principal source of income is interest income on these note receivables from related parties. The company has historically engaged in business transactions with related parties, which may not always be favorable or in the company’s best interest due to the lack of free market forces.

The company’s operations are managed by Pillar in accordance with an Advisory Agreement. Pillar’s duties include locating, evaluating, and recommending investment opportunities. The company has no employees, and Pillar’s employees render services to the company.

Critical Accounting Policies

The company’s critical accounting policies include:

1. Non-performing Notes Receivable: The company considers a note receivable to be non-performing when the maturity date has passed without principal repayment and the borrower is not making interest payments.

2. Interest Recognition on Notes Receivable: The company records interest income as earned in accordance with the terms of the related loan agreements.

3. Allowance for Estimated Losses: The company assesses the collectability of notes receivable and recognizes impairments when it is probable that principal and interest will not be received in accordance with the contractual terms.

4. Fair Value of Financial Instruments: The company applies the guidance in ASC Topic 820 to the valuation of real estate assets, which establishes a hierarchy for fair value measurements.

5. Related Parties: The company applies ASC Topic 805 to evaluate business relationships with related parties.

The company’s operations are also affected by inflation, environmental matters, and other factors.

Results of Operations

The company’s operating expenses consist primarily of general and administrative costs, such as audit and legal fees, and administrative fees paid to a related party. The company also has other income and expense items, including interest income from funds deposited with the Advisor and interest income from receivables from related parties.

Comparison of 2024 to 2023:

• Net income decreased by $2.4 million, primarily due to a $3.8 million decrease in interest income and a $0.4 million decrease in income tax provision.

Comparison of 2023 to 2022:

• See the company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of the results of operations for 2023.

Liquidity and Capital Resources

The company’s principal liquidity needs are to fund normal recurring expenses, and its principal sources of cash are the collection of mortgage notes receivables and the collections of receivables and interests from related companies.

The company anticipates that its cash and cash equivalents as of December 31, 2024, along with cash that will be generated in 2025 from notes and interest receivables, will be sufficient to meet all of its cash requirements.

Cash Flow Summary:

The decrease in cash from operating activities is primarily due to a change in related party receivables.