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COMMERCIAL LOANS AND INVESTMENTS | 9 Months Ended
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Sep. 30, 2022
COMMERCIAL LOANS AND INVESTMENTS |
COMMERCIAL LOANS AND INVESTMENTS | NOTE 4. COMMERCIAL LOANS AND INVESTMENTS ​ Our investments in commercial loans or similarly structured investments, such as preferred equity, mezzanine loans or other subordinated debt, have been and are expected to continue to be secured by real estate or the borrower’s pledge of its ownership interest in the entity that owns the real estate. The investments are associated with commercial real estate located in the United States and its territories, and are current or performing with either a fixed or floating rate. Some of these loans may be syndicated in either a pari-passu or senior/subordinated structure. Commercial first mortgage loans generally provide for a higher recovery rate due to their senior position in the underlying collateral. Commercial mezzanine loans are typically secured by a pledge of the borrower’s equity ownership in the underlying commercial real estate. Unlike a mortgage, a mezzanine loan is not secured by a lien on the property. An investor’s rights in a mezzanine loan are usually governed by an intercreditor agreement that provides holders with the rights to cure defaults and exercise control on certain decisions of any senior debt secured by the same commercial property. 2022 Activity. On January 26, 2022, the Company originated a construction loan secured by the property and improvements to be constructed thereon for the second phase of The Exchange at Gwinnett project located in Buford, Georgia for $8.7 million. The construction loan matures on January 26, 2024, has a one-year extension option, bears a fixed interest rate of 7.25%, and requires payments of interest only prior to maturity. At closing, an origination fee of $0.1 million was received by the Company. Funding of the loan occurs as the borrower completes the underlying construction. As of September 30, 2022, the Company had funded $0.3 million to the borrower, leaving a remaining commitment of $8.4 million to the borrower. On March 11, 2022, the Company sold the Carpenter Hotel ground lease located in Austin, Texas for $17.1 million. The lease with Carpenter Hotel included two tenant repurchase options. Pursuant to FASB ASC Topic 842, Leases, the initial $16.25 million investment was recorded in the consolidated balance sheets as a commercial loan investment at the time of acquisition. The carrying value at the time of sale totaled $17.3 million. On April 7, 2022, the Company entered into a preferred equity agreement to provide $30.0 million of funding towards the total investment in Watters Creek at Montgomery Farm, a grocery-anchored, mixed-use property located in Allen, Texas (the “Watters Creek Investment”). Pursuant to FASB ASC Topic 810, Consolidation, and as further described in Note 7. “Investment in Joint Ventures,” the Company determined we are not the primary beneficiary of the entity underlying the Watters Creek Investment; accordingly, the $30.0 million was recorded in the consolidated balance sheets as a commercial loan investment at the time of acquisition. The Watters Creek Investment matures on April 6, 2025, has two one-year extension options, bears a fixed interest rate of 8.50% at the time of acquisition with increases during the initial term as well as the option terms, and requires payments of interest only prior to maturity. At closing, an origination fee of $0.15 million was received by the Company. ​ On April 29, 2022, the Company originated a construction loan secured by the property and improvements to be constructed thereon for the WaterStar Residential and Retail project located in Kissimmee, Florida for $19.0 million. The construction loan matures on August 31, 2022, bears a fixed interest rate of 8.00%, and requires payments of interest only prior to maturity. At closing, an origination fee of $0.1 million was received by the Company. Funding of the loan will occur as the borrower completes the underlying construction. As of September 30, 2022, the Company had funded $19.0 million to the borrower, leaving no remaining commitment. The Borrower repaid $4.8 million of the construction loan principal balance as of September 30, 2022, leaving an outstanding balance of $14.2 million. Effective August 29, 2022, the Company entered into an agreement to extend the maturity date to November 1, 2022 at a fixed interest rate of 12.00%. ​ On May 9, 2022, the Company originated an improvement loan for a tenant at the Ashford Lane property located in Atlanta, Georgia for $1.5 million. The improvement loan matures on April 30, 2025, bears a fixed interest rate of 12.00%, until the location is open at which time the fixed interest rate will be 10.00%, and requires payments of interest only prior to maturity. Funding of the loan will occur as the borrower completes the underlying improvements. As of September 30, 2022, the Company had funded $1.1 million to the borrower, leaving a remaining commitment of $0.4 million. ​ On July 28, 2022, the Company sold the Westland Gateway Plaza located in Hialeah, Florida for $22.2 million. The lease with Westland Gateway Plaza included a tenant purchase option. Pursuant to FASB ASC Topic 842, Leases, the initial $21.1 million investment was recorded in the consolidated balance sheets as a commercial loan investment at the time of acquisition. The carrying value at the time of sale totaled $21.2 million. ​ The Company’s commercial loans and investments were comprised of the following at September 30, 2022 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Description |  | Date of Investment |  | Maturity Date |  | Original Face Amount |  | Current Face Amount |  | Carrying Value |  | Coupon Rate
Mortgage Note – 4311 Maple Avenue – Dallas, TX | ​ | October 2020 | ​ | April 2023 | ​ | ​ | 400 | ​ | ​ | 400 | ​ | ​ | 395 | ​ | 7.50%
Mortgage Note – 110 N Beach Street – Daytona Beach, FL | ​ | June 2021 | ​ | December 2022 | ​ | ​ | 364 | ​ | ​ | 364 | ​ | ​ | 364 | ​ | 10.00%
Construction Loan – The Exchange At Gwinnett – Buford, GA | ​ | January 2022 | ​ | January 2024 | ​ | ​ | 8,700 | ​ | ​ | 324 | ​ | ​ | 266 | ​ | 7.25%
Preferred Investment - Watters Creek – Allen, TX | ​ | April 2022 | ​ | April 2025 | ​ | ​ | 30,000 | ​ | ​ | 30,000 | ​ | ​ | 29,874 | ​ | 8.50%
Construction Loan - WaterStar – Kissimmee, FL | ​ | April 2022 | ​ | November 2022 | ​ | ​ | 19,000 | ​ | ​ | 14,249 | ​ | ​ | 14,249 | ​ | 12.00%
Improvement Loan - Ashford Lane – Atlanta, GA | ​ | May 2022 | ​ | April 2025 | ​ | ​ | 1,500 | ​ | ​ | 1,053 | ​ | ​ | 1,053 | ​ | 12.00%
​ | ​ | ​ | ​ | ​ | ​ | $ | 59,964 | ​ | $ | 46,390 | ​ | $ | 46,201 | ​ | ​
​ The Company’s commercial loans and investments were comprised of the following at December 31, 2021 (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Description |  | Date of Investment |  | Maturity Date |  | Original Face Amount |  | Current Face Amount |  | Carrying Value |  | Coupon Rate
Carpenter Hotel – 400 Josephine Street, Austin, TX | ​ | July 2019 | ​ | N/A | ​ | $ | 16,250 | ​ | $ | 16,250 | ​ | $ | 17,189 | ​ | N/A
Westland Gateway Plaza – Hialeah, FL | ​ | September 2020 | ​ | N/A | ​ | ​ | 21,085 | ​ | ​ | 21,085 | ​ | ​ | 21,148 | ​ | N/A
Mortgage Note – 4311 Maple Avenue – Dallas, TX | ​ | October 2020 | ​ | April 2023 | ​ | ​ | 400 | ​ | ​ | 400 | ​ | ​ | 394 | ​ | 7.50%
Mortgage Note – 110 N Beach Street – Daytona Beach, FL | ​ | June 2021 | ​ | December 2022 | ​ | ​ | 364 | ​ | ​ | 364 | ​ | ​ | 364 | ​ | 10.00%
​ | ​ | ​ | ​ | ​ | ​ | $ | 38,099 | ​ | $ | 38,099 | ​ | $ | 39,095 | ​ | ​
​ The carrying value of the commercial loans and investments portfolio at September 30, 2022 and December 31, 2021 consisted of the following (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ |  | September 30, 2022 |  | December 31, 2021
Current Face Amount | ​ | $ | 46,390 | ​ | $ | 38,099
Imputed Interest over Rent Payments Received | ​ | ​ | — | ​ | ​ | 1,002
Unaccreted Origination Fees | ​ | ​ | (185) | ​ | ​ | (2)
CECL Reserve | ​ | ​ | (4) | ​ | ​ | (4)
Total Commercial Loans and Investments | ​ | $ | 46,201 | ​ | $ | 39,095
​

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