Loans Receivable and Other Lending Investments, net (Tables)

6 Months Ended

Jun. 30, 2021

Schedule of the company's loans and other lending investments by class

The following is a summary of the Company’s loans receivable and other lending investments by class ($ in thousands):


	As of
	June 30, 2021		December 31, 2020
Construction loans
Senior mortgages	$	190,830	$	449,733
Corporate/Partnership loans		20,049		65,100
Subtotal - gross carrying value of construction loans⁽¹⁾		210,879		514,833
Loans
Senior mortgages		50,463		35,922
Corporate/Partnership loans		18,674		20,567
Subordinate mortgages		12,042		11,640
Subtotal - gross carrying value of loans		81,179		68,129
Other lending investments
Financing receivables (refer to Note 5)		48,286		46,549
Held-to-maturity debt securities		93,677		90,715
Available-for-sale debt securities		28,074		25,274
Subtotal - other lending investments		170,037		162,538
Total gross carrying value of loans receivable and other lending investments		462,095		745,500
Allowance for loan losses		(7,135)		(13,170)
Total loans receivable and other lending investments, net	$	454,960	$	732,330

(1)	As of June 30, 2021, 91% of gross carrying value of construction loans had completed construction.

Schedule of changes in the company's allowance for loan losses


	General Allowance
					Held to
	Construction				Maturity Debt		Financing		Specific
Three Months Ended June 30, 2021	Loans		Loans		Securities		Receivables		Allowance		Total
Allowance for loan losses at beginning of period	$	2,893	$	1,815	$	2,685	$	998	$	667	$	9,058
Recovery of loan losses⁽¹⁾		(1,253)		(196)		(292)		(105)		(77)		(1,923)
Allowance for loan losses at end of period	$	1,640	$	1,619	$	2,393	$	893	$	590	$	7,135

Three Months Ended June 30, 2020
Allowance for loan losses at beginning of period	$	9,724	$	686	$	53	$	1,100	$	21,701	$	33,264
Provision for loan losses⁽¹⁾		2,012		219		58		59		—		2,348
Allowance for loan losses at end of period	$	11,736	$	905	$	111	$	1,159	$	21,701	$	35,612

(1)

During the three months ended June 30, 2021 and 2020, the Company recorded a provision for (recovery of) loan losses of ($2.3) million and $2.1 million, respectively, in its consolidated statement of operations. The recovery in 2021 was due primarily to the repayment of loans during the three months ended June 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since March 31, 2021. Of this amount, $0.4 million related to a provision for loan losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities." The provision in 2020 was due to the macroeconomic impact of COVID-19 on commercial real estate markets, which was partially offset by a $0.3 million reduction in provision for loan losses for unfunded loan commitments that were funded during the three months ended June 30, 2020, and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities."

Changes in the Company’s allowance for loan losses were as follows for the six months ended June 30, 2021 and 2020 ($ in thousands):


	General Allowance
					Held to
	Construction				Maturity Debt		Financing		Specific
Six Months Ended June 30, 2021	Loans		Loans		Securities		Receivables		Allowance		Total
Allowance for loan losses at beginning of period	$	6,541	$	1,643	$	3,093	$	1,150	$	743	$	13,170
Recovery of loan losses⁽¹⁾		(4,901)		(24)		(700)		(257)		(153)		(6,035)
Allowance for loan losses at end of period	$	1,640	$	1,619	$	2,393	$	893	$	590	$	7,135

Six Months Ended June 30, 2020
Allowance for loan losses at beginning of period	$	6,668	$	265	$	—	$	—	$	21,701	$	28,634
Adoption of new accounting standard⁽²⁾		(353)		98		20		964		—		729
Provision for loan losses⁽¹⁾		5,421		542		91		195		—		6,249
Allowance for loan losses at end of period	$	11,736	$	905	$	111	$	1,159	$	21,701	$	35,612

(1)

During the six months ended June 30, 2021 and 2020, the Company recorded a provision for (recovery of) loan losses of ($6.1) million and $6.1 million, respectively, in its consolidated statements of operations. The recovery in 2021 was due primarily to the repayment of loans during the six months ended June 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. The provision for loan losses in 2020 resulted from the macroeconomic impact of COVID-19 on commercial real estate markets and was partially offset by a $0.2 million reduction in provision for loan losses for unfunded loan commitments that were funded during the six months ended June 30, 2020 and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities."

(2)

On January 1, 2020, the Company recorded an increase to its allowance for loan losses of $3.3 million upon the adoption of ASU 2016-13, of which $2.5 million related to expected credit losses for unfunded loan commitments and was recorded in “Accounts payable, accrued expenses and other liabilities.”

Schedule of recorded investment in loans and associated allowance for loan losses

The Company’s investment in loans and other lending investments and the associated allowance for loan losses were as follows as of June 30, 2021 and December 31, 2020 ($ in thousands):


	Individually		Collectively
	Evaluated for		Evaluated for
	Impairment⁽¹⁾		Impairment		Total
As of June 30, 2021
Construction loans⁽²⁾	$	56,610	$	154,269	$	210,879
Loans⁽²⁾		—		81,179		81,179
Financing receivables		—		48,286		48,286
Held-to-maturity debt securities		—		93,677		93,677
Available-for-sale debt securities⁽³⁾		—		28,074		28,074
Less: Allowance for loan losses		(590)		(6,545)		(7,135)
Total	$	56,020	$	398,940	$	454,960
As of December 31, 2020
Construction loans⁽²⁾	$	53,305	$	461,528	$	514,833
Loans⁽²⁾		—		68,129		68,129
Financing receivables		—		46,549		46,549
Held-to-maturity debt securities		—		90,715		90,715
Available-for-sale debt securities⁽³⁾		—		25,274		25,274
Less: Allowance for loan losses		(743)		(12,427)		(13,170)
Total	$	52,562	$	679,768	$	732,330

(1)

The carrying value of this loan includes an unamortized discount of $0.8 million and $0.8 million as of June 30, 2021 and December 31, 2020, respectively. The Company’s loans individually evaluated for impairment represent loans on non-accrual status and the unamortized amounts associated with these loans are not currently being amortized into income.

(2)	The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of $1.7 million and $2.3 million as of June 30, 2021 and December 31, 2020, respectively.

(3)	Available-for-sale debt securities are evaluated for impairment under ASC 326-30.

Schedule of investment in performing loans, presented by class and by credit quality, as indicated by risk rating

The Company’s amortized cost basis in performing senior mortgages, corporate/partnership loans, subordinate mortgages and financing receivables, presented by year of origination and by credit quality, as indicated by risk rating, as of June 30, 2021 were as follows ($ in thousands):


	Year of Origination
	2021		2020		2019		2018		2017		Prior to 2017		Total
Senior mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		—		—		—		—
2.5		—		—		—		—		—		—		—
3.0		34,394		—		—		118,045		—		3,500		155,939
3.5		—		—		—		28,744		—		—		28,744
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal⁽¹⁾	$	34,394	$	—	$	—	$	146,789	$	—	$	3,500	$	184,683
Corporate/partnership loans
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		13,115		—		—		13,115
2.5		—		—		—		—		—		—		—
3.0		6,934		—		—		—		—		—		6,934
3.5		—		—		—		—		—		—		—
4.0		—		—		—		18,674		—		—		18,674
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal	$	6,934	$	—	$	—	$	31,789	$	—	$	—	$	38,723
Subordinate mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		—		—		—		—
2.5		—		—		—		—		—		—		—
3.0		—		—		—		—		—		12,042		12,042
3.5		—		—		—		—		—		—		—
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal	$	—	$	—	$	—	$	—	$	—	$	12,042	$	12,042

Financing receivables
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		48,286		—		—		—		48,286
2.5		—		—		—		—		—		—		—
3.0		—		—		—		—		—		—		—
3.5		—		—		—		—		—		—		—
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal	$	—	$	—	$	48,286	$	—	$	—	$	—	$	48,286
Total	$	41,328	$	—	$	48,286	$	178,578	$	—	$	15,542	$	283,734

(1)	As of June 30, 2021, excludes $56.6 million for one loan on non-accrual status.

Schedule of recorded investment in loans, aged by payment status and presented by class

The Company’s amortized cost basis in loans, aged by payment status and presented by class, was as follows ($ in thousands):


			Less Than		Greater
			and Equal		Than		Total
	Current		to 90 Days		90 Days		Past Due		Total
As of June 30, 2021
Senior mortgages	$	184,683	$	56,610	$	—		56,610	$	241,293
Corporate/Partnership loans		38,723		—		—		—		38,723
Subordinate mortgages		12,042		—		—		—		12,042
Total	$	235,448	$	56,610	$	—	$	56,610	$	292,058
As of December 31, 2020
Senior mortgages	$	443,154	$	42,501	$	—	$	42,501	$	485,655
Corporate/Partnership loans		42,721		42,946		—		42,946		85,667
Subordinate mortgages		11,640		—		—		—		11,640
Total	$	497,515	$	85,447	$	—	$	85,447	$	582,962

Schedule of recorded investment in impaired loans


	As of June 30, 2021						As of December 31, 2020
			Unpaid						Unpaid
	Amortized		Principal		Related		Amortized		Principal		Related
	Cost		Balance		Allowance		Cost		Balance		Allowance
With an allowance recorded:
Senior mortgages⁽¹⁾	$	56,610	$	55,859	$	(590)	$	53,305	$	52,552	$	(743)
Total	$	56,610	$	55,859	$	(590)	$	53,305	$	52,552	$	(743)

(1)	The Company has one non-accrual loan as of June 30, 2021 and December 31, 2020 that is considered impaired and included in the table above. The Company did not record any interest income on impaired loans for the six months ended June 30, 2021 and 2020.

Schedule of contractual maturities of securities


					Net				Net
			Amortized		Unrealized		Estimated		Carrying
	Face Value		Cost Basis		Gain		Fair Value		Value
As of June 30, 2021
Available-for-Sale Securities
Municipal debt securities	$	23,855	$	23,855	$	4,219	$	28,074	$	28,074
Held-to-Maturity Securities
Debt securities		100,000		93,677		—		93,677		93,677
Total	$	123,855	$	117,532	$	4,219	$	121,751	$	121,751
As of December 31, 2020
Available-for-Sale Securities
Municipal debt securities	$	20,680	$	20,680	$	4,594	$	25,274	$	25,274
Held-to-Maturity Securities
Debt securities		100,000		90,715		—		90,715		90,715
Total	$	120,680	$	111,395	$	4,594	$	115,989	$	115,989

As of June 30, 2021, the contractual maturities of the Company’s securities were as follows ($ in thousands):


	Held-to-Maturity Debt Securities				Available-for-Sale Debt Securities
	Amortized		Estimated		Amortized		Estimated
	Cost Basis		Fair Value		Cost Basis		Fair Value
Maturities
Within one year	$	—	$	—	$	—	$	—
After one year through 5 years		93,677		93,677		—		—
After 5 years through 10 years		—		—		—		—
After 10 years		—		—		23,855		28,074
Total	$	93,677	$	93,677	$	23,855	$	28,074