Company Summary: Korth Direct Mortgage Inc.

Business Overview

• Type of Business: Specialized mortgage lender and servicer focusing on commercial real estate (CRE) loans.
• Core Activities:
  • Originates and funds Loans secured by commercial real estate properties (referred to as “CM Loans”).
  • Holds these loans through direct ownership or securitization via mortgage-secured notes (MSNs).
  • Serves as the servicer of the loans, collecting payments from borrowers and distributing interest/principal to investors.
  • Manages properties acquired through foreclosure or deeds in lieu (REO properties).

Funding & Capital

• Funding Channels:
  • Sells Mortgage Secured Notes (MSNs) in capital markets.
  • Sells loan participations, senior/subordinated notes, and sometimes holds loans on its balance sheet.
  • Uses warehouse lines of credit (currently terminated in favor of new arrangements).
  • Actively raising capital through a new debt fund, KDM Capital Partners, LP.

Loan Portfolio & Assets

• Loan Originations (as of December 31, 2024): Approximately $647 million.
• Loan Assets:
  • Mortgages owned: $451.97 million (down from $484.48 million in 2023).
  • Portfolio Loans (originated with own capital): $5.16 million.
  • Loans held for sale: $520,215.
  • Securitized/participated loans: Included in asset-backed securitizations.
• REO Portfolio:
  • Acquired properties in Stafford, Virginia (majority interest in a specialty office building).
  • Owned properties in Acton, Massachusetts, and St. Louis, Missouri (via foreclosure/deed in lieu).
  • Owns 5 properties in total (including acquisitions in 2024).

Revenue & Financials (2024)

• Total Revenue: $12.07 million (up 23% from 2023’s $9.84 million), primarily from:
  • Origination revenue: $1.69 million.
  • Servicing revenue: $5.04 million.
  • Leasing revenue from properties: $3 million.
  • Other revenue: $2.24 million.
• Net Loss (2024): $3.62 million (improved from a $6.2 million net loss in 2023).
• Gross Profits: $8.52 million.
• Operating Expenses: $9.53 million, including increased office expenses related to REO properties.
• Interest & Other Expenses: Significant unrealized gains/losses on mortgages and notes influence income; recorded a net expense of $1.13 million.
• Taxes: Income tax benefit of $633,698.

Employees & Customers

• Employees: 24 full-time employees, 5 contractors.
• Customers:
  • As of December 31, 2024, there are 40 customer entities.
  • These include borrowers with active loans and those under underwriting.
  • Borrowers generally use loans for CRE purposes, including multi-family, office, industrial, retail, warehouses, and specialty properties.

Stockholders & Capital

• Outstanding Shares:
  • 5 million common shares (all held by J.W. Korth as of 2024).
  • Series A preferred stock: 460,000 shares issued to Cede & Company.
  • Series B preferred stock: 19,000 shares issued to Cede & Company.
• Major Shareholders:
  • Holly MacDonald-Korth (42.7% ownership, daughter of Chairman James W. Korth).
  • James W. Korth (37%), Chairman and prior CEO.
  • Both control approximately 80% of voting stock.

Key Activities

• Runs a network with third-party brokers for loan sourcing.
• Uses software to streamline origination and marketing processes.
• Creates proprietary ratings for loans, evaluating factors like LTV, DSCR, property type, age, condition, and location.
• Manages both performing and defaulted loans, including foreclosure and REO management.
• Operates from offices in Coral Gables, Florida, and Lansing, Michigan.

Summary

Korth Direct Mortgage Inc. is a commercial real estate lender and servicer, originating, funding, and managing CRE loans across the U.S. with a portfolio that includes securitized notes, owned mortgages, and REO properties. It generates revenue through loan origination, servicing, leasing, and related activities, with total 2024 revenue of approximately $12 million and a net loss of about $3.6 million. The company has a staff of 29 and is predominantly owned by its founders and key executives, with most ownership held by Holly MacDonald-Korth and James W. Korth.