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Real Estate Owned, Net (Tables)

3 Months Ended

Mar. 31, 2022

Real Estate [Abstract]

Components of real estate owned, net

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

			March 31, 2022																		December 31, 2021
			Cost						Accumulated Depreciation/Amortization						Net						Cost						Accumulated Depreciation/Amortization						Net
Real estate:
Land (1)			$	—					$	—					$	—					$	10,000,000					$	—					$	10,000,000
Building and building    improvements			51,725,969						(4,741,596)						46,984,373						51,725,969						(4,418,305)						47,307,664
Tenant improvements			1,854,640						(1,016,689)						837,951						1,854,640						(947,369)						907,271
Furniture and fixtures			236,000						(149,467)						86,533						236,000						(125,867)						110,133
Total real estate			53,816,609						(5,907,752)						47,908,857						63,816,609						(5,491,541)						58,325,068
Lease intangible assets:
In-place lease			14,982,538						(8,929,631)						6,052,907						14,982,538						(7,627,326)						7,355,212
Above-market rent			156,542						(64,372)						92,170						156,542						(59,983)						96,559
Total intangible assets			15,139,080						(8,994,003)						6,145,077						15,139,080						(7,687,309)						7,451,771
Lease intangible liabilities:
Below-market rent			(2,754,922)						1,746,889						(1,008,033)						(2,754,922)						1,496,125						(1,258,797)
Above-market ground lease			(8,896,270)						477,945						(8,418,325)						(8,896,270)						445,357						(8,450,913)
Total intangible liabilities			(11,651,192)						2,224,834						(9,426,358)						(11,651,192)						1,941,482						(9,709,710)
Total real estate			$	57,304,497					$	(12,676,921)					$	44,627,576					$	67,304,497					$	(11,237,368)					$	56,067,129

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 March 31,
									2022						2021
Real estate operating revenues:
Lease revenue									$	1,754,561					$	1,805,874
Other operating income									1,224,893						205,767
Total									$	2,979,454					$	2,011,641
Real estate operating expenses:
Utilities									$	45,334					$	33,992
Real estate taxes									346,432						346,354
Repairs and maintenances									157,416						145,246
Management fees									67,868						61,325
Lease expense, including amortization of above-market ground lease (1)									487,163						283,538
Other operating expenses									113,750						100,860
Total									$	1,217,963					$	971,315

_______________

(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 $0.5 million for the three months ended March 31, 2021 and total real estate operating expenses would have been $1.2 million for the three months ended March 31, 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 March 31, 2022 are as follows: 

Years Ending December 31,						Total
2022 (April 1 through December 31)						$	5,357,817
2023						4,235,538
2024						4,380,043
2025						792,925
2026						816,724
2027						598,943
Thereafter						1,815,497
Total						$	17,997,487

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 March 31, 2022, 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
2022 (April 1 through December 31)						$	(680,178)					$	3,654,609					$	(97,761)					$	2,876,670
2023						(139,056)						1,093,878						(130,348)						824,474
2024						(139,056)						1,093,878						(130,348)						824,474
2025						17,556						87,121						(130,348)						(25,671)
2026						17,556						87,121						(130,348)						(25,671)
2027						7,315						36,300						(130,348)						(86,733)
Thereafter						—						—						(7,668,824)						(7,668,824)
Total						$	(915,863)					$	6,052,907					$	(8,418,325)					$	(3,281,281)

_______________

(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:    

			March 31, 2022						December 31, 2021
Operating lease
Operating lease right-of-use asset			$	27,391,012					$	27,394,936
Operating lease liability			$	27,391,012					$	27,394,936
Weighted average remaining lease term — operating lease (years)			64.6						64.8
Weighted average discount rate — operating lease			7.6		%				7.6		%

Component of lease expense for the ground lease

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

									Three Months Ended March 31,
									2022						2021
Operating lease cost (1)									$	519,750					$	316,125

_______________(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:

						Three Months Ended March 31,
						2022						2021
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from an operating lease						$	519,750					$	316,125
Right-of-use asset obtained in exchange for lease obligations:
Operating lease						$	519,750					$	316,125

Maturities of operating lease liabilities

Maturities of operating lease liability are as follows:

Years Ending December 31,						Operating Lease
2022 (April 1 through December 31)						$	1,559,250
2023						2,079,000
2024						2,079,000
2025						2,079,000
2026						2,079,000
2027						2,079,000
Thereafter						122,227,875
Total lease payments						134,182,125
Less: Imputed interest						(106,791,113)
Total						$	27,391,012

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