CNSREIT-AR-2024 Final - Flipbook - Page 62
B-Notes and A/B Structures may pose additional risks that may adversely affect our results of operations and financial
condition.
We may invest in B-notes, which are mortgage loans typically (i) secured by a first mortgage on a commercial
property or group of related properties and (ii) subordinated to an A-note portion of the same first mortgage secured by the
same collateral (which we would not expect to hold). As a result, if a borrower defaults, there may not be sufficient funds
remaining to repay B-note holders after payment to the A-note holders. Since each transaction is privately negotiated, Bnotes can vary in their structural characteristics and risks. In addition to the risks described above, certain additional risks
apply to B-note investments, including those described herein. The B-note portion of a loan is typically small relative to the
overall loan, and is in the first loss position. As a means to protect against the holder of the A-note from taking certain
actions or receiving certain benefits to the detriment of the holder of the B-note, the holder of the B-note often (but not
always) has the right to purchase the A-note from its holder. If available, this right may not be meaningful to us. For
example, we may not have the capital available to protect our B-note interest or purchasing the A-note may alter our
overall portfolio and risk/return profile to the detriment of our stockholders. In addition, a B-note may be in the form of a
