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COMMERCIAL LOANS AND INVESTMENTS | 6 Months Ended
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Jun. 30, 2024
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. 2024 Activity. On April 18, 2024, the borrower on the mortgage loan secured by the Sabal Pavilion property, as described below, repaid the mortgage loan, at a $0.2 million discount, for proceeds to the Company of $15.2 million. On March 26, 2024, the Company originated a construction loan secured by the property and improvements to be constructed thereon consisting of seven outparcel locations, known as the Hypoluxo Project, located in Lake Worth, Florida for $10.0 million. The construction loan matures on September 26, 2025, bears a fixed interest rate of 11.0%, and requires interest only payments prior to maturity. Funding of the loan will occur as the borrower completes the underlying construction. As of June 30, 2024, the Company had funded $7.1 million to the borrower and received $1.5 million in principal payments, leaving a remaining commitment of $2.9 million to the borrower. On February 2, 2024, the borrower under the construction loan originated in January 2022 and secured by the property and improvements constructed thereon for the second phase of The Exchange at Gwinnett project located in Buford, Georgia repaid the principal balance of $1.9 million, leaving no remaining balance outstanding as of June 30, 2024. There is no remaining commitment to the borrower as of June 30, 2024. 2023 Activity. On February 21, 2023, the borrower of the mortgage note secured by the 4311 Maple Avenue property located in Dallas, Texas repaid the principal balance of $0.4 million, leaving no remaining balance outstanding as of March 31, 2023. On March 1, 2023, the Company originated a $15.0 million first mortgage loan secured by the Founders Square property located in Dallas, Texas. The loan is interest-only with a term of three years with a fixed interest rate of 8.75%. The Company received an origination fee of 1.0% or $0.15 million. During the six months ended June 30, 2023, the Company funded $2.2 million to the borrower and received $0.6 million in principal repayments under the construction loan originated in January 2022 and secured by the property and improvements to be constructed thereon for the second phase of The Exchange at Gwinnett project located in Buford, Georgia. As of June 30, 2023, there is no remaining commitment to the borrower. ​ On December 20, 2023, simultaneous with the sale of the property, the Company originated a $15.4 million first mortgage loan secured by the Sabal Pavilion property located in Tampa, Florida. The loan was interest-only with a term of six months with a fixed interest rate of 7.50%. During the six months ended June 30, 2024, the borrower repaid the mortgage loan, at a $0.2 million discount, for proceeds to the Company of $15.2 million. Watters Creek Investment. 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”). 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. The Watters Creek Investment represents $30.0 million, or approximately 23%, 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 Property”). The remaining funding is comprised of a combination of third-party sponsorship equity and a secured first mortgage. The Company’s variable interest in the entity underlying the Watters Creek Investment is primarily due to the inherent credit risk associated with the $30.0 million fixed-return preferred investment. The day-to-day operations, including asset management and leasing, of the Watters Creek Property are managed by an unrelated third-party. Pursuant to FASB ASC Topic 810, Consolidation, the Company determined we are not the primary beneficiary of the entity underlying the Watters Creek Investment; accordingly, the entity was not consolidated. The investment was recorded in the consolidated balance sheets as a commercial loan investment at the time of acquisition. The significant factors related to this determination included, but were not limited to, the Company not having the power to direct the activities of the entity underlying the Watters Creek Investment due to (i) the day-to-day operations being managed by an unrelated third-party and (ii) the Company’s position as minority lender with fixed returns and maturity dates for the repayment of the $30.0 million preferred investment. The Company’s commercial loans and investments were comprised of the following at June 30, 2024 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Description |  | Date of Investment |  | Maturity Date |  | Original Face Amount |  | Current Face Amount |  | Carrying Value |  | Coupon Rate
Preferred Investment – Watters Creek – Allen, TX | ​ | April 2022 | ​ | April 2025 | ​ | $ | 30,000 | ​ | $ | 30,000 | ​ | $ | 29,961 | ​ | 9.00%
Mortgage Note – Founders Square – Dallas, TX | ​ | March 2023 | ​ | March 2026 | ​ | ​ | 15,000 | ​ | ​ | 15,000 | ​ | ​ | 14,917 | ​ | 8.75%
Promissory Note – Main Street – Daytona Beach, FL | ​ | June 2023 | ​ | May 2033 | ​ | ​ | 400 | ​ | ​ | 400 | ​ | ​ | 400 | ​ | 7.00%
Construction Loan - Hypoluxo - Lake Worth, FL | ​ | March 2024 | ​ | September 2025 | ​ | ​ | 10,000 | ​ | ​ | 5,638 | ​ | ​ | 5,555 | ​ | 11.00%
​ | ​ | ​ | ​ | ​ | ​ | $ | 55,400 | ​ | $ | 51,038 | ​ | $ | 50,833 | ​ | ​
CECL Reserve | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (510) | ​ | ​
Total Commercial Loans and Investments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 50,323 | ​ | ​
​ ​ The Company’s commercial loans and investments were comprised of the following at December 31, 2023 (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Description |  | Date of Investment |  | Maturity Date |  | Original Face Amount |  | Current Face Amount |  | Carrying Value |  | Coupon Rate
Construction Loan – The Exchange At Gwinnett – Buford, GA | ​ | January 2022 | ​ | January 2024 | ​ | $ | 8,700 | ​ | $ | 1,857 | ​ | $ | 1,854 | ​ | 7.25%
Preferred Investment – Watters Creek – Allen, TX | ​ | April 2022 | ​ | April 2025 | ​ | ​ | 30,000 | ​ | ​ | 30,000 | ​ | ​ | 29,937 | ​ | 8.75%
Mortgage Note – Founders Square – Dallas, TX | ​ | March 2023 | ​ | March 2026 | ​ | ​ | 15,000 | ​ | ​ | 15,000 | ​ | ​ | 14,892 | ​ | 8.75%
Promissory Note – Main Street – Daytona Beach, FL | ​ | June 2023 | ​ | May 2033 | ​ | ​ | 400 | ​ | ​ | 400 | ​ | ​ | 400 | ​ | 7.00%
Mortgage Note – Sabal Pavilion – Tampa, FL | ​ | December 2023 | ​ | June 2024 | ​ | ​ | 15,400 | ​ | ​ | 15,400 | ​ | ​ | 15,393 | ​ | 7.50%
​ | ​ | ​ | ​ | ​ | ​ | $ | 69,500 | ​ | $ | 62,657 | ​ | $ | 62,476 | ​ | ​
CECL Reserve | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (627) | ​ | ​
Total Commercial Loans and Investments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 61,849 | ​ | ​
​ The carrying value of the commercial loans and investments portfolio at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of
​ |  | June 30, 2024 |  | December 31, 2023
Current Face Amount | ​ | $ | 51,038 | ​ | $ | 62,657
Unaccreted Origination Fees | ​ | ​ | (205) | ​ | ​ | (181)
CECL Reserve | ​ | ​ | (510) | ​ | ​ | (627)
Total Commercial Loans and Investments | ​ | $ | 50,323 | ​ | $ | 61,849
​

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- Definition The entire disclosure for claims held for amounts due to entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/310-10/tableOfContent Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 835 -SubTopic 30 -Name Accounting Standards Codification -Section 45 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482925/835-30-45-2 + Details
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