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Real Estate Owned, Net (Tables)

9 Months Ended

Sep. 30, 2021

Real Estate [Abstract]

Components of real estate owned, net

The following table presents the components of real estate owned, net:

			September 30, 2021																		December 31, 2020
			Cost						Accumulated Depreciation/Amortization						Net						Cost						Accumulated Depreciation/Amortization						Net
Real estate:
Land			$	13,395,430					$	—					$	13,395,430					$	13,395,430					$	—					$	13,395,430
Building and building    improvements			51,725,969						(4,095,015)						47,630,954						51,725,969						(3,125,143)						48,600,826
Tenant improvements			1,854,640						(885,916)						968,724						1,854,640						(670,090)						1,184,550
Furniture and fixtures			236,000						(94,400)						141,600						236,000						(31,467)						204,533
Total real estate			67,212,039						(5,075,331)						62,136,708						67,212,039						(3,826,700)						63,385,339
Lease intangible assets:
In-place lease			14,982,538						(6,849,595)						8,132,943						15,852,232						(6,172,747)						9,679,485
Above-market rent			156,542						(55,594)						100,948						156,542						(42,427)						114,115
Total intangible assets			15,139,080						(6,905,189)						8,233,891						16,008,774						(6,215,174)						9,793,600
Lease intangible liabilities:
Below-market rent			(2,754,922)						1,353,240						(1,401,682)						(3,371,314)						1,702,800						(1,668,514)
Above-market ground lease			(8,896,270)						412,770						(8,483,500)						(8,896,270)						315,008						(8,581,262)
Total intangible liabilities			(11,651,192)						1,766,010						(9,885,182)						(12,267,584)						2,017,808						(10,249,776)
Total real estate			$	70,699,927					$	(10,214,510)					$	60,485,417					$	70,953,229					$	(8,024,066)					$	62,929,163

The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2021						2020						2021						2020
Real estate operating revenues:
Lease revenue						$	1,805,647					$	2,515,678					$	5,417,341					$	6,359,883
Other operating income						385,531						475,241						1,051,178						1,195,182
Total						$	2,191,178					$	2,990,919					$	6,468,519					$	7,555,065
Real estate operating expenses:
Utilities						82,672						58,468						$	153,140					$	131,498
Real estate taxes						356,350						234,375						1,046,823						700,125
Repairs and maintenances						184,173						119,512						453,391						516,073
Management fees						55,609						50,392						205,915						165,169
Lease expense, including amortization of above-market    ground lease (1)						487,163						283,538						1,597,239						850,614
Other operating expenses						98,534						95,423						295,413						293,954
Total						$	1,264,501					$	841,708					$	3,751,921					$	2,657,433

_______________

(1)As discussed in “Leases” below, the multi-tenant office building is subject to a ground lease, for which the rent resets every five years. The last rent reset was on November 1, 2020. Based on information available to the Company as of November 1, 2020, including the fact that there was a global pandemic with a potentially significant negative impact on real estate

values, the Company estimated the value of the land was no greater than the value on the date of foreclosure and continued to accrue and pay rent at the then-existing rate. On June 2, 2021, the third-party appraisal process was completed, resulting in an increase of the annual base rent to $2.1 million from $1.3 million. The increase in base rent was retroactive back to November 1, 2020. The Company accounted for the change in base rent as a change in accounting estimate; as a result, the increase in rent from November 2020 through March 2021 was recorded in the period in which the change occurred, which is June 2021. Had the new base rent been recorded on November 1, 2020, lease expense including amortization of above-market ground lease would have been $1.3 million for the nine months ended September 30, 2021 and total real estate operating expenses would have been $3.4 million for the nine months ended September 30, 2021.

Future minimum rents, exclusive of renewals and expenses paid by tenants

Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at September 30, 2021 are as follows: 

Years Ending December 31,						Total
2021 (October 1 through December 31)						$	2,341,470
2022						7,504,551
2023						7,746,538
2024						7,995,237
2025						4,517,455
Thereafter						3,864,450
Total						$	33,969,701

Scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter

Based on the intangible assets and liabilities recorded at September 30, 2021, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows:

Years Ending December 31,						Net Decrease in Real Estate Operating Revenue (1)						Increase in Depreciation and Amortization (1)						Decrease in Rent Expense (1)						Total
2021 (October 1 through December 31)						$	(84,555)					$	515,515					$	(32,587)					$	398,373
2022						(338,220)						2,062,060						(130,348)						1,593,492
2023						(338,220)						2,062,060						(130,348)						1,593,492
2024						(338,220)						2,062,060						(130,348)						1,593,492
2025						(181,608)						1,431,248						(130,348)						1,119,292
Thereafter						(19,911)						—						(7,929,521)						(7,949,432)
Total						$	(1,300,734)					$	8,132,943					$	(8,483,500)					$	(1,651,291)

_______________

(1)Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to lease revenues; amortization of in-place lease intangibles is included in depreciation and amortization; and amortization of above-market ground lease is recorded as a reduction to rent expense.

Supplemental balance sheet information related to the ground lease

Supplemental balance sheet information related to the ground lease was as follows:    

			September 30, 2021						December 31, 2020
Operating lease
Operating lease right-of-use assets (1)			$	27,398,786					$	16,105,888
Operating lease liabilities			$	27,398,786					$	16,105,888
Weighted average remaining lease term — operating lease (years)			65.1						65.8
Weighted average discount rate — operating lease			7.6		%				7.9		%

_______________(1)The operating lease ROU assets and liabilities were remeasured at June 30, 2021 based on the new base rent resulting from the ground rent reset.

Component of lease expense for the ground lease

The component of lease expense for the ground lease was as follows:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2021						2020						2021						2020
Operating lease cost (1)						$	519,750					$	316,125					$	1,695,000					$	948,375

_______________(1)The increase in operating lease cost was a result of the ground rent reset described above.

Supplemental non-cash information related to the ground lease

Supplemental non-cash information related to the ground lease was as follows:

						Nine Months Ended September 30,
						2021						2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	1,695,000					$	948,375
Right-of-use assets obtained in exchange for lease obligations
Operating leases						$	1,695,000					$	948,375

Maturities of operating lease liabilities

Maturities of operating lease liabilities are as follows:

Years Ending December 31,						Operating Lease
2021 (October 1 through December 31)						$	519,750
2022						2,079,000
2023						2,079,000
2024						2,079,000
2025						2,079,000
Thereafter						126,385,875
Total lease payments						135,221,625
Less: Imputed interest						(107,822,839)
Total						$	27,398,786

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