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Loans Held for Investment | 3 Months Ended
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Mar. 31, 2022
Receivables [Abstract] |
Loans Held for Investment | Note 3. Loans Held for Investment Portfolio Summary The following table provides a summary of the Company’s loan portfolio as of March 31, 2022 and December 31, 2021:
| March 31, 2022 |  | December 31, 2021
| Fixed Rate |  | Floating Rate (1)(2)(3) |  | Total |  | Fixed Rate |  | Floating Rate (1)(2)(3) |  | Total
Number of loans | 7 |  |  | 18 |  |  | 25 |  |  | 6 |  |  | 15 |  |  | 21 |
Principal balance | $ | 97,914,340 |  |  | $ | 469,606,633 |  |  | $ | 567,520,973 |  |  | $ | 74,880,728 |  |  | $ | 405,270,423 |  |  | $ | 480,151,151 |
Carrying value | $ | 99,264,597 |  |  | $ | 458,754,403 |  |  | $ | 558,019,000 |  |  | $ | 75,520,212 |  |  | $ | 394,153,102 |  |  | $ | 469,673,314 |
Fair value | $ | 99,045,593 |  |  | $ | 457,961,364 |  |  | $ | 557,006,957 |  |  | $ | 75,449,410 |  |  | $ | 391,752,209 |  |  | $ | 467,201,619 |
Weighted-average coupon rate | 12.92 | % |  | 7.16 | % |  | 8.15 | % |  | 12.39 | % |  | 7.01 | % |  | 7.85 | %
Weighted-average remaining term (years) | 1.98 |  | 1.32 |  | 1.44 |  | 1.93 |  | 1.45 |  | 1.53
_______________ (1)These loans pay a coupon rate of LIBOR or Secured Overnight Financing Rate (“SOFR”), as applicable, plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.45% and SOFR of 0.16% as of March 31, 2022 and LIBOR of 0.10% as of December 31, 2021. (2)As of March 31, 2022 and December 31, 2021, amount included $351.1 million and $290.6 million of senior mortgages used as collateral for $241.5 million and $176.9 million of borrowings under credit facilities, respectively (Note 8). (3)As of March 31, 2022 and December 31, 2021, sixteen and thirteen of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable. Lending Activities The following table presents the activities of the Company’s loan portfolio for the three months ended March 31, 2022 and 2021:
| Loans Held for Investment |  | Loans Held for Investment through Participation Interests |  | Total
Balance, January 1, 2022 | $ | 457,329,582 |  |  | $ | 12,343,732 |  |  | $ | 469,673,314 |
New loans made | 87,538,133 |  |  | 581,688 |  |  | 88,119,821 |
Principal repayments received | (750,000) |  |  | — |  |  | (750,000) |
Net amortization of premiums on loans | (15,348) |  |  | — |  |  | (15,348) |
Accrual, payment and accretion of investment-related fees and other, net | 1,029,625 |  |  | 11,884 |  |  | 1,041,509 |
Provision for loan losses | (50,296) |  |  | — |  |  | (50,296) |
Balance, March 31, 2022 | $ | 545,081,696 |  |  | $ | 12,937,304 |  |  | $ | 558,019,000 |
| Loans Held for Investment |  | Loans Held for Investment through Participation Interests |  | Total
Balance, January 1, 2021 | $ | 417,986,462 |  |  | $ | 4,294,053 |  |  | $ | 422,280,515 |
New loans made | 14,410,706 |  |  | — |  |  | 14,410,706 |
Principal repayments received | (31,531,804) |  |  | — |  |  | (31,531,804) |
PIK interest (1) | 676,646 |  |  | — |  |  | 676,646 |
Net amortization of premiums on loans | (15,348) |  |  | — |  |  | (15,348) |
Accrual, payment and accretion of investment-related fees and other, net | 526,081 |  |  | (1,905) |  |  | 524,176 |
Provision for loan losses | (276,020) |  |  | — |  |  | (276,020) |
Balance, March 31, 2021 | $ | 401,776,723 |  |  | $ | 4,292,148 |  |  | $ | 406,068,871 |
_______________ (1)Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted $0.5 million for the three months ended March 31, 2021. Portfolio Information The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of March 31, 2022 and December 31, 2021:
|  | March 31, 2022 |  | December 31, 2021
Loan Structure |  | Principal Balance |  | Carrying Value |  | % of Total |  | Principal Balance |  | Carrying Value |  | % of Total
First mortgages |  | $ | 410,635,036 |  |  | $ | 413,619,050 |  |  | 74.1 | % |  | $ | 345,454,454 |  |  | $ | 348,101,455 |  |  | 74.0 | %
Preferred equity investments |  | 93,441,580 |  |  | 93,607,463 |  |  | 16.8 | % |  | 92,252,340 |  |  | 92,400,572 |  |  | 19.7 | %
Credit facility |  | 46,000,000 |  |  | 46,885,375 |  |  | 8.4 | % |  | 25,000,000 |  |  | 25,206,964 |  |  | 5.4 | %
Mezzanine loans |  | 17,444,357 |  |  | 17,615,889 |  |  | 3.2 | % |  | 17,444,357 |  |  | 17,622,804 |  |  | 3.8 | %
Allowance for loan losses |  | — |  |  | (13,708,777) |  |  | (2.5) | % |  | — |  |  | (13,658,481) |  |  | (2.9) | %
Total |  | $ | 567,520,973 |  |  | $ | 558,019,000 |  |  | 100.0 | % |  | $ | 480,151,151 |  |  | $ | 469,673,314 |  |  | 100.0 | %
|  | March 31, 2022 |  | December 31, 2021
Property Type |  | Principal Balance |  | Carrying Value |  | % of Total |  | Principal Balance |  | Carrying Value |  | % of Total
Office |  | $ | 229,192,520 |  |  | $ | 230,101,500 |  |  | 41.2 | % |  | $ | 221,596,870 |  |  | $ | 222,426,872 |  |  | 47.3 | %
Multifamily |  | 120,216,869 |  |  | 122,074,241 |  |  | 21.9 | % |  | 80,805,787 |  |  | 81,835,756 |  |  | 17.4 | %
Industrial |  | 67,571,608 |  |  | 67,606,537 |  |  | 12.1 | % |  | 32,000,000 |  |  | 32,206,964 |  |  | 6.9 | %
Hotel - full/select service |  | 56,918,328 |  |  | 57,520,720 |  |  | 10.3 | % |  | 56,847,381 |  |  | 57,395,682 |  |  | 12.2 | %
Infill land |  | 33,807,563 |  |  | 33,895,151 |  |  | 6.1 | % |  | 28,960,455 |  |  | 28,923,827 |  |  | 6.2 | %
Student housing |  | 31,000,000 |  |  | 31,667,292 |  |  | 5.7 | % |  | 31,000,000 |  |  | 31,565,670 |  |  | 6.7 | %
Mixed use |  | 28,814,085 |  |  | 28,862,336 |  |  | 5.2 | % |  | 28,940,658 |  |  | 28,977,024 |  |  | 6.2 | %
Allowance for loan losses |  | — |  |  | (13,708,777) |  |  | (2.5) | % |  | — |  |  | (13,658,481) |  |  | (2.9) | %
Total |  | $ | 567,520,973 |  |  | $ | 558,019,000 |  |  | 100.0 | % |  | $ | 480,151,151 |  |  | $ | 469,673,314 |  |  | 100.0 | %
|  | March 31, 2022 |  | December 31, 2021
Geographic Location |  | Principal Balance |  | Carrying Value |  | % of Total |  | Principal Balance |  | Carrying Value |  | % of Total
United States |  |  |  |  |  |  |  |  |  |  |  |
California |  | $ | 241,635,304 |  |  | $ | 243,830,108 |  |  | 43.7 | % |  | $ | 234,968,151 |  |  | $ | 237,015,597 |  |  | 50.4 | %
New York |  | 93,441,580 |  |  | 93,607,463 |  |  | 16.8 | % |  | 92,252,340 |  |  | 92,400,572 |  |  | 19.7 | %
Georgia |  | 53,970,491 |  |  | 54,221,854 |  |  | 9.7 | % |  | 53,289,288 |  |  | 53,536,884 |  |  | 11.4 | %
North Carolina |  | 45,781,188 |  |  | 46,026,460 |  |  | 8.2 | % |  | 44,492,971 |  |  | 44,704,699 |  |  | 9.5 | %
New Jersey |  | 35,571,608 |  |  | 35,391,604 |  |  | 6.3 | % |  | — |  |  | — |  |  | — | %
Utah |  | 28,000,000 |  |  | 28,529,857 |  |  | 5.1 | % |  | 28,000,000 |  |  | 28,420,056 |  |  | 6.1 | %
Washington |  | 24,424,855 |  |  | 24,487,967 |  |  | 4.4 | % |  | 3,523,401 |  |  | 3,382,683 |  |  | 0.7 | %
Pennsylvania |  | 21,000,000 |  |  | 21,670,442 |  |  | 3.9 | % |  | — |  |  | — |  |  | — | %
Texas |  | 13,695,947 |  |  | 13,824,587 |  |  | 2.5 | % |  | 13,625,000 |  |  | 13,725,690 |  |  | 2.9 | %
Massachusetts |  | 7,000,000 |  |  | 7,000,000 |  |  | 1.3 | % |  | 7,000,000 |  |  | 7,000,000 |  |  | 1.5 | %
South Carolina |  | 3,000,000 |  |  | 3,137,435 |  |  | 0.6 | % |  | 3,000,000 |  |  | 3,145,614 |  |  | 0.7 | %
Allowance for loan losses |  | — |  |  | (13,708,777) |  |  | (2.5) | % |  | — |  |  | (13,658,481) |  |  | (2.9) | %
Total |  | $ | 567,520,973 |  |  | $ | 558,019,000 |  |  | 100.0 | % |  | $ | 480,151,151 |  |  | $ | 469,673,314 |  |  | 100.0 | %
Loan Risk Rating As described in Note 2, the Manager evaluates the Company’s loan portfolio on a quarterly basis or more frequently as needed. In conjunction with the quarterly review of the Company’s loan portfolio, the Manager assesses the risk factors of each loan, and assigns a risk rating based on a five-point scale with “1” being the lowest risk and “5” being the greatest risk. The following table allocates the principal balance and the carrying value of the Company’s loans based on the loan risk rating as of March 31, 2022 and December 31, 2021:
|  | March 31, 2022 |  | December 31, 2021
Loan Risk Rating |  | Number of Loans |  | Principal Balance |  | Carrying Value |  | % of Total |  | Number of Loans |  | Principal Balance |  | Carrying Value |  | % of Total
1 |  | — |  |  | $ | — |  |  | $ | — |  |  | — | % |  | — |  |  | $ | — |  |  | $ | — |  |  | — | %
2 |  | 2 |  |  | 25,000,000 |  |  | 25,041,590 |  |  | 4.4 | % |  | 2 |  |  | 25,000,000 |  |  | 25,041,124 |  |  | 5.2 | %
3 |  | 19 |  |  | 435,383,446 |  |  | 439,254,137 |  |  | 76.8 | % |  | 15 |  |  | 349,273,811 |  |  | 352,164,409 |  |  | 72.9 | %
4 |  | 1 |  |  | 60,583,057 |  |  | 60,583,057 |  |  | 10.6 | % |  | 1 |  |  | 60,012,639 |  |  | 60,012,639 |  |  | 12.4 | %
5 |  | — |  |  | — |  |  | — |  |  | — | % |  | — |  |  | — |  |  | — |  |  | — | %
Other (1) |  | 3 |  |  | 46,554,470 |  |  | 46,848,993 |  |  | 8.2 | % |  | 3 |  |  | 45,864,701 |  |  | 46,113,623 |  |  | 9.5 | %
|  | 25 |  |  | $ | 567,520,973 |  |  | 571,727,777 |  |  | 100.0 | % |  | 21 |  |  | $ | 480,151,151 |  |  | 483,331,795 |  |  | 100.0 | %
Allowance for loan losses |  | (13,708,777) |  |  |  |  |  |  |  |  | (13,658,481) |  |  |
Total, net of allowance for loan losses |  | $ | 558,019,000 |  |  |  |  |  |  |  |  | $ | 469,673,314 |  |  |
_______________ (1)Because these loans have an event of default, they are removed from the pool of loans on which a general allowance is calculated and are evaluated for collectability individually. As of both March 31, 2022 and December 31, 2021, the specific allowance for loan losses on these loans were $12.8 million, as a result of a decline in the fair value of the respective collateral. As of March 31, 2022, the Company had one loan with a loan risk rating of “4” and no loans with a loan risk rating of “5” and recorded general allowance for loan losses of $0.01 million for the three months ended March 31, 2022. As of March 31, 2021, the Company had three loans with a loan risk rating of “4” and one loan with a loan risk rating of “5” and recorded general allowance for loan losses of $0.04 million for the three months ended March 31, 2021. Additionally, as of March 31, 2022 and 2021, the Company had three and one loans, respectively, deemed impaired and recorded specific allowance for loan losses of $0.04 million and $0.2 million, respectively, as a result of a decline in the value of the underlying collateral. The following table presents the activity in the Company’s allowance for loan losses for the three months ended March 31, 2022 and 2021:
|  | Three Months Ended March 31,
|  | 2022 |  | 2021
Allowance for loan losses, beginning of period |  | $ | 13,658,481 |  |  | $ | 3,738,758 |
Provision for loan losses |  | 50,296 |  |  | 276,020 |
Charge-offs |  | — |  |  | — |
Recoveries |  | — |  |  | — |
Allowance for loan losses, end of period |  | $ | 13,708,777 |  |  | $ | 4,014,778 |
As of both March 31, 2022 and December 31, 2021, the Company had one loan that was in maturity default. Additionally, for the three months ended March 31, 2022 and 2021, the Company suspended interest income accrual of $1.1 million and $0.7 million on two loans, respectively, because recovery of such income was doubtful. Troubled Debt Restructuring As of March 31, 2022 and December 31, 2021, the Company had a recorded investment in troubled debt restructuring of $13.7 million. Due to financial difficulty resulting from the COVID-19 pandemic, a borrower defaulted on interest payments in May 2020 on a $3.5 million mezzanine loan, and the Company subsequently suspended the interest accrual. The Company purchased the senior loan from a third-party lender on September 3, 2021 in order to facilitate a refinancing. Subsequently on September 23, 2021, the senior and mezzanine loans were refinanced and the Company issued a new senior loan with a committed amount of $14.7 million, of which $13.6 million was funded at closing. The concession granted in the refinancing was the forgiveness of principal and accrued interest of $1.3 million on the mezzanine loan, of which $1.0 million was previously recorded as an allowance for loan losses, in addition to $0.4 million of nonaccrual interest. The Company classified the refinancing as a TDR as it met all the conditions to be considered a TDR pursuant to ASC 310-40. The following table summarizes the recorded investment of TDR as of the date of restructuring:
Number of loans modified |  | 1 |  |
Pre-modified recorded carrying value |  | $ | 18,503,470 |  |  |
Post-modified recorded carrying value (1) |  | $ | 13,625,000 |  |  |
_______________ (1)As of March 31, 2022, the principal balance of this loan was $13.7 million and the carrying value of this loan, which includes the present value of the exit fee, was $13.8 million. There is no allowance for loan losses recorded for this new senior loan. Once classified as a TDR, the new senior loan is classified as an impaired loan until it is extinguished and the carrying value is evaluated at each reporting date for collectability based on the fair value of the underlying collateral. Since the fair value of the collateral is greater than the carrying value of the new senior loan, no specific allowance was recorded as of March 31, 2022. For the three months ended March 31, 2022, interest income from the new senior loan was $0.3 million. In April 2022, this loan was repaid in full.

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