10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                               to                              

001-36892

(Commission file number) 

JERNIGAN CAPITAL, INC.

(Exact name of registrant as specified in its charter)

Maryland	47-1978772
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

6410 Poplar Avenue, Suite 650	38119
Memphis, Tennessee	(Zip Code)
(Address of principal executive offices)

(901) 567-9510

Registrant’s telephone number, including area code

Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.

Yes    x    No    ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes    x    No    ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer  x (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    ¨    No    x

As of May 10, 2016, the Jernigan Capital, Inc. had 6,162,500 shares of common stock outstanding.

Table of Contents

	Page
PART I.  FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	37
PART II.  Other information	38
Item 1. Legal Proceedings	38
Item 1A. Risk Factors	38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	39
Item 5. Other Information	39
Item 6. Exhibits	39

2

In this quarterly report on Form 10-Q (“report”), unless the context indicates otherwise, references to “Jernigan Capital,” “we,” “the Company,” “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Jernigan Capital, Inc.; “Operating Company” refers to Jernigan Capital Operating Company, LLC, a Delaware limited liability company; and “our Manager” refers to JCap Advisors, LLC, a Florida limited liability company.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JERNIGAN CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	March 31, 2016			December 31, 2015
	(Unaudited)
Assets:
Cash and cash equivalents	$	28,801		$	43,859
Development property investments at fair value		47,223			40,222
Operating property loans at fair value		20,178			19,600
Investment in real estate venture		7,919			-
Prepaid expenses and other assets		2,128			1,485
Fixed assets, net		245			261
Total assets	$	106,494		$	105,427
Liabilities:
Due to Manager	$	674		$	698
Accounts payable, accrued expenses and other liabilities		2,602			808
Dividends payable		2,157			2,157
Total liabilities		5,433			3,663
Equity:
Jernigan Capital, Inc. stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding at March 31, 2016 and December 31, 2015;		-			-
Common stock, $0.01 par value, 500,000,000 shares authorized at March 31, 2016 and December 31, 2015; 6,162,500 issued and outstanding at March 31, 2016 and December 31, 2015		62			62
Additional paid-in capital		110,809			110,634
Accumulated deficit		(10,431	)		(9,396	)
Total Jernigan Capital, Inc. stockholders' equity		100,440			101,300
Non-controlling interests		621			464
Total equity		101,061			101,764
Total liabilities and equity	$	106,494		$	105,427

See accompanying notes to consolidated financial statements.

3

JERNIGAN CAPITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

	Three Months Ended March 31,
	2016			2015
Revenues:
Interest income from investments	$	1,143		$	-
Net interest income		1,143			-
Costs and expenses:
General and administrative expenses reimbursable to Manager		830			-
General and administrative expenses		474			147
Management fees to Manager		414
Transaction and other expenses		1,952			-
Restructuring costs		7			-
Deferred termination fee to Manager		157			-
Total costs and expenses		3,834			147
Operating loss		(2,691	)		(147	)
Other income:
Change in fair value of investments		3,791			-
Other interest income		22			-
Total other income		3,813			-
Net income (loss)	$	1,122		$	(147	)
Basic earnings per share attributable to common stockholders	$	0.18			n/a
Diluted earnings per share attributable to common stockholders		0.18			n/a
Dividends declared per share of common stock	$	0.35		$	-

See accompanying notes to consolidated financial statements.

4

JERNIGAN CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(in thousands, except share data)

	Shares		Common  Stock		Additional Paid-In-Capital		Accumulated Deficit			Total Stockholders' Equity			Non- Controlling  Interests		Total Equity
Balance at December 31, 2014		1,000	$	-	$	1	$	-		$	1		$	-	$	1
Net loss		-		-		-		(147	)		(147	)		-		(147	)
Balance at March 31, 2015		1,000	$	-	$	1	$	(147	)	$	(146	)	$	-	$	(146	)
Balance at December 31, 2015		6,162,500	$	62	$	110,634	$	(9,396	)	$	101,300		$	464	$	101,764
Stock-based compensation		-		-		175		-			175			-		175
Deferred termination fee to Manager		-		-		-		-			-			157		157
Dividends declared		-		-		-		(2,157	)		(2,157	)		-		(2,157	)
Net income		-		-		-		1,122			1,122			-		1,122
Balance at March 31, 2016		6,162,500	$	62	$	110,809	$	(10,431	)	$	100,440		$	621	$	101,061

See accompanying notes to consolidated financial statements.

5

JERNIGAN CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Three Months Ended March 31,
	2016			2015
Cash flows from operating activities
Net income (loss)	$	1,122		$	(147	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Interest capitalized on outstanding loans		(730	)		-
Change in fair market value of investments		(3,791	)		-
Stock-based compensation		175			-
Deferred termination fee to Manager		157			-
Depreciation		18			-
Accretion of origination fees		(38	)		-
Changes in operating assets and liabilities:
Other assets		(174	)		-
Due to Manager		(24	)		147
Accounts payable, accrued expenses, and other liabilities		1,783			-
Net cash used in operating activities		(1,502	)		-
Cash flows from investing activities
Purchase of fixed assets		(1	)		-
Capitalized real estate venture costs		(226	)		-
Funding of investments:
Development property investments		(10,551	)		-
Operating property loans		(165	)		-
Other loans		(456	)		-
Net cash used in investing activities		(11,399	)		-
Cash flows from financing activities
Dividends paid		(2,157	)		-
Net cash used in financing activities		(2,157	)		-
Net change in cash and cash equivalents		(15,058	)		-
Cash and cash equivalents at the beginning of the period		43,859			1
Cash and cash equivalents at the end of the period	$	28,801		$	1
Supplemental disclosure of non-cash activities:
Dividends declared	$	2,157		$	-
Contribution of assets to real estate venture		7,693			-

See accompanying notes to consolidated financial statements.

6

JERNIGAN CAPITAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except share and per share data, percentages and as otherwise indicated)

1. ORGANIZATION AND FORMATION OF THE COMPANY

Jernigan Capital, Inc. (together with its consolidated subsidiaries, the “Company”) makes debt and equity investments in newly-constructed and existing self-storage facilities. The Company is a Maryland corporation that was organized on October 1, 2014. The Company closed its initial public offering of its common stock (the “IPO”) on April 1, 2015, and has used proceeds of the IPO primarily to fund real estate loans to private developers, owners and operators of self-storage facilities. The Company is structured as an Umbrella Partnership REIT (“UPREIT”) and conducts its investment activities through its operating company, Jernigan Capital Operating Company, LLC (the “Operating Company”).

The Company intends to elect to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986 (the “Code”), as amended. As a REIT, the Company generally will not be subject to U.S. federal income taxes on REIT taxable income, determined without regard to the deduction for dividends paid and excluded capital gains, to the extent that it annually distributes all of its REIT taxable income to stockholders and complies with various other requirements for qualification as a REIT set forth in the Code.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying interim consolidated financial statements include all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods included therein. Substantially all operations are conducted through the Operating Company, and all significant intercompany transactions and balances have been eliminated in consolidation.

Liquidity

As of March 31, 2016, the Company had unrestricted cash of $28.8 million and unfunded commitments of $69.8 million related to its investment portfolio, a difference of approximately $41.0 million. On May 3, 2016, the Company terminated negotiations with its proposed credit facility provider under the previously announced term sheet for a proposed $60.0 million credit facility. The Company intends to fund the shortfall of $41.0 million as follows:

a) On April 29, 2016 the Company received $5.0 million of proceeds from the sale of 65.0% senior participations (the “FirstBank A Notes”) in two separate operating property loans. See Note 12, Subsequent Events.

b) On May 4, 2016 the Company executed a non-binding term sheet for the sale of a 56.4% senior participation to FirstBank in a construction loan, which will provide net proceeds of $10.0 million. See Note 12, Subsequent Events.

c) On May 9, 2016, the Company received $5.6 million (including prepayment penalty) for the early payoff of an operating property loan.

d) Prior to December 31, 2016, the Company expects full principal repayments on three construction loans in the Chicago, West Palm Beach and Sarasota MSAs with an aggregate principal balance of approximately $19.1 million (of which $14.3 million is unfunded as of March 31, 2016). Each of the self-storage facilities collateralizing these loans is subject to a definitive binding purchase and sale agreement between the developer and a third-party purchaser, containing certain conditions, pursuant to which the financed project is anticipated to be sold and the Company’s loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility. These loans have maturities of either March 1, 2017 or May 31, 2017, subject to acceleration upon a sale of the project. The Company anticipates certificates of occupancy to be issued for all three facilities between September 1, 2016 and December 31, 2016.

e) As of March 31, 2016, the Company has development property investments (with profits interests) of an aggregate of $33.3 million of funded principal, with a total aggregate investment commitment of $76.5 million. The Company has additional operating property loans (excluding such loans described in (a) and (c) above) with an aggregate funded principal balance of $7.0 million. The Company believes, based on the nature of these investments and current market conditions in the self-storage real estate sector, that it could successfully sell senior participations in these loans at 50% or more of the total investment commitment which would provide funding of at least approximately $41.0 million.

7

Additionally, the Company could generate additional cash to fund its remaining unfunded commitments by one or more of the following means: (1) reducing general and administrative expenses (primarily marketing, travel, and certain cash compensation expenses); (2) issuing common and/or preferred stock in public or private offerings (which could be at prices dilutive to current stockholders or at cumulative yields that are in excess of the Company’s current dividend yield on our common stock); and/or (3) reducing or eliminating the Company’s dividend. Based on the above, the Company believes it is likely that it can successfully implement the aforementioned plan in meeting funding commitments for at least the next twelve months. If the Company is unable to complete the aforementioned planned transactions and actions, it could impact its ability to realize its assets at their recorded values, specifically the Company’s development property investments and operating property loans, and to meet its funding commitments in the normal course of business.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Variable Interest Entities

The Company invests in entities that may qualify as variable interest entities (“VIEs”). A VIE is a legal entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. Management bases the qualitative analysis on its review of the design of the entity, its organizational structure including allocation of decision-making authority and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. Management reassesses the initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party that, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the Company’s business activities and the other interests. Management reassesses the determination of whether the Company is the primary beneficiary of a VIE each reporting period.

Equity Investments

Investments in real estate ventures and entities over which the Company exercises significant influence but not control are accounted for using the equity method. In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825-10”), issued by the Financial Accounting Standards Board (“FASB”), the Company has elected the fair value option of accounting for its development property investments, which are equity method investments. The Company’s investment in real estate venture is an equity method investment that is accounted for under the equity method of accounting.

Loan Investments and Election of Fair Value Option of Accounting for Loan Investments

The Company has elected the fair value option of accounting for all of its investment portfolio loan investments, including those that are required under GAAP to be accounted for under the equity method, in order to provide better transparency into the Company’s revenues and value inherent in the Company’s equity participation in development projects. Changes in the fair value of these investments are recorded in change in fair value of investments within other income. All direct loan costs are charged to expense as incurred.

Each loan investment is evaluated for impairment on a periodic basis. A loan will be considered impaired when, based on current information and events, it is probable that the loan will not be collected according to the contractual terms of the loan agreement. Factors to be considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. At March 31, 2016 and December 31, 2015, there were no loans in default.

8

Fair Value Measurement

The Company carries certain financial instruments at fair value because it has elected to apply the fair value option on an instrument by instrument basis under ASC 825-10. The Company’s financial instruments consist of cash, development property investments (which are typically comprised of a first mortgage loan, a mezzanine loan, and a 49.9% profits interest in the development project), operating property loans (loans secured by operating properties), the investment in real estate venture, certain other assets, receivables and payables.

The following table presents the financial instruments measured at fair value on a recurring basis at March 31, 2016:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	47,223	$	-	$	-	$	47,223
Operating property loans		20,178		-		-		20,178
Total investments	$	67,401	$	-	$	-	$	67,401

The following table presents the financial instruments measured at fair value on a recurring basis at December 31, 2015:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	40,222	$	-	$	-	$	40,222
Operating property loans		19,600		-		-		19,600
Total investments	$	59,822	$	-	$	-	$	59,822

Estimating fair value requires the use of judgment. The types of judgments involved depend upon the availability of observable market information. Management’s judgments include determining the appropriate valuation model to use, estimating unobservable inputs and applying valuation adjustments. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions, as well as the election of the fair value option for certain financial instruments.

Cash and Cash Equivalents

Cash, investments in money market accounts and certificates of deposit with original maturities of three months or less are considered to be cash equivalents. The Company places its cash and cash equivalents primarily with a single financial institution and, at times, cash held may exceed the Federal Deposit Insurance Corporation insurance limit. 

Prepaid Expenses and Other Assets

The Company’s prepaid expenses and other assets balance at March 31, 2016 includes principal balances for four revolving loan agreements and one mortgage loan. The Company’s prepaid expenses and other assets balance at December 31, 2015 includes principal balances for three revolving loan agreements and one mortgage loan. Because these loans are not part of the Company’s core investment portfolio, these loans are accounted for under the cost method.

Fixed Assets

Fixed assets are recorded at cost and consist of furniture, office and computer equipment, and software. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from three to seven years. Fixed assets are generally purchased by the Manager and then reimbursed by the Company. As a result, depreciation expense is included in general and administrative expenses reimbursable to Manager in the Consolidated Statement of Operations. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is included in income.

Revenue recognition

Interest income is recognized as earned on a simple interest basis and is reported in interest income from investments in the Consolidated Statement of Operations. Accrual of interest will be discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. The Company will recognize income on impaired loans when they are placed into non-accrual status on a cash basis when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. If these factors do not exist, the Company will not recognize income on such loans. Accrued interest generally is reversed when a loan is placed on non-accrual status.

9

The Company’s loan origination fees are accreted into interest income over the term of the investment using the effective yield method.

Transaction and other expenses

Transaction and other expenses consist of $2.0 million of advisory fees and other expenses incurred in connection with various financing transactions and investment transactions and are expensed as incurred.

Offering Costs

Underwriting commissions and offering costs incurred in connection with the Company’s stock offerings are reflected as a reduction of additional paid-in capital. Offering costs represent professional fees, fees paid to various regulatory agencies, and other costs incurred in connection with the registration and sale of the Company’s common stock.

Organization Costs

Costs incurred to organize the Company were expensed as incurred.

Restructuring Costs

Restructuring costs consist of severance and benefits costs, lease termination costs, and other costs incurred by the Company in conjunction with consolidating its offices and moving its corporate headquarters. The Company recognizes these severance and other charges when the requirements of ASC 420, Exit or Disposal Cost Obligations (“ASC 420”), have been met regarding a plan of termination and when communication has been made to employees. All restructuring activities were completed during the quarter ended September 30, 2015.

Income Taxes

The Company intends to elect to be taxed as a REIT and to comply with the related provisions of the Code commencing with its taxable year ended December 31, 2015. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. The Company had no taxable income for the three months ended March 31, 2016 and March 31, 2015. To qualify as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements.

Earnings per Share (“EPS”)

Basic EPS includes only the weighted average number of common shares outstanding during the period. Diluted EPS includes the weighted average number of common shares and the dilutive effect of restricted stock and redeemable Operating Company units when such instruments are dilutive.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are treated as participating in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted EPS must be applied.

Comprehensive Income

For the three months ended March 31, 2016 and March 31, 2015, comprehensive income equaled net income; therefore, a separate Consolidated Statement of Comprehensive Income is not included in the accompanying consolidated financial statements.

Segment Reporting

The Company does not evaluate performance on a relationship specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

Recent Accounting Pronouncements

In February 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis. This ASU amends the assessment of whether a limited partnership or limited liability company is a variable interest entity; the effect that fees paid to a decision maker have on the consolidation analysis; how variable interests held by a reporting entity’s related parties or de facto agents affect its consolidation conclusion; and for entities other than limited partnerships and limited liability companies, clarifies how to determine whether the equity holders as a group have power over an entity. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption being allowed. The Company early adopted the provisions of this ASU in 2015, and there was no impact on our consolidated financial statements as a result of the adoption.

In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This guidance simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related debt liability, consistent with debt discount or premiums. The recognition guidance for debt issuance costs is not affected by amendments in this update, which is effective for annual reporting periods beginning after December 15, 2015. The adoption did not have a material impact on the Company’s consolidated financial statements.

10

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2016. In August 2015, the FASB extended the effective date by one year to years beginning on and after December 15, 2017. The standard may be adopted as early as the original effective date but early adoption prior to that date is not permitted. This ASU outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable) and, if so, disclose that fact. This ASU is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements and disclosures.

3. INVESTMENTS

The Company’s self-storage investments at March 31, 2016 consist of the following:

· Development Property Investments - The Company had 11 investments totaling an aggregate committed principal amount of approximately $76.5 million to finance the ground-up construction of, or conversion of existing buildings into, self-storage facilities. Each development property investment is funded over time as the developer constructs the project. Each development property investment is typically comprised of a first mortgage loan, a mezzanine loan, and a 49.9% interest in the positive cash flows (including the sale and refinancing proceeds after debt repayment) of the project. The loans are secured by the first mortgages on the projects and first priority security interests in the membership interests of the owners of the projects. Loans comprising development property investments are non-recourse with customary carve-outs and subject to completion guaranties, are interest-only with a fixed interest rate of 6.9% per annum and have a term of 72 months.

The Company also had four construction loan investments totaling an aggregate committed principal amount of approximately $36.8 million, each of which has a term of 18 months. Each construction loan is interest-only at a fixed interest rate of 6.9% per annum, has no equity participation and is secured by a first priority mortgage or deed of trust on the project. Each of these construction loans is subject to a purchase and sale agreement between the developer and a third-party purchaser, containing certain conditions, pursuant to which the financed project is anticipated to be sold and our loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility.

· Operating property loans - The Company had six term loans totaling $20.5 million of aggregate committed principal amount, the proceeds of which were used by borrowers to finance the acquisition of, refinance existing indebtedness on, or recapitalize operating self-storage facilities. These loans are secured by first mortgages on the projects financed, are interest-only with a fixed interest rate ranging from 5.85% to 6.9% per annum, and generally have a term of 72 months.

11

The Company’s development property investments and operating property loans are collectively referred to herein as the Company’s investment portfolio.

As of March 31, 2016, the aggregate committed principal amount of the Company’s investment portfolio was approximately $133.8 million and outstanding principal was $64.0 million, as described in more detail in the table below:

Closing Date	Metropolitan Statistical Area ("MSA")	Total Investment Commitment		Funded Investment (1)		Remaining Unfunded Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando	$	5,372	$	4,356	$	1,016	$	5,383
6/10/2015	Atlanta		8,132		6,164		1,968		7,000
6/19/2015	Tampa		5,369		4,520		849		4,863
6/26/2015	Atlanta		6,050		4,199		1,851		5,057
6/29/2015	Charlotte		7,624		2,657		4,967		3,202
7/2/2015	Milwaukee		7,650		2,677		4,973		2,645
7/31/2015	New Haven		6,930		1,810		5,120		1,810
8/10/2015	Pittsburgh		5,266		1,688		3,578		1,711
8/14/2015	Raleigh		8,998		1,072		7,926		995
9/30/2015	Jacksonville		6,445		3,330		3,115		3,738
10/27/2015	Austin		8,658		865		7,793		785
		$	76,494	$	33,338	$	43,156	$	37,189
Construction loans:
8/5/2015	West Palm Beach		7,500		2,324		5,176		2,267
8/5/2015	Sarasota		4,792		1,054		3,738		1,018
11/17/2015	Chicago		6,808		1,394		5,414		1,327
12/23/2015	Miami		17,733		5,753		11,980		5,422
		$	36,833	$	10,525	$	26,308	$	10,034
	Subtotal	$	113,327	$	43,863	$	69,464	$	47,223
Operating property loans:
6/19/2015	New Orleans		2,800		2,800		-		2,788
7/7/2015	Newark		3,480		3,480		-		3,496
10/30/2015	Nashville		1,210		1,210		-		1,216
11/10/2015	Sacramento		5,500		5,500		-		5,514
11/24/2015	Nashville		4,968		4,863		105		4,853
12/22/2015	Chicago		2,502		2,295		207		2,311
	Subtotal	$	20,460	$	20,148	$	312	$	20,178
	Total investments	$	133,787	$	64,011	$	69,776	$	67,401

⁽¹⁾ Represents principal balance of loan gross of origination fees

The following table provides a reconciliation of the funded principal to the fair market value of investments at March 31, 2016:

Funded principal	$	64,011
Adjustments:
Unamortized origination fees		(1,273	)
Net increase in fair value of investments		4,663
Fair value of investments	$	67,401

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As of December 31, 2015, the aggregate committed principal amount of the Company’s investment portfolio was approximately $175.7 million and outstanding principal was $60.7 million, as described in more detail in the table below:

Closing Date	Metropolitan Statistical Area ("MSA")	Total Investment Commitment		Funded Investment (1)		Remaining Unfunded Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando	$	5,372	$	3,254	$	2,118	$	3,400
5/14/2015	Miami (2)		13,867		2,258		11,609		2,115
5/14/2015	Miami (2)		14,849		3,076		11,773		2,929
6/10/2015	Atlanta		8,132		4,723		3,409		4,829
6/19/2015	Tampa		5,369		3,720		1,649		3,820
6/26/2015	Atlanta		6,050		2,799		3,251		2,823
6/29/2015	Charlotte		7,624		1,124		6,500		1,554
7/2/2015	Milwaukee		7,650		2,529		5,121		2,463
7/31/2015	New Haven		6,930		997		5,933		960
8/10/2015	Pittsburgh		5,266		1,542		3,724		1,542
8/14/2015	Raleigh		8,998		1,026		7,972		934
9/25/2015	Fort Lauderdale (2)		13,230		2,144		11,086		2,009
9/30/2015	Jacksonville		6,445		1,213		5,232		1,180
10/27/2015	Austin		8,658		800		7,858		708
		$	118,440	$	31,205	$	87,235	$	31,266
Construction loans:
8/5/2015	West Palm Beach		7,500		2,011		5,489		1,951
8/5/2015	Sarasota		4,792		1,036		3,756		998
11/17/2015	Chicago		6,808		775		6,033		706
12/23/2015	Miami		17,733		5,655		12,078		5,301
		$	36,833	$	9,477	$	27,356	$	8,956
	Subtotal	$	155,273	$	40,682	$	114,591	$	40,222
Operating property loans:
6/19/2015	New Orleans		2,800		2,800		-		2,736
7/7/2015	Newark		3,480		3,480		-		3,416
10/30/2015	Nashville		1,210		1,210		-		1,192
11/10/2015	Sacramento		5,500		5,500		-		5,401
11/24/2015	Nashville		4,968		4,863		105		4,755
12/22/2015	Chicago		2,502		2,130		372		2,100
	Subtotal	$	20,460	$	19,983	$	477	$	19,600
	Total investments	$	175,733	$	60,665	$	115,068	$	59,822

⁽¹⁾ Represents principal balance of loan gross of origination fees

⁽²⁾ These development property investments (having approximately $8.1 million of outstanding principal balances as of the time of contribution on March 31, 2016) were contributed to the SL1 Venture (defined in Note 5, Investment in Real Estate Venture) in partial satisfaction of our required $12.2 million capital commitment to the SL1 Venture. See Note 5, Investment in Real Estate Venture.

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The following table provides a reconciliation of the funded principal to the fair market value of investments at December 31, 2015:

Funded principal	$	60,665
Adjustments:
Unamortized origination fees		(1,715	)
Net increase in fair value of investments		872
Fair value of investments	$	59,822

The Company has elected the fair value option of accounting for all of its investment portfolio investments in order to provide better transparency into its revenues and value inherent in its equity participation in development projects. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions.

No loans are in non-accrual status as of March 31, 2016 and December 31, 2015.

All of the Company’s development property investments with a profits interest would have been accounted for under the equity method had the Company not elected the fair value option. For the development property investments with a profits interest, the assets and liabilities of the equity method investees approximate $41.8 million and $33.3 million, respectively, at March 31, 2016 and approximate $44.4 million and $31.2 million, respectively, at December 31, 2015. These investees had no significant revenues or expenses for the three months ended March 31, 2016 since the development properties were all under construction during that period.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value option under ASC 825-10 allows companies to elect to report selected financial assets and liabilities at fair value. The Company has elected the fair value option for its development property investments and operating property loan investments because it believes such accounting provides investors and others relying on the Company’s financial statements with a more transparent view of its revenues and value inherent in its equity participation in self-storage development projects.

The Company applies ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820 defines fair value as the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820 requires the Company to assume that the investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company has considered its principal market as the market for the purchase and sale of self-storage properties, which the Company believes would be the most likely market for the Company’s loan investments given the nature of the collateral securing such loans and the types of borrowers. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820, these inputs are summarized in the three broad levels listed below:

Level 1 -	Quoted prices for identical assets or liabilities in an active market.
Level 2 -	Financial assets and liabilities whose values are based on the following: (i) Quoted prices for similar assets or liabilities in active markets; (ii) Quoted prices for identical or similar assets or liabilities in non-active markets; (iii) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 -	Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

The carrying values of cash, certain other assets, receivables and payables approximate their fair values due to their short-term nature. These instruments are categorized as Level 1 instruments in the measurement of fair value. The below table summarizes the valuation techniques and inputs used to measure the fair value of items categorized in Level 3 of the fair value hierarchy.

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Instrument	Valuation technique and assumptions	Hierarchy classification
Development property investments	Valuations are based using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable.  The valuation models are calibrated to the total investment net drawn amount as of the issuance date.	Level 3
Development property investments with a profits interest(a)	Valuations are based using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests. An option-pricing method (OPM) framework is utilized to calculate the value of the profits interests.	Level 3
Operating property loans	Valuations are based using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable.	Level 3

(a) Certain of the Company's development property investments include profits interests.

The Company’s development property investments and operating property loan investments are valued using two different valuation techniques based on the early stage of the Company’s investments. The first valuation technique is an income approach analysis of the debt instrument components of the Company’s investments. The second valuation technique is an option pricing model that is used to determine the fair value of any profits interests associated with an investment. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests. At the issuance date of each development property investment, generally the value of the property underlying such investment approximates the sum of the net investment drawn amount plus the developer’s equity investment.

For development property investments with a profits interest, at a certain stage of construction, the option pricing method incorporates an adjustment to measure entrepreneurial profit. Entrepreneurial profit is a monetary return above total construction costs that provides compensation for the risk of a development project. Under this method, the value of each property is estimated based on the cost incurred to date, plus an estimated earned entrepreneurial profit.  Total entrepreneurial profit is estimated as the difference between the projected value of a property at stabilization and the total development costs, including land, building improvements, and lease-up costs.  Utilizing information obtained from the market coupled with the Company’s own experience, the Company has estimated that in most cases, approximately one-third of the entrepreneurial profit is earned during the construction period beginning when construction is approximately 40% complete and ending when construction is 100% complete, and approximately two-thirds of the entrepreneurial profit is earned from construction completion through stabilization. For properties between 40% and 100% complete, the Company has estimated the entrepreneurial profit adjustment to the enterprise value input used in the option pricing model to be equal to one-third of the estimated entrepreneurial profit, allocated on a straight-line basis. No properties have reached construction completion at March 31, 2016. For the Company’s development property investments at or around completion of construction, a discounted cash flow model will be the primary method for projecting value of a project. The Company also will consider inputs such as appraisals which differ from the developer’s equity investment, bona fide third-party offers to purchase development projects, sales of development projects, or sales of comparable properties in its markets.

Level 3 Fair Value Measurements

The following table summarizes the significant unobservable inputs the Company used to value its investments categorized within Level 3 as of March 31, 2016 and December 31, 2015. The table is not intended to be all-inclusive, but instead to capture the significant unobservable inputs relevant to the Company’s determination of fair values.

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As of March 31, 2016
		Unobservable Inputs
Asset Category	Primary Valuation Techniques	Input	Estimated Range			Weighted Average
Development property investments	Income approach analysis	Market yields/ discount rate		7.73 - 9.00	%		8.51	%
		Exit date		0.92 - 3.58 years			2.86 years
Development property investments with a profits interest (a)	Option pricing model	Volatility		73.39 – 74.07	%		73.74	%
		Exit date		3.06 - 3.58 years			3.25 years
		Capitalization rate (b)		5.50 – 5.75	%		5.61	%
Operating property loans	Income approach analysis	Market yields/ discount rate		5.80 – 7.12	%		6.50	%
		Exit date (c)		5.25 - 6.34 years			5.70 years

(a) The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investment with a profits interest only requires incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.

(b) Six properties were between 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit.

(c) The exit dates for the operating property loans are the contractual maturity dates.

As of December 31, 2015
		Unobservable Inputs
Asset Category	Primary Valuation Techniques	Input	Estimated Range			Weighted Average
Development property investments	Income approach analysis	Market yields/ discount rate		7.74 - 9.35	%		8.77	%
		Exit date		1.17 - 3.83 years			3.02 years
Development property investments with a profits interest  (a)	Option pricing model	Volatility		72.46 - 73.12	%		72.82	%
		Exit date		3.31 - 3.83 years			3.49 years
		Capitalization rate (b)		6.00 - 6.50	%		6.38	%
Operating property loans	Income approach analysis	Market yields/ discount rate		6.22 - 7.53	%		6.91	%
		Exit date (c)		5.50 - 6.68 years			5.97 years

(a) The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investment with a profits interest only requires incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.

(b) Four properties were between 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit.

(c) The exit dates for the operating property loans are the contractual maturity dates.

The fair value measurements are sensitive to changes in unobservable inputs. A change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. The following provides a discussion of the impact of changes in each of the unobservable inputs on the fair value measurement.

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Market yields - changes in market yields and discount rates, each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase in market yields or discount rates may result in a decrease in the fair value of certain of the Company’s investments. The following fluctuations in the market yields/discount rates would have had the following impact on the fair value of our investments: 

	Increase (decrease) in fair value of investments
Change in market yields/discount rates (in millions)	March 31, 2016			December 31, 2015
Up 100 basis points	$	(2.3	)	$	(1.6	)
Down 50 basis points, subject to a minimum yield/rate of 10 basis points		1.2			0.8

Capitalization rate - changes in capitalization rate, in isolation and all else equal, may change the fair value of certain of the Company’s development investments containing profits interests. Generally an increase in the capitalization rate assumption may result in a decrease in the fair value of the entrepreneurial profit associated with certain of the Company’s investments. The following fluctuations in the capitalization rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in capitalization rates (in millions)	March 31, 2016			December 31, 2015
Up 100 basis points	$	(1.1	)	$	(0.3	)
Down 100 basis points		1.6			0.4

Exit date - changes in exit date, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an increase in the exit date assumption may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

Volatility - changes in volatility, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an increase in volatility may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

The Company also evaluates the impact of changes in instrument-specific credit risk in determining the fair value of investments. There were no gains or losses attributable to changes in instrument-specific credit risk in the three months ended March 31, 2016.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate an investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.

The following table presents changes in investments that use Level 3 inputs for the three months ended March 31, 2016:

Balance as of December 31, 2015	$	59,822
Net realized gains		-
Net unrealized gains		3,791
Fundings of principal, net of accretion of origination fees		10,751
Payment-in-kind interest		730
Contribution of assets to Heitman Joint Venture		(7,693	)
Net transfers in or out of Level 3		-
Balance as of March 31, 2016	$	67,401

There is no comparative data for the three months ended March 31, 2015 as there were no investments as of March 31, 2015.

As of March 31, 2016 and December 31, 2015, the total net unrealized appreciation on the investments that use Level 3 inputs was $4.7 million and $0.9 million, respectively.

For the three months ended March 31, 2016, all of the change in fair value of investments in the Company’s Consolidated Statement of Operations was attributable to unrealized gains relating to the Company’s Level 3 assets still held as of March 31, 2016.

17

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

5. INVESTMENT IN REAL ESTATE VENTURE

On March 7, 2016, the Company, through its Operating Company, entered into the Limited Liability Company Agreement (the “JV Agreement”) of Storage Lenders LLC, a Delaware limited liability company, to form a real estate venture (the “SL1 Venture”) with HVP III Storage Lenders Investor, LLC (“HVP III”), an investment vehicle managed by Heitman Capital Management LLC (“Heitman”). The SL1 Venture was formed for the purpose of providing capital to developers of self-storage facilities identified and underwritten by the Company. HVP III committed $110.0 million for a 90% interest in the SL1 Venture, and the Company committed $12.2 million for a 10% interest.

On March 31, 2016, the Company contributed to the SL1 Venture three of its existing development property investments with a profits interest located in Miami and Fort Lauderdale, Florida that were not yet under construction. These investments had an aggregate committed principal amount of approximately $41.9 million and an aggregate drawn balance of $8.1 million. In exchange, the Company’s funding commitment of $12.2 million was reduced by $8.1 million, representing the Company’s initial “Net Invested Capital” balance as defined in the JV Agreement. The Company accounted for this contribution in accordance with ASC 845, Nonmonetary Transactions, and recorded an investment in the SL1 Venture based on the fair value of the contributed development property investments, which is the same as carryover basis. The fair value of the contributed development property investments as of March 31, 2016 was $7.7 million.

As of March 31, 2016, the SL1 Venture had assets of $7.7 million related to the three development property investments with a profits interest contributed by the Company and no liabilities. Pursuant to the JV Agreement, Heitman, in fulfilling its $110.0 million commitment, will provide capital to the SL1 Venture as cash is required, including funding draws on the three contributed development property investments. During the period from inception to March 31, 2016, there was no income earned or expenses incurred by the SL1 Venture. The SL1 Venture has elected the fair value option of accounting for its development property investments with a profits interest.

During the three months ended March 31, 2016, $0.2 million of transaction expenses were incurred by the Company and included in the carrying amount of the Company’s investment in the SL1 Venture.

In accordance with the JV Agreement, for each development property investment, the borrower must deliver to SL1 Venture a completion guarantee whereby the borrower agrees to cover all costs in excess of the agreed upon budget amount. Additionally, the Company is required to deliver to the SL1 Venture a backstop completion guarantee for each development property investment to guarantee completion in the event the borrower does not satisfy its obligations. The Company concluded that the likelihood of loss is remote and assigned no value to this guarantee as of March 31, 2016.

6. VARIABLE INTEREST ENTITIES

Development Property Investments

The Company holds variable interests in its development property investments. The Company has determined that these investees qualify as VIEs because the entities do not have enough equity to finance their activities without additional subordinated financial support. In determining whether the Company is the primary beneficiary of the VIEs, the Company identified the activities that most significantly impact the VIEs’ economic performance. Such activities are (1) managing the construction and operations of the project, (2) selecting the property manager, (3) financing decisions, (4) authorizing capital expenditures and (5) disposition of the property. Although the Company has certain participating and protective rights, it does not have the power to direct the activities that most significantly impact the VIEs’ economic performance and is not the primary beneficiary; therefore, the Company does not consolidate the VIEs.

The Company has recorded assets of $47.2 million and $40.2 million at March 31, 2016 and December 31, 2015, respectively, for its variable interest in the VIEs which is included in the Development Property Investments at Fair Value line item in the Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its involvement with the VIEs is as follows (in millions):

	March 31, 2016		December 31, 2015
Assets recorded related to VIEs	$	47.2	$	40.2
Unfunded loan commitments to VIEs		69.5		114.6
Maximum exposure to loss	$	116.7	$	154.8

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The Company has a construction completion guaranty from the managing members of the VIEs or individual affiliates/owners of such managing members.

Investment in Real Estate Venture

The Company determined that the SL1 Venture qualifies as a VIE because it does not have enough equity to finance its activities without additional subordinated financial support. In determining whether the Company is the primary beneficiary of the entity, the Company identified the activities that most significantly impact the entity’s economic performance. Such activities are (1) approving self-storage development investments and acquiring self-storage properties, (2) managing directly-owned properties, (3) obtaining debt financing, and (4) disposing of investments. Although the Company has certain rights, it does not have the power to direct the activities that most significantly impact the entity’s economic performance and thus is not the primary beneficiary. As such, the Company does not consolidate the entity and accounts for its unconsolidated interest in the SL1 Venture using the equity method of accounting. The Company’s investment in the SL1 Venture is included in the Investment in Real Estate Venture balance in the Consolidated Balance Sheet, and future earnings attributed to the SL1 Venture will be presented in the Company’s Consolidated Statements of Operations. The Company’s maximum contribution to the SL1 Venture is $12.2 million.

The JV Agreement permits Heitman to cause us to repurchase from Heitman its Developer Equity Interests (as defined in the JV Agreement). Under the JV Agreement, if a developer causes to be refinanced a self-storage facility with respect to which the SL1 Venture has made a development property investment and such refinancing does not coincide with a sale of the underlying self-storage facility, then at any time after the fourth anniversary of the commencement of the SL1 Venture, Heitman may either put to the Company its share of the Developer Equity Interests in respect of each such development property investment, or sell Heitman’s Developer Equity Interests to a third party.

7. OTHER ASSETS

The Company has four revolving loan agreements with an aggregate outstanding principal amount of $1.0 million at March 31, 2016. At December 31, 2015, the Company had three revolving loan agreements with an aggregate outstanding principal amount of $0.5 million. Three of the agreements are with individuals who are owners of limited liability companies, and the fourth agreement is with a limited liability company and is personally guaranteed. All of the borrowers are either directly or indirectly owners of certain of the Company’s development property investments. The agreements provide for borrowings of up to $0.5 million (total of $2.0 million) to fund expenses for initial costs to contract for additional self-storage sites. The loan to the limited liability company is secured by a first priority security interest and assignment of its 100% interest in a limited liability company which owns one of the Company’s development investment properties. The loans bear interest at 6.9-7.0% per annum and are due in full in three years. These loans are accounted for under the cost method.

The Company also has a loan of $0.7 million extended to a limited liability company that is under common control with a borrower in a development property investment. This loan is secured by a mortgage on real and personal property, is interest-only with a fixed interest rate of 6.9% per annum, and matures in June 2016. This loan is accounted for under the cost method.

8. STOCKHOLDERS’ EQUITY

The Company was organized in Maryland on October 1, 2014, and under the Company’s Articles of Incorporation, as amended, the Company is authorized to issue up to 500,000,000 shares of common stock and 100,000,000 shares of preferred stock. The sole stockholder of the Company prior to the closing of its IPO was the founder and chief executive officer, who is an affiliate of the Company. The founder’s initial capital contribution to the Company was $1.0 thousand made on October 2, 2014, in exchange for 1,000 shares of common stock. These shares were retired effective with the IPO.

Common Stock Offering

On April 1, 2015, the Company closed its IPO and received $93.0 million in proceeds, net of underwriter’s discount. Simultaneously, the Company received $5.0 million in proceeds from the concurrent private placement with an affiliate of its founder. In connection with these transactions, the Company issued 5,000,000 and 250,000 shares of common stock, respectively and the initial 1,000 shares of common stock issued on October 2, 2014 were retired.

On April 9, 2015, the Company completed the sale of shares of common stock to the underwriters of its IPO pursuant to the underwriters’ over-allotment option. The Company issued 750,000 shares of common stock and received $14.0 million, net of underwriters’ discount.

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Equity Incentive Plan

In connection with the IPO, the Company established the 2015 Equity Incentive Plan for the purpose of attracting and retaining directors, executive officers, investment professionals and other key personnel and service providers, including officers and employees of the Manager and other affiliates, and to stimulate their efforts toward the Company’s continued success, long-term growth and profitability. The 2015 Equity Incentive Plan provides for the grant of stock options, share awards (including restricted common stock and restricted stock units), stock appreciation rights, dividend equivalent rights, performance awards, annual incentive cash awards and other equity-based awards, including Long-Term Incentive Plan (“LTIP”) units, which are convertible on a one-for-one basis into Operating Company Units (“OC Units”).  A total of 200,000 shares of common stock are reserved for issuance pursuant to the 2015 Equity Incentive Plan, subject to certain adjustments set forth in the plan. On April 1, 2015, each non-employee director of the Company received an award of 2,500 shares of restricted common stock (total of 10,000 shares) which vest ratably over a three-year period. On June 15, 2015, in connection with the appointment of the Company’s President and Chief Operating Officer (an employee of the Manager), 100,000 shares of restricted common stock were granted, which shares vest ratably over a five-year period. During the quarter ended September 30, 2015, the Company granted 52,500 shares of restricted common stock to an executive officer (an employee of the Manager) and key employees of the Manager, which shares vest ratably over a three-year period. The Manager provides services to the Company.

Restricted Stock Awards

The 2015 Equity Incentive Plan permits the issuance of restricted stock awards to employees and non-employee directors. Non-vested shares at March 31, 2016 and December 31, 2015 aggregated 162,500 service-based stock awards, of which none vested during the three months ended March 31, 2016, 40,833 will vest in 2016, 2017 and 2018, and 20,000 will vest in 2019 and 2020. Non-vested shares are earned over the respective vesting period based on a service condition only. Expenses related to restricted stock awards are charged to compensation expense and are recognized over the respective vesting period (three to five years) of the awards. For restricted stock issued to non-employee directors of the Company, compensation expense is based on the market value of the shares at the grant date. For restricted stock awards issued to employees of the Manager, compensation expense is remeasured at each reporting date based on the then current value of the Company’s common stock.

The Company recognized approximately $0.2 million of stock-based compensation expense for the three months ended March 31, 2016. No stock-based compensation expense was recorded for the three months ended March 31, 2015. As of March 31, 2016 and December 31, 2015, the total unrecognized compensation cost related to the Company’s restricted shares was approximately $2.1 million and $2.2 million, respectively, based on the grant date market value for awards issued to non-employee directors of the Company and based on the measurement of awards using the Company’s stock price of $15.62 and $14.95 as of March 31, 2016 and December 31, 2015, respectively, for awards issued to employees of the Manager. This cost is expected to be recognized over the remaining weighted average period of 3.5 years. The Company presents stock-based compensation expense in general and administrative expenses in the Consolidated Statement of Operations.

A summary of changes in the Company’s restricted shares for the three months ended March 31, 2016 is as follows:

	Shares		Weighted average grant date fair value
Nonvested at December 31, 2015		162,500	$	20.08
Granted		-		-
Vested		-		-
Forfeited		-		-
Nonvested at March 31, 2016		162,500	$	20.08

There were no restricted shares issued at March 31, 2015.

Nonvested restricted shares receive dividends which are nonforfeitable.

9. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period.  All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share. Both the unvested restricted shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis with our diluted earnings per share being the more dilutive of the treasury stock or two-class methods.  Redeemable Operating Company Units are included in dilutive earnings per share calculations when they are dilutive to earnings per share. For the three months ended March 31, 2016, the Company’s basic earnings per share is computed using the two-class method, and our diluted earnings per share is computed using the more dilutive of the treasury stock method or two-class method:

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Shares outstanding
Weighted average common shares - basic		6,000,000
Effect of dilutive securities (1)		-
Weighted average common shares - diluted		6,000,000
Calculation of Earnings per Share - basic
Net income	$	1,122
Net income allocated to unvested restricted shares		(30	)
Net income, adjusted	$	1,092
Weighted average common shares - basic		6,000,000
Earnings per share - basic	$	0.18
Calculation of Earnings per Share - diluted
Net income	$	1,122
Net income allocated to unvested restricted shares		(30	)
Net income, adjusted (2)	$	1,092
Weighted average common shares - diluted		6,000,000
Earnings per share - diluted	$	0.18

(1) For the three months ended March 31, 2016, potentially dilutive securities are not included in the diluted earnings per share calculation as they are not dilutive.

(2) The Company has no undistributed earnings and accordingly reallocation of undistributed earnings between potential common stock and participating securities is not necessary.

10. RELATED PARTY TRANSACTIONS

The Company’s founder was reimbursed for $0.1 million of organizational costs and $0.1 million of offering costs in April 2015 following the closing of the Company’s IPO.

Equity Method Investments

Certain of the Company’s development property investments are equity method investments for which the Company has elected the fair value option of accounting. The fair value of these equity method investments at March 31, 2016 and December 31, 2015 were $37.2 million and $31.3 million, respectively, and the interest income realized and the change in fair value from these equity method investments for the three months ended March 31, 2016 was $0.5 million and $3.3 million respectively.

The Company’s investment in the real estate venture, SL1Venture, has a carrying amount of $7.9 million at March 31, 2016 and no earnings for the three months ended March 31, 2016

There were no equity method investments at March 31, 2015.

Management Agreement

On April 1, 2015, the Company entered into a management agreement with its Manager (the “Management Agreement”). Pursuant to the terms of the Management Agreement, the Manager will be responsible for (a) the Company’s day-to-day operations, (b) determining investment criteria and strategy in conjunction with the Company’s Board of Directors, (c) sourcing, analyzing, originating, underwriting, structuring, and acquiring the Company’s portfolio investments, and (d) performing portfolio management duties. The Manager has an Investment Committee that approves investments in accordance with the Company’s investment guidelines, investment strategy, and financing strategy.

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The initial term of the Management Agreement will be five years, with up to a maximum of three, one-year extensions that end on the applicable anniversary of the completion of the Company’s offering. The Company’s independent directors will review the Manager’s performance annually. Following the initial term, the Management Agreement may be terminated annually upon the affirmative vote of at least two-thirds of the Company’s independent directors based upon: (a) the Manager’s unsatisfactory performance that is materially detrimental to the Company; or (b) the Company’s determination that the management fees payable to the Manager are not fair, subject to the Manager’s right to prevent termination based on unfair fees by accepting a reduction of management fees agreed to by at least two-thirds of the independent directors. The Company will provide its Manager with 180 days’ prior notice of such a termination. Upon such a termination, the Company will pay the Manager a termination fee except as provided below.

No later than 180 days prior to the end of the initial term of the Management Agreement, the Manager will offer to contribute to the Company’s Operating Company at the end of the initial term all of the assets or equity interests in the Manager at the internalization price and on such terms and conditions included in a written offer provided by the Manager.

Upon receipt of the Manager’s initial internalization offer, a special committee consisting solely of the Company’s independent directors may accept the Manager’s proposal or submit a counter offer to the Manager. If the Manager and the special committee are unable to agree, the Manager and the special committee will repeat this process annually during the term of any extension of the Management Agreement. Acquisition of the Manager pursuant to this process requires a fairness opinion from a nationally recognized investment banking firm and stockholder approval, in addition to approval by the special committee.

If the Company does not acquire the assets or equity interests of the Manager in an internalization transaction as described above and the Management Agreement terminates other than for Cause, voluntary non-renewal by the Manager or the Company being required to register as an investment company under the Investment Company Act of 1940, then the Company shall pay to the Manager, on the date on which such termination is effective, a termination fee equal to the greater of (i) three times the sum of the average annual Base Management Fee and Incentive Fee earned by the Manager during the 24-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination, or (ii) the offer price, which will be based on the lesser of (a) the Manager’s earnings before interest, taxes, depreciation and amortization (adjusted for unusual, extraordinary and non-recurring charges and expenses), or “EBITDA” annualized based on the most recent quarter ended, multiplied by a specific multiple, or EBITDA Multiple, depending on the Company’s achieved total annual return, and (b) the Company’s equity market capitalization multiplied by a specific percentage, or Capitalization Percentage, depending on the Company’s achieved total return (the Internalization Price). Any Termination Fee will be payable by the Operating Company in OC Units equal to the Termination Fee divided by the average of the daily market price of the Common Stock for the ten consecutive trading days immediately preceding the date of termination within 90 days after occurrence of the event requiring the payment of the Termination Fee. In accordance with ASC 505-50, Equity - Equity-based Payments to Non-Employees, since the number of OC Units to be issued is dependent upon different possible outcomes, the Company recognized the lowest aggregate amount within the range of outcomes. Accordingly, the Company estimates the deferred termination fee payable and accrues the expense over the term of the Management Agreement. The Company recorded $0.2 million of expense for the deferred termination fee for the three months ended March 31, 2016. There was no deferred termination fee for the three months ended March 31, 2015.

The Company also may terminate the Management Agreement at any time, including during the initial term, without the payment of any termination fee, with 30 days’ prior written notice from the Board of Directors, for cause. “Cause” is defined as: (i) the Manager’s continued breach of any material provision of the Management Agreement following a prescribed period; (ii) the occurrence of certain events with respect to the bankruptcy or insolvency of the Manager; (iii) a change of control of the Manager that a majority of the Company’s independent directors determines is materially detrimental to the Company; (iv) the Manager committing fraud against the Company, misappropriating or embezzling the Company’s funds, or acting grossly negligent in the performance of its duties under the Management Agreement; (v) the dissolution of the Manager; (vi) the Manager fails to provide adequate or appropriate personnel that are reasonably necessary for the Manager to identify investment opportunities for the Company and to manage and develop the Company’s investment portfolio if such default continues uncured for a period of 60 days after written notice thereof, which notice must contain a request that the same be remedied; (vii) the Manager is convicted (including a plea of nolo contendere) of a felony; or (viii) the departure of Mr. Jernigan from the senior management of the Manager, or the Company, during the term of the Management Agreement other than by reason of death or disability.

The Manager may terminate the Management Agreement if the Company becomes required to register as an investment company under the 1940 Act, with such termination deemed to occur immediately before such event, in which case the Company would not be required to pay the Manager a termination fee. The Manager may also decline to renew the Management Agreement by providing the Company with 180 days’ written notice, in which case the Company would not be required to pay a termination fee.

The Management Agreement provides for the Manager to earn a base management fee and an incentive fee. In addition, the Company will reimburse certain expenses of the Manager, excluding the salaries and cash bonuses of the Manager’s chief executive officer and chief financial officer, half of the salary of the president and chief operating officer, and certain other costs as determined by the Manager in accordance with the Management Agreement. Certain prepaid expenses and fixed assets are also purchased through the Manager and reimbursed by the Company. In the event that the Company terminates the Management Agreement per the terms of the agreement, other than for cause or the Company being required to register as an investment company, there will be a termination fee due to the Manager. Amounts reimbursable to the Manager for expenses totaled $0.8 million for the three months ended March 31, 2016. There were no expenses reimbursable to the Manager for the three months ended March 31, 2015.

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Management Fees

As of March 31, 2016, the Company did not have any personnel. As a result, the Company is relying on the properties, resources and personnel of the Manager to conduct operations. The Company has agreed to pay the Manager a base management fee in an amount equal to 0.375% of the Company’s stockholders’ equity (a 1.5% annual rate) calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, the Company’s stockholder’s equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) any amount that the Company pays to repurchase the Company’s common stock since inception. It also excludes (x) any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and (y) one-time events pursuant to changes in GAAP (such as a cumulative change to the Company’s operating results as a result of a codification change pursuant to GAAP), and certain non-cash items not otherwise described above (such as depreciation and amortization), in each case after discussions between the Company’s Manager and the Company’s independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the base management fee, could be greater or less than the amount of stockholders’ equity shown on the Company’s financial statements. The base management fee is payable independent of the performance of the Company’s portfolio. The Manager computes the base management fee within 30 days after the end of the fiscal quarter with respect to which such installment is payable and promptly delivers such calculation to the Company’s Board of Directors. The amount of the installment shown in the calculation is due and payable no later than the date which is five business days after the date of delivery of such computation to the Board of Directors. The calculation generally will be reviewed by the Board of Directors at their regularly scheduled quarterly board meeting. The base management fee for the three months ended March 31, 2016 was $0.4 million. There was no base management fee for the three months ended March 31, 2015.

Incentive Fee

The Manager is entitled to an incentive fee with respect to each fiscal quarter (or part thereof that the Management Agreement is in effect) in arrears in cash. The incentive fee will be an amount, not less than zero, determined pursuant to the following formula:

IF = .20 times (A minus (B times .08)) minus C

In the foregoing formula:

· A equals the Company’s Core Earnings (as defined below) for the previous 12-month period;

· B equals (i) the weighted average of the issue price per share of the Company’s common stock of all of its public offerings of common stock, multiplied by (ii) the weighted average number of all shares of common stock outstanding (including (i) any restricted stock units and any restricted shares of common stock in the previous 12-month period and (ii) shares of common stock issuable upon conversion of outstanding OC Units); and

· C equals the sum of any incentive fees earned by the Manager with respect to the first three fiscal quarters of such previous 12-month period.

Notwithstanding application of the incentive fee formula, no incentive fee shall be paid with respect to any fiscal quarter unless cumulative annual stockholder total return for the four most recently completed fiscal quarters is greater than 8%. Any computed incentive fee earned but not paid because of the foregoing hurdle will accrue until such 8% cumulative annual stockholder total return is achieved. The total return is calculated by adding stock price appreciation (based on the volume-weighted average of the closing price of the Company’s common stock on the NYSE (or other applicable trading market) for the last ten consecutive trading days of the applicable computation period minus the volume-weighted average of the closing market price of the Company’s common stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period) plus dividends per share paid during such computation period, divided by the volume-weighted average of the closing market price of the Company’s common stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period. For purposes of computing the Incentive Fee, “Core Earnings” is defined as net income (loss) determined under GAAP, plus non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that the Company forecloses on any facilities underlying the Company’s target investments), any unrealized losses or other non-cash expense items reflected in GAAP net income (loss), less any unrealized gains reflected in GAAP net income. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and the Company’s independent directors and after approval by a majority of the independent directors.

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For purposes of calculating the incentive fee prior to the completion of a 12-month period following this offering, Core Earnings is calculated on the basis of the number of days that the Management Agreement has been in effect on an annualized basis.

The Manager computes each quarterly installment of the incentive fee within 45 days after the end of the fiscal quarter with respect to which such installment is payable and promptly delivers such calculation to the Company’s Board of Directors. The amount of the installment shown in the calculation is due and payable no later than the date which is five business days after the date of delivery of such computation to the Board of Directors. The calculation generally will be reviewed by the Board of Directors at their regularly scheduled quarterly board meeting. The Manager has not earned an incentive fee for the three months ended March 31, 2016 and 2015.

11. RESTRUCTURING COSTS

On August 11, 2015, the Company’s Board of Directors approved consolidating its offices and moving the corporate headquarters to Memphis, Tennessee. In connection with the consolidation and moving of the Company’s headquarters, the Company added legal, accounting, loan administration and business development personnel in Memphis and closed its offices in Miami, Florida and Cleveland, Ohio. The consolidation was completed by the end of the third quarter.

Restructuring costs reflected in the accompanying Consolidated Statement of Operations relate primarily to one-time termination benefits and lease termination costs. The Company recognizes these severance and other charges when the requirements of ASC 420 have been met regarding a plan of termination and when communication has been made to employees. During the three months ended March 31, 2016, the Company recorded approximately $7.0 thousand in restructuring costs in the Consolidated Statement of Operations. There were no restructuring costs for the three months ended March 31, 2015.

As of March 31, 2016
Cost Type	Restructuring costs liability at December 31, 2015		Restructuring costs incurred		Cash payments			Non-cash activity			Restructuring costs liability at March 31, 2016		Total cumulative restructuring costs incurred or expected to be incurred
Severance	$	-	$	-	$	-		$	-		$	-	$	97
Fixed asset disposal		-		-		-			-			-		33
Lease termination		85		16		(21	)		-			80		140
Other		10				-			(10	)		-		13
Total restructuring costs	$	95	$	16	$	(21	)	$	(10	)	$	80	$	283

12. SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. Other than those disclosed below, there have been no subsequent events that occurred during such period that require disclosure or recognition in the accompanying consolidated financial statements as of and for the three month period ended March 31, 2016.

On April 29, 2016, the Company sold 65.0% senior participations (the “FirstBank A Notes”) in two separate operating property loans in the Nashville, Tennessee and New Orleans, Louisiana MSAs, having an aggregate outstanding principal balance of $7.8 million, to FirstBank, a Tennessee banking corporation, in exchange for cash consideration of $5.0 million (the “FirstBank A Note Sale”). The FirstBank A Note Sale was effected pursuant to participation agreements between FirstBank and the Company (the “Participation Agreements”). Under the Participation Agreements, the Company will continue to service the underlying loans so long as the Company is not in default under the Participation Agreements. FirstBank has the option to “put” either of the senior participations to the Company in the event the underlying borrower defaults on the underlying loan or if the Company defaults under the applicable Participation Agreement. The Company will pay to FirstBank interest on the outstanding balance of the FirstBank A Notes at the rate of 30-day LIBOR plus 3.85%, which translates to a current rate of approximately 4.30%. The FirstBank A Notes mature on April 1, 2019, at which time the Company is obligated to repurchase the FirstBank A Notes at the then outstanding principal balances thereof. As part of the Participation Agreements, the Company will maintain a minimum aggregate balance of $0.5 million in depository or money market accounts at FirstBank.

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On May 3, 2016, the Company terminated negotiations with its proposed credit facility provider under the previously announced term sheet for a proposed $60.0 million credit facility.

On May 4, 2016, the Company executed a non-binding term sheet with FirstBank for the sale of an additional 56.4% senior participation in an approximately $17.7 million self-storage construction loan on a facility in Miami, Florida, which will provide net proceeds of $10.0 million. The term sheet is subject to completion of due diligence and definitive documentation, and the sale of the senior participation is expected to close before May 31, 2016.

On May 9, 2016, the Company received $5.6 million (including prepayment penalty) for the early payoff of an operating property loan in the Sacramento, California MSA.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

We make statements in this Quarterly Report on Form 10-Q that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). These forward-looking statements include, without limitation, statements about our estimates, expectations, predictions and forecasts of our future business plans and financial and operating performance and/or results, as well as statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. When we use the words “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” or similar expressions or their negatives, as well as statements in future tense, we intend to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual financial and operating results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such differences are described in the section entitled “Risk Factors” in this report and in the Annual Report of Form 10-K, which was filed with the Securities and Exchange Commission (“SEC”) on April 5, 2016, which factors include, without limitation, the following:

· our ability to successfully source, structure, negotiate and close investments in self-storage facilities

· changes in our business strategy and the market’s acceptance of our investment terms

· our ability to fund our outstanding and future loan commitments

· availability, terms and our rate of deployment of equity and debt capital, including executing our pending and expected potential sources of liquidity

· our manager’s ability to hire and retain qualified personnel

· changes in the self-storage industry, interest rates or the general economy

· the degree and nature of our competition

· volatility in the value of our assets carried at fair market value

· general volatility of the capital markets and the market price of our common stock.

Given these uncertainties, undue reliance should not be placed on our forward-looking statements. We assume no duty or responsibility to publicly update or revise any forward-looking statement that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events. We urge you to review the disclosures concerning risks in the sections entitled “Risk Factors,” “Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K, which was filed with the SEC on April 5, 2016.

Overview

We are a commercial real estate company incorporated in Maryland that provides capital to private developers, owners and operators of self-storage facilities. Our principal business objective is to deliver attractive long-term risk adjusted returns to our stockholders by investing primarily in newly-constructed self-storage facilities, which we refer to as development property investments, and, secondarily, by making loans secured by currently operating self-storage facilities, which loans we refer to as operating property loans. We expect to generate attractive long-term returns on development property investments through interest payments (typically at a fixed rate) on our invested capital together with a 49.9% interest in the positive cash flows from operations, sales and/or refinancings of the self-storage facility, which we refer to herein as “Profits Interests.” We also generate cash flows from construction loans and operating property loans in the form of interest payments, origination fees, and occasional prepayment fees. In addition, in connection with many of our development property investments, we obtain a right of first refusal to acquire the subject property. In the future, we expect to acquire self-storage properties by exercising our rights of first refusal.

We account for our development property investments and operating property loans at fair value. Under fair value accounting, each of our development property investments and operating property loans is re-valued each quarter, and any unrealized appreciation and depreciation from those financial instruments is reflected in the carrying values of those investments in our Consolidated Balance Sheet and in our Consolidated Statement of Operations. We believe reflecting our investments at fair value provides our stockholders with a clearer view of our true economic performance and the intrinsic value inherent in our Profits Interests as newly-developed self-storage facilities we finance are occupied, leased-up and become stabilized.

As of March 31, 2016, we had closed 21 investments for an aggregate committed principal amount of $133.8 million, including 11 development property investments totaling approximately $76.5 million of aggregate committed principal amount, each of which provides us with a Profits Interest, four construction loans totaling approximately $36.8 million of aggregate committed principal amount and six operating property loans totaling approximately $20.5 million of aggregate committed principal amount. Each of the development property investments is in a primary or secondary market with demographics that management believes will support successful lease-up and value creation in the property. Each construction loan has an 18-month term, and each self-storage facility for which we have provided construction financing is subject to a binding purchase and sale agreement between the developer and a third-party purchaser to be completed shortly after a certificate of occupancy is issued with respect to the subject property at a contract price sufficient to repay our construction loan. As of March 31, 2016, we had funded approximately $64.0 million of the aggregate committed principal amount of our closed investments. We have funded all of our investments to date with the net proceeds from our initial public offering of common stock (“IPO”) and concurrent private placement, which were consummated on April 1, 2015. As of March 31, 2016, we have incurred no indebtedness.

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On March 7, 2016, we, through our Operating Company, entered into the Limited Liability Company Agreement (the “JV Agreement”) of Storage Lenders LLC, a Delaware limited liability company, to form a real estate venture (the “SL1 Venture”) with HVP III Storage Lenders Investor, LLC (“HVP III”), an investment vehicle managed by Heitman Capital Management LLC (“Heitman”). The SL1 Venture was formed for the purpose of providing capital to developers of self-storage facilities identified and underwritten by us. HVP III committed $110.0 million for a 90% interest in the SL1 Venture, and we committed $12.2 million for a 10% interest. On March 31, 2016, we contributed to the SL1 Venture three self-storage development investments in Miami and Fort Lauderdale, Florida that were not yet under construction. These investments had an aggregate committed principal amount of approximately $41.9 million and aggregate drawn balances of $8.1 million. In exchange, our funding commitment was reduced by $8.1 million.

On April 29, 2016, we sold to FirstBank, a Tennessee bank, senior participations in two separate operating property loans having an aggregate principal balance of approximately $7.8 million and earning interest at a rate of 6.9% per annum (the “FirstBank A Notes”). FirstBank paid to the Company approximately $5.0 million for 65% senior participations in the two loans (the “FirstBank A Note Sale”). We will pay interest to FirstBank on its senior participations at the annual rate of 30-day LIBOR plus 3.85%, which translates to a current rate of approximately 4.30%.

On May 4, 2016, we executed a non-binding term sheet with FirstBank for the sale of an additional 56.4% senior participation (the “proposed FirstBank A Note Sale”) in an approximately $17.7 million self-storage construction loan on a facility in Miami, Florida, which will provide net proceeds of $10.0 million. The term sheet is subject to completion of due diligence and definitive documentation, and the sale of the senior participation is expected to close before May 31, 2016.

The Company is externally managed and advised by the Manager. The Manager is led by our founder and chief executive officer, Dean Jernigan, and our president and chief operating officer, John A. Good. Mr. Jernigan is a 30-year veteran of the self-storage industry, including a combined 16 years as the chief executive officer of Storage USA and CubeSmart, both New York Stock Exchange listed self-storage REITs. During his time at these two companies, Mr. Jernigan oversaw the investment of over $3 billion of capital in the self-storage industry. Mr. Good has over 28 years working with senior management teams and boards of directors of public companies in the REIT and financial services industries on corporate finance, corporate governance, merger and acquisition, tax, executive compensation, joint venture, and strategic planning projects as a nationally recognized corporate and securities lawyer. Prior to joining the Company, he served as lead counsel on over 200 securities offerings, including our IPO, raising in excess of $25 billion over the past 25 years, with more than 125 of those deals being in the REIT industry. We believe the industry experience and depth of relationships of our senior management team and other investment professionals provide us with a significant competitive advantage in sourcing, evaluating, underwriting and servicing self-storage investments.

We are a Maryland corporation that intends to elect to be taxed as a REIT under the Code. As a REIT, we generally will not be subject to U.S. federal income taxes on our taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains, to the extent that we annually distribute all of our REIT taxable income to stockholders and comply with certain other requirements for qualification as a REIT set forth in the Code. We are structured as an UPREIT and conduct our investment activities through our Operating Company. We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940.

Factors Impacting Our Operating Results

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, changes in the fair value of our assets and the performance of self-storage facilities in which we have invested. Our net interest income, which also reflects the accretion of origination fees, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. The objective of the interest method is to arrive at periodic interest income that yields a level rate of return over the loan term. Interest rates may vary according to the type of loan, conditions in the financial markets, credit worthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers. In addition, our operating results are affected by the valuation of our development property investments and our operating property loans. These investments are marked to fair value each quarter, and increases and decreases in fair value are reflected in the carrying values of the investments in our Consolidated Balance Sheet and as unrealized increases/decreases in fair value in our Consolidated Statement of Operations. In the future we may make additional equity investments in self-storage facilities, either for fee simple ownership by our Operating Company or in joint ventures with institutional or other strategic partners. In the event we own self-storage facilities in the future, our operating results will also include rental income and related operating expenses from such self-storage facilities. In that regard, in connection with many of our development investments, we have obtained rights of first refusal in connection with potential future sales of self-storage facilities that we finance. Our results for the three months ended March 31, 2016 also were impacted by our accounting methods as discussed below.

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Changes in Fair Value of Our Assets

The Company has elected the fair value option of accounting for our investment portfolio. We have elected fair value accounting for these financial instruments because we believe such accounting provides investors and others relying on our financial statements with a more transparent view of our revenues and the intrinsic value inherent in the Profits Interests we possess. Under the fair value option, we will mark our investment portfolio to estimated fair value at the end of each accounting period, with corresponding increases or decreases in fair value being reflected in our Consolidated Statement of Operations. There is no active secondary market for our investments and no readily available market value; accordingly, our determination of fair value requires judgment and extensive use of estimates. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Our investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate an investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.

Changes in Market Interest Rates

With respect to our business operations, increases in interest rates, in general, may over time cause: the interest expense associated with our borrowings to increase; the value of our loan portfolio to decline; interest rates on any floating rate loans to reset, although on a delayed basis, to higher interest rates; and to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase. Conversely, decreases in interest rates, in general, may over time cause: the interest expense associated with our borrowings to decrease; the value of our mortgage loan portfolio to increase; interest rates on any floating rate loans to reset, although on a delayed basis, to lower interest rates; and to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease.

Credit Risk

We are subject to varying degrees of credit risk in connection with our target investments. Our Manager seeks to mitigate this risk by seeking to originate or acquire loans of higher quality at appropriate prices given anticipated and unanticipated losses, by utilizing a comprehensive selection, underwriting and due diligence review process, and by proactively monitoring originated or acquired loans. Nevertheless, unanticipated credit losses could occur that could adversely impact our operating results.

Market Conditions

We believe that present market conditions are favorable for realizing attractive risk-adjusted returns on investments in self-storage facilities owned by private operators. While construction in the self-storage industry remains low compared to historical averages, the industry is seeing increased construction starts recently and the trend is expected to continue upwards. In addition, the number of purchase and sale transactions has been increasing, fueled by investor appetite for self-storage’s cash flow performance. The key demand factors of the self-storage industry include population mobility and new job creation, both of which are experiencing increases since the recession. These factors have created demand for self-storage, which in turn have developers looking to develop and match demand with supply. The main deterrent for developers is the lack of financing available in the sector. Currently, lenders are only willing to lend up to 70% LTV, whereas our substantial industry knowledge enables us to make loans at ratios of 90% LTC and LTV.

Recent Developments

First Quarter Dividend Declaration

On March 18, 2016, the Company announced that our Board of Directors declared a cash dividend of $0.35 per share of common stock for the quarter ending March 31, 2016. The dividend was payable on April 15, 2016 to stockholders of record on April 1, 2016.

Real Estate Venture

On March 7, 2016, we, through our operating company, entered into the JV Agreement to form the SL1 Venture with Heitman. The SL1 Venture was formed for the purpose of providing capital to developers of self-storage facilities identified and underwritten by us. On March 31, 2016, we contributed to the SL1 Venture three existing self-storage development investments in Miami and Fort Lauderdale, Florida that were not yet under construction with an aggregate committed principal amount of approximately $41.9 million, and we are obligated to provide all new development investment opportunities to the SL1 Venture until the earlier of March 31, 2017 or until the SL1 Venture is fully committed (the “Investment Period”). HVP III committed $110.0 million for a 90% interest in the SL1 Venture, and we committed $12.2 million (approximately $8.1 million of which was contributed on March 31, 2016 in the form of the drawn balances on the three self-storage development property investments) for a 10% interest.

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Under the JV Agreement, we will receive a priority distribution (after debt service and any reserve but before any other distributions) out of operating cash flow and residual distributions based upon 1% of the committed principal amount of loans made by the SL1 Venture, exclusive of the loans contributed to the SL1 Venture by us. Operating cash flow of the SL1 Venture (after debt service, reserves and the foregoing priority distributions) will be distributed in accordance with capital commitments. Residual cash flow from capital and other events (after debt service, reserves and priority distributions) will be distributed (i) pro rata in accordance with capital commitments (its “Percentage Interest”) until each member has received a return of all capital contributed; (ii) pro rata in accordance with each member’s Percentage Interest until Heitman has achieved a 14% internal rate of return; (iii) to Heitman in an amount equal to its Percentage Interest less 10% and to us in an amount equal to our Percentage Interest plus 10% until Heitman has achieved a 17% internal rate of return; (iv) to Heitman in an amount equal to its Percentage Interest less 20% and to us in an amount equal to our Percentage Interest plus 20% until Heitman has achieved a 20% internal rate of return; and (v) any excess to Heitman in an amount equal to its Percentage Interest less 30% and to us in an amount equal to our Percentage Interest plus 30%. However, we will not be entitled to any such promoted interest prior to the earlier to occur of the third anniversary of the JV Agreement and Heitman receiving distributions to the extent necessary to provide Heitman with a 1.48 multiple on its contributed capital.

Under the JV Agreement, Heitman and we will seek to obtain and, if obtained, will share joint rights of first refusal to acquire self-storage facilities that are the subject of development property investments made by the SL1 Venture. Additionally, so long as we, through our operating subsidiary, are a member of the SL1 Venture and the SL1 Venture holds any assets, we will not make any investment of debt or equity or otherwise, directly or indirectly, in one or more new joint ventures or similar programs for the purposes of funding or providing development loans or financing, directly or indirectly, for the development, construction or conversion of self-storage facilities, in each case without first offering such opportunity to Heitman to participate on substantially the same terms as those set forth in the JV Agreement, either through the SL1 Venture or a newly formed real estate venture.

The JV Agreement permits Heitman to cause us to repurchase from Heitman its Developer Equity Interests (as defined in the JV Agreement). Under the JV Agreement, if a developer causes to be refinanced a self-storage facility with respect to which the SL1 Venture has made a development property investment and such refinancing does not coincide with a sale of the underlying self-storage facility, then at any time after the fourth anniversary of the commencement of the SL1 Venture, Heitman may either put to us its share of the Developer Equity Interests in respect of each such development property investment, or sell Heitman’s Developer Equity Interests to a third party.

We are the managing member of the SL1 Venture and will manage and administer (i) the day-to-day business and affairs of the SL1 Venture and any of its acquired properties and (ii) loan servicing and other administration of the approved development property investments. We will be paid a monthly expense reimbursement amount by the SL1 Venture in connection with our role as managing member, as set forth in the JV Agreement. Heitman may remove us as the managing member of the SL1 Venture if we commit an event of default (as defined in the JV Agreement), if we undergo a change of control (as defined in the JV Agreement), if we become insolvent or if, during the Investment Period, Mr. Jernigan ceases to have an active role in the finding and underwriting of potential development loans for the SL1 Venture, and, as a result of such cessation, we are not capable of fulfilling our duties and obligations under the JV Agreement, as reasonably determined by Heitman in good faith.

Heitman has the right to approve all “Major Decisions” of the SL1 Venture, as defined in the JV Agreement, including, but not limited to, each investment of capital, the incurrence of any indebtedness, the sale or other disposition of assets of the SL1 Venture, the replacement of the managing member, the acceptance of new members into the SL1 Venture and the liquidation of the SL1 Venture.

FirstBank A Note Sale

On April 29, 2016, we sold 65.0% senior participations in two separate operating property loans in the Nashville, Tennessee and New Orleans, Louisiana MSAs, having an aggregate outstanding principal balance of $7.8 million, to FirstBank, a Tennessee banking corporation, in exchange for cash consideration of $5.0 million. The FirstBank A Note Sale was effected pursuant to participation agreements between FirstBank and us (the “Participation Agreements”). Under the Participation Agreements, we will continue to service the underlying loans so long as we are not in default under the Participation Agreements. FirstBank has the option to “put” either of the senior participations to us in the event the underlying borrower defaults on the underlying loan or if we default under the applicable Participation Agreement. We will pay to FirstBank interest on the outstanding balance of the FirstBank A Notes at the rate of 30-day LIBOR plus 3.85%, which translates to a current rate of approximately 4.30%. The FirstBank A Notes mature on April 1, 2019, at which time we are obligated to repurchase the FirstBank A Notes at the then outstanding principal balances thereof. As part of the Participation Agreements, the Company will maintain a minimum aggregate balance of $0.5 million in depository or money market accounts at FirstBank.

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FirstBank A Note Term Sheet

On May 4, 2016, we executed a non-binding term sheet with FirstBank for the sale of an additional 56.4% senior participation in an approximately $17.7 million self-storage construction loan on a facility in Miami, Florida, which will provide net proceeds of $10.0 million. The term sheet is subject to completion of due diligence and definitive documentation, and the sale of the senior participation is expected to close before May 31, 2016. There can be no assurance we will complete this sale or receive the capital needed from this transaction.

Investment Activity

The Company’s self-storage investments at March 31, 2016 consisted of the following:

· Development Property Investments - The Company had 11 investments totaling an aggregate committed principal amount of approximately $76.5 million to finance the ground-up construction of, or conversion of existing buildings into, self-storage facilities. Each development property investment is funded over time as the developer constructs the project. Each development property investment is typically comprised of a first mortgage loan, a mezzanine loan, and a 49.9% interest in the positive cash flows (including the sale and refinancing proceeds after debt repayment) of the project. The loans are secured by the first mortgages on the projects and first priority security interests in the membership interests of the owners of the projects. Loans comprising development property investments are non-recourse with customary carve-outs and subject to completion guarantees, are interest-only with a fixed interest rate of 6.9% per annum and have a term of 72 months.

The Company also had four construction loan investments totaling an aggregate committed principal amount of approximately $36.8 million, each of which has a term of 18 months. Each construction loan is interest-only at a fixed interest rate of 6.9% per annum, has no equity participation and is secured by a first priority mortgage or deed of trust on the project. Each of these construction loans is subject to a purchase and sale agreement between the developer and a third party purchaser, containing certain conditions, pursuant to which the financed project is anticipated to be sold and our loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility.

· Operating property loans - The Company had six term loans totaling $20.5 million of aggregate committed principal amount, the proceeds of which were used by borrowers to finance the acquisition of, refinance existing indebtedness on, or recapitalize operating self-storage facilities. These loans are secured by first mortgages on the projects financed, are interest-only with a fixed interest rate ranging from 5.85% to 6.9% per annum, and generally have a term of 72 months.

The Company’s development property investments and operating property loans are collectively referred to herein as the Company’s investment portfolio.

As of March 31, 2016, the aggregate committed principal amount of the Company’s investment portfolio is approximately $133.8 million and outstanding principal is $64.0 million, as described in more detail in the table below:

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Closing Date	Metropolitan Statistical Area ("MSA")	Total Investment Commitment		Funded Investment (1)		Remaining Unfunded Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando	$	5,372	$	4,356	$	1,016	$	5,383
6/10/2015	Atlanta		8,132		6,164		1,968		7,000
6/19/2015	Tampa		5,369		4,520		849		4,863
6/26/2015	Atlanta		6,050		4,199		1,851		5,057
6/29/2015	Charlotte		7,624		2,657		4,967		3,202
7/2/2015	Milwaukee		7,650		2,677		4,973		2,645
7/31/2015	New Haven		6,930		1,810		5,120		1,810
8/10/2015	Pittsburgh		5,266		1,688		3,578		1,711
8/14/2015	Raleigh		8,998		1,072		7,926		995
9/30/2015	Jacksonville		6,445		3,330		3,115		3,738
10/27/2015	Austin		8,658		865		7,793		785
		$	76,494	$	33,338	$	43,156	$	37,189
Construction loans:
8/5/2015	West Palm Beach		7,500		2,324		5,176		2,267
8/5/2015	Sarasota		4,792		1,054		3,738		1,018
11/17/2015	Chicago		6,808		1,394		5,414		1,327
12/23/2015	Miami		17,733		5,753		11,980		5,422
		$	36,833	$	10,525	$	26,308	$	10,034
	Subtotal	$	113,327	$	43,863	$	69,464	$	47,223
Operating property loans:
6/19/2015	New Orleans		2,800		2,800		-		2,788
7/7/2015	Newark		3,480		3,480		-		3,496
10/30/2015	Nashville		1,210		1,210		-		1,216
11/10/2015	Sacramento		5,500		5,500		-		5,514
11/24/2015	Nashville		4,968		4,863		105		4,853
12/22/2015	Chicago		2,502		2,295		207		2,311
	Subtotal	$	20,460	$	20,148	$	312	$	20,178
	Total investments	$	133,787	$	64,011	$	69,776	$	67,401

⁽¹⁾ Represents principal balance of loan gross of origination fees

Business Outlook

As of March 31, 2016, we have funded our investments with proceeds from the IPO and concurrent private placement. As of March 31, 2016, we had unrestricted cash of approximately $28.8 million and remaining unfunded commitments of $69.8 million related to our investment portfolio. From our unrestricted cash, the $5.0 million of proceeds from the FirstBank A Note Sale, the $10.0 million of proceeds from the proposed FirstBank A Note Sale, expected repayments on existing loans and anticipated proceeds from other potential capital markets transactions, we believe that we will have sufficient capital to fund our operations for at least the next 12 months. See “ — Recent Developments – Real Estate Venture, FirstBank A Note Sale, and FirstBank A Note Term Sheet.”

We continue to experience robust demand for our capital for the development of state-of-the-art Class A self-storage facilities in top U.S. markets. As of March 31, 2016, we have executed term sheets for investments in 14 separate self-storage development projects for an aggregate capital commitment of up to approximately $139.4 million. On April 15 and 29, 2016, respectively, the SL1 Joint Venture closed on two of these development projects, with an approximately $27.5 million aggregate capital commitment for an approximately 91,000 net rentable square foot self-storage development located in the Washington D.C. MSA and an approximately 71,000 net rentable square foot self-storage development located in the Atlanta MSA. After closing these commitments, our SL1 Joint Venture has approximately $52.8 million in remaining capital to fund the remaining $111.9 million subject to these executed term sheets. We anticipate that substantially all of the remaining capital in the SL1 Venture will be committed by the end of the second quarter of 2016. We currently are evaluating alternatives to fund the remaining investment projects that exceed the available capital provided under the SL1 Venture. In addition to the term sheets that have been executed, we have issued new, unexecuted term sheets for an additional four projects, which term sheets, if executed, could produce capital commitments of an additional $40.4 million. We can provide no assurance that any of the existing or future projects subject to term sheets will produce actual investment commitments or if all term sheets will meet all conditions necessary to consummate investment commitments, and we can provide no assurance that we will have adequate capital to close all such prospective commitments in the future.

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Critical Accounting Policies

There have been no significant changes to our critical accounting policies as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on April 5, 2016.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements affecting the Company is included in Note 2 of the accompanying consolidated financial statements.

Results of Operations

The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and the accompanying notes thereto. We commenced operations on April 1, 2015 upon closing our IPO. Prior to that time, we had no operations; however, the Company incurred a net loss of $0.1 million during the three months ended March 31, 2015 due to organization costs for which we reimbursed our Company’s founder in April 2015. No meaningful results of operations occurred in the period ended March 31, 2015. 

	Three months ended
	March 31, 2016			December 31, 2015			March 31, 2015
Revenues:
Interest income from investments	$	1,143		$	1,008		$	-
Net interest income		1,143			1,008			-
Costs and expenses:
General and administrative expenses reimbursable to Manager		830			810			-
General and administrative expenses		474			656			147
Total general and administrative expenses	$	1,304		$	1,466		$	147
Management fees to Manager		414			414			-
Transaction and other expenses		1,952			-			-
Restructuring costs		7			56			-
Deferred termination fee to Manager		157			156			-
Total costs and expenses	$	3,834		$	2,092		$	147
Operating loss	$	(2,691	)	$	(1,084	)	$	(147	)
Other income:
Change in fair value of investments		3,791			216			-
Other interest income		22			37			-
Total other income	$	3,813		$	253		$	-
Net income (loss)	$	1,122		$	(831	)	$	(147	)

Revenues

Interest income from investments consists of interest earned on development property investments and operating property loans on self-storage properties. Interest rates on the majority of the development property investments and operating property loans are 6.9% per annum. During the three months ended December 31, 2015, interest included $0.2 million related to prepayments. There were no prepayments during the three months ended March 31, 2016.

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Expenses

The following table provides a detail of total general and administrative expenses:

	Three months ended
	March 31, 2016		December 31, 2015
Compensation and benefits	$	766	$	641
Occupancy		112		104
Business development		113		149
Professional fees		210		345
Other		103		227
Total general and administrative expenses	$	1,304	$	1,466

Total general and administrative expenses

Total general and administrative expenses for the three months ended March 31, 2016 were $1.3 million, a decrease of $0.2 million from the three months ended December 31, 2015. The majority of the decrease was comprised of a $135.0 thousand decrease in professional fees as we significantly completed our design of policies and procedures related to our adoption of fair value accounting, and a decrease in other expenses of $124.0 thousand. These decreases were offset by an increase in compensation and benefits of approximately $125.0 thousand due primarily to changes in the estimates of compensation and benefits reimbursable to Manager recorded in the three months ended December 31, 2015. Compensation and benefits included $175.0 thousand and $138.0 thousand of stock-based compensation expense for the three months ended March 31, 2016 and December 31, 2015, respectively.

Transaction and other expenses

The transaction and other expenses of $2.0 million primarily consists of advisory fees and other expenses incurred in connection with the Company’s various financing transactions.

Other operating expenses

The management fee of $0.4 million relates to the fee earned by the Manager pursuant to the management agreement. Restructuring costs relate to remaining lease termination costs incurred by closing the Miami, Florida office. The deferred termination fee to our Manager of $0.2 million represents the accrual over the term of the management agreement of the deferred termination fee payable by our Operating Company in OC Units.

Other income

For the three months ended March 31, 2016 and December 31, 2015, we recorded other income of $3.8 million and $0.3 million, respectively, which primarily relates to the change in fair value of investments. The change in fair value of investments increased due to changes in market yields and entrepreneurial profit adjustments.

Adjusted Earnings

Adjusted Earnings is a measure that is not specifically defined by accounting principles generally accepted in the United States (“GAAP”) and is defined as net income (computed in accordance with GAAP) plus stock-based compensation expense and transaction and other expenses.

Adjusted Earnings should not be considered as an alternative to net income or any other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of liquidity. We believe that Adjusted Earnings is helpful to investors as a starting point in measuring our operational performance, because it excludes various non-cash items included in net income that do not relate to or are not indicative of its operating performance, which can make periodic and peer analyses of operating performance more difficult. The Company’s computation of Adjusted Earnings may not be comparable to other key performance indicators reported by other REITs or real estate companies.

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The following table is a reconciliation of Adjusted Earnings to net income:

	Three months ended
	March 31, 2016		December 31, 2015
Net income (loss)	$	1,122	$	(831	)
Plus: stock-based compensation		175		138
Plus: transaction and other expenses		1,952		-
Adjusted Earnings	$	3,249	$	(693	)

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including commitments to fund our investment portfolio, repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and other general business needs. We will use significant cash to originate our target investments, make distributions to our stockholders and fund our operations.

Liquidity

As of March 31, 2016, the Company had unrestricted cash of $28.8 million and unfunded commitments of $69.8 million related to its investment portfolio, a difference of approximately $41.0 million. On May 3, 2016, the Company terminated negotiations with its proposed credit facility provider under the previously announced term sheet for a proposed $60.0 million credit facility. The Company intends to fund the shortfall of $41.0 million as follows:

a) On April 29, 2016 the Company received $5.0 million of proceeds from the sale of 65.0% senior participations (the “FirstBank A Notes”) in two separate operating property loans.

b) On May 4, 2016 the Company executed a non-binding term sheet for the sale of a 56.4% senior participation to FirstBank in a construction loan, which will provide net proceeds of $10.0 million.

c) On May 9, 2016, the Company received $5.6 million (including prepayment penalty) for the early payoff of an operating property loan.

d) Prior to December 31, 2016, the Company expects full principal repayments on three construction loans in the Chicago, West Palm Beach and Sarasota MSAs with an aggregate principal balance of approximately $19.1 million (of which $14.3 million is unfunded as of March 31, 2016). Each of the self-storage facilities collateralizing these loans is subject to a definitive binding purchase and sale agreement between the developer and a third-party purchaser, containing certain conditions, pursuant to which the financed project is anticipated to be sold and the Company’s loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility. These loans have maturities of either March 1, 2017 or May 31, 2017, subject to acceleration upon a sale of the project. The Company anticipates certificates of occupancy to be issued for all three facilities between September 1, 2016 and December 31, 2016.

e) As of March 31, 2016, the Company has development property investments (with profits interests) of an aggregate of $33.3 million of funded principal, with a total aggregate investment commitment of $76.5 million. The Company has additional operating property loans (excluding such loans described in (a) and (c) above) with an aggregate funded principal balance of $7.0 million. The Company believes, based on the nature of these investments and current market conditions in the self-storage real estate sector, that it could successfully sell senior participations in these loans at 50% or more of the total investment commitment which would provide funding of at least approximately $41.0 million.

Additionally, the Company could generate additional cash to fund its remaining unfunded commitments by one or more of the following means: (1) reducing general and administrative expenses (primarily marketing, travel, and certain cash compensation expenses); (2) issuing common and/or preferred stock in public or private offerings (which could be at prices dilutive to current stockholders or at cumulative yields that are in excess of the Company’s current dividend yield on our common stock); and/or (3) reducing or eliminating the Company’s dividend. Based on the above, the Company believes it is likely that it can successfully implement the aforementioned plan in meeting funding commitments for at least the next twelve months. If the Company is unable to complete the aforementioned planned transactions and actions, it could impact its ability to realize its assets at their recorded values, specifically the Company’s development property investments and operating property loans, and to meet its funding commitments in the normal course of business.

In the future, our primary sources of cash will generally consist of the net proceeds of future financings, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results. We expect that our primary sources of financing will be, to the extent available to us, through (a) senior participations or A note sales, (b) other sources of private financing, which may include private placements of equity or debt securities and/or joint ventures, (c) public offerings of our equity or debt securities, and (d) credit facilities. In the future, we may utilize other sources of financing to the extent available to us.

Cash Flows

The following table sets forth changes in cash and cash equivalents:

	Three months ended
	March 31, 2016
Net income	$	1,122
Adjustments to reconcile net income to net cash used in operating activities		(2,624	)
Net cash used in operating activities		(1,502	)
Net cash used in investing activities		(11,399	)
Net cash used in financing activities		(2,157	)
Change in cash and cash equivalents	$	(15,058	)

Cash decreased by $15.1 million during the three months ended March 31, 2016. Net cash used in operating activities totaled $1.5 million during the three months ended March 31, 2016. The primary components of cash used in operating activities were net income of $1.1 million, an increase of $1.6 million for changes in operating assets and liabilities, and an increase in other noncash adjustments to net income of approximately $0.3 million. These increases were offset by interest capitalized on outstanding loans of $0.7 million and change in fair value of investments of $3.8 million.

Net cash used in investing activities for the three months ended March 31, 2016 totaled $11.4 million, and related primarily to the funding of additional principal on existing investments.

Net cash used by financing activities for the three months ended March 31, 2016 totaled $2.2 million related to dividends paid.

Equity Capital Policies

Subject to applicable law, our board of directors has the authority, without further stockholder approval, to issue additional authorized common stock and preferred stock or otherwise raise capital, including through the issuance of senior securities, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property. Stockholders will have no preemptive right to additional shares issued in any offering, and any offering may cause a dilution of your investment.

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Leverage Policies

As of March 31, 2016 we have funded our loan portfolio exclusively with the proceeds of the IPO and the concurrent private placement. In the future, we may utilize equity raised in follow-on offerings and/or borrowing against our target investments in accordance with our investment guidelines in order to increase the size of our loan portfolio and potential return to stockholders. Our investment guidelines state that our leverage will generally not exceed 50% of the total value of our loan portfolio. We may borrow up to 100% of the principal value of certain development property loans. Our actual leverage will depend on our mix of loans. Our charter and bylaws do not limit the amount of indebtedness we can incur, and our board of directors has discretion to deviate from or change our investment guidelines at any time. We will use corporate leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates. Our financing strategy focuses on the use of match-funded financing structures. This means that we will seek to match the maturities and/or repricing schedules of our financial obligations with those of our loan portfolio to minimize the risk that we will have to refinance our liabilities prior to the maturities of our loans and to reduce the impact of changing interest rates on earnings. We will disclose any material changes to our leverage policies in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the quarterly report on Form 10-Q or annual report on Form 10-K for the period in which the change is made, or in a Current Report on Form 8-K if required by the rules of the SEC or the board of directors deems it advisable, in its sole discretion.  

Future Revisions in Policies and Strategies

The board of directors has the power to modify or waive our investment policies and strategies without the consent of our stockholders to the extent that the board of directors (including a majority of our independent directors) determines that a modification or waiver is in the best interest of our stockholders. Among other factors, developments in the market that either affect the policies and strategies mentioned herein or that change our assessment of the market may cause our board of directors to revise our policies and strategies.

Contractual Obligations and Commitments

The following table reflects our total contractual cash obligations, which consist primarily of operating leases:

	As of March 31, 2016
2016	$	216
2017		295
2018		206
2019		2
2020		2
Total	$	721

At March 31, 2016, the Company had $69.8 million of unfunded loan commitments related to its investment portfolio. These commitments are funded over the 18-24 months following the investment closing date as construction is completed. At March 31, 2016, the Company had $1.0 million of unfunded loan commitments related to four revolving loan agreements. See “ — Liquidity and Capital Resources – Liquidity.”

As of March 31, 2016, we had unrestricted cash of approximately $28.8 million.

Off-Balance Sheet Arrangements

At March 31, 2016 and 2015, we did not have any relationships, including those with unconsolidated entities or financial partnerships, for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

Our investment in real estate venture is recorded using the equity method as we do not have a controlling interest.

Dividends

For the quarter ended March 31, 2016, we declared a cash dividend to our stockholders of $0.35 per share, payable on April 15, 2016 to stockholders of record on April 1, 2016. We intend to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT annually distribute at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. We intend to pay regular quarterly dividends to our stockholders in an amount equal to or greater than our net taxable income, if and to the extent authorized by our Board of Directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on any secured funding facilities, other lending facilities, repurchase agreements and other debt payable. If our cash available for distribution is less than our net taxable income, we could be required to reduce our dividends, sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. In addition, prior to the time we have fully deployed the net proceeds of the IPO and private placement to originate our target investments, we may fund quarterly distributions out of such net proceeds.

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Inflation

Virtually all of our assets and liabilities will be interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and our distributions will be determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification; in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.

There have been no material changes in our credit risk, interest rate risk, interest rate mismatch risk, or real estate risks from what was disclosed in the Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on April 5, 2016.

Market Risk

Our development property investments and operating property loans generally will be reflected at their estimated fair value, with changes in fair market value recorded in our income. The estimated fair value of these investments fluctuates primarily due to changes in interest rates, capitalization rates, and other factors. Generally, in a rising interest rate environment, the estimated fair value of the fixed-rate securities would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of the fixed-rate securities would be expected to increase. As market volatility increases or liquidity decreases, the fair value of our investments may be adversely impacted. If we are unable to readily obtain independent pricing to validate our estimated fair value of any loan investment in our portfolio, the fair value gains or losses recorded in income may be adversely affected.

The following fluctuations in the market yields/discount rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in market yields/discount rates (in millions)	March 31, 2016			December 31, 2015
Up 100 basis points	$	(2.3	)	$	(1.6	)
Down 50 basis points, subject to a minimum yield/rate of 10 basis points		1.2			0.8

The following fluctuations in the capitalization rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in capitalization rates (in millions)	March 31, 2016			December 31, 2015
Up 100 basis points	$	(1.1	)	$	(0.3	)
Down 100 basis points		1.6			0.4

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. The controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer, President and Chief Operating Officer, and Chief Financial Officer. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this quarterly report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that material information related to our company and our consolidated subsidiaries is made known to management, including the Chief Executive Officer and Chief Financial Officer.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

37

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently involved in any legal proceedings.

ITEM 1A. RISK FACTORS

The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015, which describes various risks and uncertainties to which we are or may be subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows and prospects in a material adverse manner.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS FROM REGISTERED SECURITIES

Unregistered Sales of Equity Securities

None.

Use of Proceeds from Registered Securities

38

On April 1, 2015, we completed the IPO, pursuant to which we sold 5,000,000 shares of our common stock at a price per share of $20 and generated gross proceeds of $100.0 million. On April 9, 2015, we sold an additional 750,000 shares of our common stock at a price per share of $20 to the underwriters of the initial public offering pursuant to the underwriters’ option to purchase additional shares. The aggregate net proceeds to us in the IPO, including the overallotment shares, after deducting the underwriting discount and commissions and expenses payable by us, were approximately $105.0 million. All of the shares were sold pursuant to our registration statement on Form S-11, as amended (File No. 333-203185), that was declared effective by the SEC on March 26, 2015. Raymond James & Associates, Inc. served as the book-running manager for the offering. Robert W. Baird & Co. Incorporated and Wunderlich Securities, Inc. served as co-managers.

As of May 9, 2016, the net proceeds from the IPO had been used as follows: (i) approximately $277,000 to reimburse Mr. Jernigan for amounts advanced or incurred in connection with the IPO and organization costs; (ii) net funding of loan transactions of approximately $75.0 million, and (iii) approximately $8.6 million in dividends to shareholders. The remaining net proceeds will be used for funding loan commitments, paying the Manager’s fees, general corporate purposes, including working capital, and, distributions to the Company’s stockholders.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

The exhibits listed in the accompanying Exhibit Index, which is incorporated herein by reference, are filed or furnished as part of this Quarterly Report on Form 10-Q.

39

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		JERNIGAN CAPITAL, INC.
Date: May 10, 2016	By:	/s/ Dean Jernigan
		Dean Jernigan
		Chairman and Chief Executive Officer (Principal Executive Officer)
Date: May 10, 2016	By:	/s/ William C. Drummond
		William C. Drummond
		Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

40

EXHIBIT INDEX

Exhibit Number	Exhibit Description
10.1	Limited Liability Company Agreement of Jernigan Capital Operating Company, LLC, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 5, 2016.
10.2	Limited Liability Company Agreement of Storage Lenders LLC, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on March 11, 2016.
31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Financial Officer
32.1*	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

*This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

41

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dean Jernigan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Jernigan Capital, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [Language omitted in accordance with SEC Release Nos. 34-47986 and 34-54942] for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	[Language omitted in accordance with SEC Release Nos. 34-47986 and 34-54942];

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2016	/s/ DEAN JERNIGAN
	Dean Jernigan
	Chairman of the Board and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William C. Drummond, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Jernigan Capital, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [Language omitted in accordance with SEC Release Nos. 34-47986 and 34-54942] for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	[Language omitted in accordance with SEC Release Nos. 34-47986 and 34-54942];

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2016	/s/ WILLIAM C. DRUMMOND
	William C. Drummond
	Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jernigan Capital, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dean Jernigan, the Chairman and Chief Executive Officer of the Company, and I, William C. Drummond, the Senior Vice President and Chief Financial Officer of the Company, certify, to our knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2016	/s/ DEAN JERNIGAN
	Dean Jernigan
	Chairman of the Board and Chief Executive Officer

/s/ WILLIAM C. DRUMMOND

William C. Drummond

Senior Vice President and Chief Financial Officer

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 10, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Entity Registrant Name	Jernigan Capital, Inc.
Entity Central Index Key	0001622353
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Trading Symbol	JCAP
Entity Common Stock, Shares Outstanding		6,162,500

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Assets:
Cash and cash equivalents	$ 28,801	$ 43,859
Development property investments at fair value	47,223	40,222
Operating property loans at fair value	20,178	19,600
Investment in real estate venture	7,919	0
Prepaid expenses and other assets	2,128	1,485
Fixed assets, net	245	261
Total assets	106,494	105,427
Liabilities:
Due to Manager	674	698
Accounts payable, accrued expenses and other liabilities	2,602	808
Dividends payable	2,157	2,157
Total liabilities	5,433	3,663
Jernigan Capital, Inc. stockholders' equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding at March 31, 2016 and December 31, 2015;	0	0
Common stock, $0.01 par value, 500,000,000 shares authorized at March 31, 2016 and December 31, 2015; 6,162,500 issued and outstanding at March 31, 2016 and December 31, 2015	62	62
Additional paid-in capital	110,809	110,634
Accumulated deficit	(10,431)	(9,396)
Total Jernigan Capital, Inc. stockholders' equity	100,440	101,300
Non-controlling interests	621	464
Total equity	101,061	101,764
Total liabilities and equity	$ 106,494	$ 105,427

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Preferred Stock, Par Value (in dollars per share)	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	100,000,000	100,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par Value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, Shares Authorized	500,000,000	500,000,000
Common Stock, Shares Issued	6,162,500	6,162,500
Common Stock, Shares Outstanding	6,162,500	6,162,500

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Interest income from investments	$ 1,143	$ 0
Net interest income	1,143	0
Costs and expenses:
General and administrative expenses reimbursable to Manager	830	0
General and administrative expenses	474	147
Management fees to Manager	414
Transaction and other expenses	1,952	0
Restructuring costs	7	0
Deferred termination fee to Manager	157	0
Total costs and expenses	3,834	147
Operating loss	(2,691)	(147)
Other income:
Change in fair value of investments	3,791	0
Other interest income	22	0
Other income, Total	3,813	0
Net income (loss)	$ 1,122	$ (147)
Basic earnings per share attributable to common stockholders	$ 0.18
Diluted earnings per share attributable to common stockholders	0.18
Dividends declared per share of common stock	$ 0.35	$ 0

XML

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total Stockholders' Equity [Member]	Non-Controlling Interests [Member]
Balance at Dec. 31, 2014	$ 1	$ 0	$ 1	$ 0	$ 1	$ 0
Balance (in shares) at Dec. 31, 2014		1,000
Stock-based compensation	0
Deferred termination fee to Manager	0
Dividends declared	0
Net Income (loss)	(147)	$ 0	0	(147)	(147)	0
Balance at Mar. 31, 2015	(146)	$ 0	1	(147)	(146)	0
Balance (in shares) at Mar. 31, 2015		1,000
Balance at Dec. 31, 2015	101,764	$ 62	110,634	(9,396)	101,300	464
Balance (in shares) at Dec. 31, 2015		6,162,500
Stock-based compensation	175	$ 0	175	0	175	0
Deferred termination fee to Manager	157	0	0	0	0	157
Dividends declared	(2,157)	0	0	(2,157)	(2,157)	0
Net Income (loss)	1,122	0	0	1,122	1,122	0
Balance at Mar. 31, 2016	$ 101,061	$ 62	$ 110,809	$ (10,431)	$ 100,440	$ 621
Balance (in shares) at Mar. 31, 2016		6,162,500

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities
Net income (loss)	$ 1,122	$ (147)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Interest capitalized on outstanding loans	(730)	0
Change in fair market value of investments	(3,791)	0
Stock-based compensation	175	0
Deferred termination fee to Manager	157	0
Depreciation	18	0
Accretion of origination fees	(38)	0
Changes in operating assets and liabilities:
Other assets	(174)	0
Due to Manager	(24)	147
Accounts payable, accrued expenses, and other liabilities	1,783	0
Net cash used in operating activities	(1,502)	0
Cash flows from investing activities
Purchase of fixed assets	(1)	0
Capitalized real estate venture costs	(226)	0
Funding of investments - Development property investments	(10,551)	0
Funding of investments - Operating property loans	(165)	0
Funding of investments - Other loans	(456)	0
Net cash used in investing activities	(11,399)	0
Cash flows from financing activities
Dividends paid	(2,157)	0
Net cash provided by financing activities	(2,157)	0
Net change in cash and cash equivalents	(15,058)	0
Cash and cash equivalents at the beginning of the period	43,859	1
Cash and cash equivalents at the end of the period	28,801	1
Supplemental disclosure of non-cash activities:
Dividends declared	2,157	0
Contribution of assets to real estate venture	$ 7,693	$ 0

XML

ORGANIZATION AND FORMATION OF THE COMPANY

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. ORGANIZATION AND FORMATION OF THE COMPANY

Jernigan Capital, Inc. (together with its consolidated subsidiaries, the “Company”) makes debt and equity investments in newly-constructed and existing self-storage facilities. The Company is a Maryland corporation that was organized on October 1, 2014. The Company closed its initial public offering of its common stock (the “IPO”) on April 1, 2015, and has used proceeds of the IPO primarily to fund real estate loans to private developers, owners and operators of self-storage facilities. The Company is structured as an Umbrella Partnership REIT (“UPREIT”) and conducts its investment activities through its operating company, Jernigan Capital Operating Company, LLC (the “Operating Company”).

The Company intends to elect to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986 (the “Code”), as amended. As a REIT, the Company generally will not be subject to U.S. federal income taxes on REIT taxable income, determined without regard to the deduction for dividends paid and excluded capital gains, to the extent that it annually distributes all of its REIT taxable income to stockholders and complies with various other requirements for qualification as a REIT set forth in the Code.

XML

SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying interim consolidated financial statements include all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods included therein. Substantially all operations are conducted through the Operating Company, and all significant intercompany transactions and balances have been eliminated in consolidation.

Liquidity

As of March 31, 2016, the Company had unrestricted cash of $28.8 million and unfunded commitments of $69.8 million related to its investment portfolio, a difference of approximately $41.0 million. On May 3, 2016, the Company terminated negotiations with its proposed credit facility provider under the previously announced term sheet for a proposed $60.0 million credit facility. The Company intends to fund the shortfall of $41.0 million as follows:

a) On April 29, 2016 the Company received $5.0 million of proceeds from the sale of 65.0% senior participations (the “FirstBank A Notes”) in two separate operating property loans. See Note 12, Subsequent Events.

b) On May 4, 2016 the Company executed a non-binding term sheet for the sale of a 56.4% senior participation to FirstBank in a construction loan, which will provide net proceeds of $10.0 million. See Note 12, Subsequent Events.

c) On May 9, 2016, the Company received $5.6 million (including prepayment penalty) for the early payoff of an operating property loan.

d) Prior to December 31, 2016, the Company expects full principal repayments on three construction loans in the Chicago, West Palm Beach and Sarasota MSAs with an aggregate principal balance of approximately $19.1 million (of which $14.3 million is unfunded as of March 31, 2016). Each of the self-storage facilities collateralizing these loans is subject to a definitive binding purchase and sale agreement between the developer and a third-party purchaser, containing certain conditions, pursuant to which the financed project is anticipated to be sold and the Company’s loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility. These loans have maturities of either March 1, 2017 or May 31, 2017, subject to acceleration upon a sale of the project. The Company anticipates certificates of occupancy to be issued for all three facilities between September 1, 2016 and December 31, 2016.

e) As of  March 31, 2016, the Company has development property investments (with profits interests) of an aggregate of $33.3 million of funded principal, with a total aggregate investment commitment of $76.5 million. The Company has additional operating property loans (excluding such loans described in (a) and (c) above) with an aggregate funded principal balance of $7.0 million. The Company believes, based on the nature of these investments and current market conditions in the self-storage real estate sector, that it could successfully sell senior participations in these loans at 50% or more of the total investment commitment which would provide funding of  at least approximately $41.0 million.

Additionally, the Company could generate additional cash to fund its remaining unfunded commitments by one or more of the following means: (1) reducing general and administrative expenses (primarily marketing, travel, and certain cash compensation expenses); (2) issuing common and/or preferred stock in public or private offerings (which could be at prices dilutive to current stockholders or at cumulative yields that are in excess of the Company’s current dividend yield on our common stock); and/or (3) reducing or eliminating the Company’s dividend. Based on the above, the Company believes it is likely that it can successfully implement the aforementioned plan in meeting funding commitments for at least the next twelve months. If the Company is unable to complete the aforementioned planned transactions and actions, it could impact its ability to realize its assets at their recorded values, specifically the Company’s development property investments and operating property loans, and to meet its funding commitments in the normal course of business.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Variable Interest Entities

The Company invests in entities that may qualify as variable interest entities (“VIEs”). A VIE is a legal entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. Management bases the qualitative analysis on its review of the design of the entity, its organizational structure including allocation of decision-making authority and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. Management reassesses the initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party that, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the Company’s business activities and the other interests. Management reassesses the determination of whether the Company is the primary beneficiary of a VIE each reporting period.

Equity Investments

Investments in real estate ventures and entities over which the Company exercises significant influence but not control are accounted for using the equity method. In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825-10”), issued by the Financial Accounting Standards Board (“FASB”), the Company has elected the fair value option of accounting for its development property investments, which are equity method investments. The Company’s investment in real estate venture is an equity method investment that is accounted for under the equity method of accounting.

Loan Investments and Election of Fair Value Option of Accounting for Loan Investments

The Company has elected the fair value option of accounting for all of its investment portfolio loan investments, including those that are required under GAAP to be accounted for under the equity method, in order to provide better transparency into the Company’s revenues and value inherent in the Company’s equity participation in development projects. Changes in the fair value of these investments are recorded in change in fair value of investments within other income. All direct loan costs are charged to expense as incurred.

Each loan investment is evaluated for impairment on a periodic basis. A loan will be considered impaired when, based on current information and events, it is probable that the loan will not be collected according to the contractual terms of the loan agreement. Factors to be considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. At March 31, 2016 and December 31, 2015, there were no loans in default.

Fair Value Measurement

The Company carries certain financial instruments at fair value because it has elected to apply the fair value option on an instrument by instrument basis under ASC 825-10. The Company’s financial instruments consist of cash, development property investments (which are typically comprised of a first mortgage loan, a mezzanine loan, and a 49.9% profits interest in the development project), operating property loans (loans secured by operating properties), the investment in real estate venture, certain other assets, receivables and payables.

 

The following table presents the financial instruments measured at fair value on a recurring basis at March 31, 2016:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	47,223	$	-	$	-	$	47,223
Operating property loans		20,178		-		-		20,178
Total investments	$	67,401	$	-	$	-	$	67,401

The following table presents the financial instruments measured at fair value on a recurring basis at December 31, 2015:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	40,222	$	-	$	-	$	40,222
Operating property loans		19,600		-		-		19,600
Total investments	$	59,822	$	-	$	-	$	59,822

Estimating fair value requires the use of judgment. The types of judgments involved depend upon the availability of observable market information. Management’s judgments include determining the appropriate valuation model to use, estimating unobservable inputs and applying valuation adjustments. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions, as well as the election of the fair value option for certain financial instruments.

Cash and Cash Equivalents

Cash, investments in money market accounts and certificates of deposit with original maturities of three months or less are considered to be cash equivalents. The Company places its cash and cash equivalents primarily with a single financial institution and, at times, cash held may exceed the Federal Deposit Insurance Corporation insurance limit. 

Prepaid Expenses and Other Assets

The Company’s prepaid expenses and other assets balance at March 31, 2016 includes principal balances for four revolving loan agreements and one mortgage loan. The Company’s prepaid expenses and other assets balance at December 31, 2015 includes principal balances for three revolving loan agreements and one mortgage loan. Because these loans are not part of the Company’s core investment portfolio, these loans are accounted for under the cost method.

Fixed Assets

Fixed assets are recorded at cost and consist of furniture, office and computer equipment, and software. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from three to seven years. Fixed assets are generally purchased by the Manager and then reimbursed by the Company. As a result, depreciation expense is included in general and administrative expenses reimbursable to Manager in the Consolidated Statement of Operations. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is included in income.

Revenue recognition

Interest income is recognized as earned on a simple interest basis and is reported in interest income from investments in the Consolidated Statement of Operations. Accrual of interest will be discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. The Company will recognize income on impaired loans when they are placed into non-accrual status on a cash basis when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. If these factors do not exist, the Company will not recognize income on such loans. Accrued interest generally is reversed when a loan is placed on non-accrual status.

The Company’s loan origination fees are accreted into interest income over the term of the investment using the effective yield method.

Transaction and other expenses

Transaction and other expenses consist of $2.0 million of advisory fees and other expenses incurred in connection with various financing transactions and investment transactions and are expensed as incurred.

Offering Costs

Underwriting commissions and offering costs incurred in connection with the Company’s stock offerings are reflected as a reduction of additional paid-in capital. Offering costs represent professional fees, fees paid to various regulatory agencies, and other costs incurred in connection with the registration and sale of the Company’s common stock.

Organization Costs

Costs incurred to organize the Company were expensed as incurred.

Restructuring Costs

Restructuring costs consist of severance and benefits costs, lease termination costs, and other costs incurred by the Company in conjunction with consolidating its offices and moving its corporate headquarters. The Company recognizes these severance and other charges when the requirements of ASC 420, Exit or Disposal Cost Obligations (“ASC 420”), have been met regarding a plan of termination and when communication has been made to employees. All restructuring activities were completed during the quarter ended September 30, 2015.

Income Taxes

The Company intends to elect to be taxed as a REIT and to comply with the related provisions of the Code commencing with its taxable year ended December 31, 2015. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. The Company had no taxable income for the three months ended March 31, 2016 and March 31, 2015. To qualify as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements.

Earnings per Share (“EPS”)

Basic EPS includes only the weighted average number of common shares outstanding during the period. Diluted EPS includes the weighted average number of common shares and the dilutive effect of restricted stock and redeemable Operating Company units when such instruments are dilutive.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are treated as participating in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted EPS must be applied.

Comprehensive Income

For the three months ended March 31, 2016 and March 31, 2015, comprehensive income equaled net income; therefore, a separate Consolidated Statement of Comprehensive Income is not included in the accompanying consolidated financial statements.

Segment Reporting

The Company does not evaluate performance on a relationship specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

Recent Accounting Pronouncements

In February 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis. This ASU amends the assessment of whether a limited partnership or limited liability company is a variable interest entity; the effect that fees paid to a decision maker have on the consolidation analysis; how variable interests held by a reporting entity’s related parties or de facto agents affect its consolidation conclusion; and for entities other than limited partnerships and limited liability companies, clarifies how to determine whether the equity holders as a group have power over an entity. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption being allowed. The Company early adopted the provisions of this ASU in 2015, and there was no impact on our consolidated financial statements as a result of the adoption.

In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This guidance simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related debt liability, consistent with debt discount or premiums. The recognition guidance for debt issuance costs is not affected by amendments in this update, which is effective for annual reporting periods beginning after December 15, 2015. The adoption did not have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2016. In August 2015, the FASB extended the effective date by one year to years beginning on and after December 15, 2017. The standard may be adopted as early as the original effective date but early adoption prior to that date is not permitted. This ASU outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable) and, if so, disclose that fact. This ASU is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements and disclosures.

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INVESTMENTS

3 Months Ended

Mar. 31, 2016

Schedule of Investments [Abstract]

Investment Holdings, Schedule of Investments [Text Block]

3. INVESTMENTS

The Company’s self-storage investments at March 31, 2016 consist of the following:

· Development Property Investments - The Company had 11 investments totaling an aggregate committed principal amount of approximately $76.5 million to finance the ground-up construction of, or conversion of existing buildings into, self-storage facilities. Each development property investment is funded over time as the developer constructs the project. Each development property investment is typically comprised of a first mortgage loan, a mezzanine loan, and a 49.9% interest in the positive cash flows (including the sale and refinancing proceeds after debt repayment) of the project. The loans are secured by the first mortgages on the projects and first priority security interests in the membership interests of the owners of the projects. Loans comprising development property investments are non-recourse with customary carve-outs and subject to completion guaranties, are interest-only with a fixed interest rate of 6.9% per annum and have a term of 72 months.

The Company also had four construction loan investments totaling an aggregate committed principal amount of approximately $36.8 million, each of which has a term of 18 months. Each construction loan is interest-only at a fixed interest rate of 6.9% per annum, has no equity participation and is secured by a first priority mortgage or deed of trust on the project. Each of these construction loans is subject to a purchase and sale agreement between the developer and a third-party purchaser, containing certain conditions, pursuant to which the financed project is anticipated to be sold and our loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility.

· Operating property loans - The Company had six term loans totaling $20.5 million of aggregate committed principal amount, the proceeds of which were used by borrowers to finance the acquisition of, refinance existing indebtedness on, or recapitalize operating self-storage facilities. These loans are secured by first mortgages on the projects financed, are interest-only with a fixed interest rate ranging from 5.85% to 6.9% per annum, and generally have a term of 72 months.

The Company’s development property investments and operating property loans are collectively referred to herein as the Company’s investment portfolio.

As of March 31, 2016, the aggregate committed principal amount of the Company’s investment portfolio was approximately $133.8 million and outstanding principal was $64.0 million, as described in more detail in the table below:

Closing Date	Metropolitan Statistical Area ("MSA")	Total Investment Commitment		Funded Investment (1)		Remaining Unfunded Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando	$	5,372	$	4,356	$	1,016	$	5,383
6/10/2015	Atlanta		8,132		6,164		1,968		7,000
6/19/2015	Tampa		5,369		4,520		849		4,863
6/26/2015	Atlanta		6,050		4,199		1,851		5,057
6/29/2015	Charlotte		7,624		2,657		4,967		3,202
7/2/2015	Milwaukee		7,650		2,677		4,973		2,645
7/31/2015	New Haven		6,930		1,810		5,120		1,810
8/10/2015	Pittsburgh		5,266		1,688		3,578		1,711
8/14/2015	Raleigh		8,998		1,072		7,926		995
9/30/2015	Jacksonville		6,445		3,330		3,115		3,738
10/27/2015	Austin		8,658		865		7,793		785
		$	76,494	$	33,338	$	43,156	$	37,189
Construction loans:
8/5/2015	West Palm Beach		7,500		2,324		5,176		2,267
8/5/2015	Sarasota		4,792		1,054		3,738		1,018
11/17/2015	Chicago		6,808		1,394		5,414		1,327
12/23/2015	Miami		17,733		5,753		11,980		5,422
		$	36,833	$	10,525	$	26,308	$	10,034
	Subtotal	$	113,327	$	43,863	$	69,464	$	47,223
Operating property loans:
6/19/2015	New Orleans		2,800		2,800		-		2,788
7/7/2015	Newark		3,480		3,480		-		3,496
10/30/2015	Nashville		1,210		1,210		-		1,216
11/10/2015	Sacramento		5,500		5,500		-		5,514
11/24/2015	Nashville		4,968		4,863		105		4,853
12/22/2015	Chicago		2,502		2,295		207		2,311
	Subtotal	$	20,460	$	20,148	$	312	$	20,178
	Total investments	$	133,787	$	64,011	$	69,776	$	67,401

⁽¹⁾ Represents principal balance of loan gross of origination fees

The following table provides a reconciliation of the funded principal to the fair market value of investments at March 31, 2016:

Funded principal	$	64,011
Adjustments:
Unamortized origination fees		(1,273	)
Net increase in fair value of investments		4,663
Fair value of investments	$	67,401

As of December 31, 2015, the aggregate committed principal amount of the Company’s investment portfolio was approximately $175.7 million and outstanding principal was $60.7 million, as described in more detail in the table below:

Closing Date	Metropolitan Statistical Area ("MSA")	Total Investment Commitment		Funded Investment (1)		Remaining Unfunded Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando	$	5,372	$	3,254	$	2,118	$	3,400
5/14/2015	Miami (2)		13,867		2,258		11,609		2,115
5/14/2015	Miami (2)		14,849		3,076		11,773		2,929
6/10/2015	Atlanta		8,132		4,723		3,409		4,829
6/19/2015	Tampa		5,369		3,720		1,649		3,820
6/26/2015	Atlanta		6,050		2,799		3,251		2,823
6/29/2015	Charlotte		7,624		1,124		6,500		1,554
7/2/2015	Milwaukee		7,650		2,529		5,121		2,463
7/31/2015	New Haven		6,930		997		5,933		960
8/10/2015	Pittsburgh		5,266		1,542		3,724		1,542
8/14/2015	Raleigh		8,998		1,026		7,972		934
9/25/2015	Fort Lauderdale (2)		13,230		2,144		11,086		2,009
9/30/2015	Jacksonville		6,445		1,213		5,232		1,180
10/27/2015	Austin		8,658		800		7,858		708
		$	118,440	$	31,205	$	87,235	$	31,266
Construction loans:
8/5/2015	West Palm Beach		7,500		2,011		5,489		1,951
8/5/2015	Sarasota		4,792		1,036		3,756		998
11/17/2015	Chicago		6,808		775		6,033		706
12/23/2015	Miami		17,733		5,655		12,078		5,301
		$	36,833	$	9,477	$	27,356	$	8,956
	Subtotal	$	155,273	$	40,682	$	114,591	$	40,222
Operating property loans:
6/19/2015	New Orleans		2,800		2,800		-		2,736
7/7/2015	Newark		3,480		3,480		-		3,416
10/30/2015	Nashville		1,210		1,210		-		1,192
11/10/2015	Sacramento		5,500		5,500		-		5,401
11/24/2015	Nashville		4,968		4,863		105		4,755
12/22/2015	Chicago		2,502		2,130		372		2,100
	Subtotal	$	20,460	$	19,983	$	477	$	19,600
	Total investments	$	175,733	$	60,665	$	115,068	$	59,822

⁽¹⁾ Represents principal balance of loan gross of origination fees

⁽²⁾ These development property investments (having approximately $8.1 million of outstanding principal balances as of the time of contribution on March 31, 2016) were contributed to the SL1 Venture (defined in Note 5, Investment in Real Estate Venture) in partial satisfaction of our required $12.2 million capital commitment to the SL1 Venture. See Note 5, Investment in Real Estate Venture.

The following table provides a reconciliation of the funded principal to the fair market value of investments at December 31, 2015:

Funded principal	$	60,665
Adjustments:
Unamortized origination fees		(1,715	)
Net increase in fair value of investments		872
Fair value of investments	$	59,822

The Company has elected the fair value option of accounting for all of its investment portfolio investments in order to provide better transparency into its revenues and value inherent in its equity participation in development projects. See Note 4,  Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions.

No loans are in non-accrual status as of March 31, 2016 and December 31, 2015.

All of the Company’s development property investments with a profits interest would have been accounted for under the equity method had the Company not elected the fair value option. For the development property investments with a profits interest, the assets and liabilities of the equity method investees approximate $41.8 million and $33.3 million, respectively, at March 31, 2016 and approximate $44.4 million and $31.2 million, respectively, at December 31, 2015. These investees had no significant revenues or expenses for the three months ended March 31, 2016 since the development properties were all under construction during that period.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value option under ASC 825-10 allows companies to elect to report selected financial assets and liabilities at fair value. The Company has elected the fair value option for its development property investments and operating property loan investments because it believes such accounting provides investors and others relying on the Company’s financial statements with a more transparent view of its revenues and value inherent in its equity participation in self-storage development projects.

The Company applies ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820 defines fair value as the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820 requires the Company to assume that the investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company has considered its principal market as the market for the purchase and sale of self-storage properties, which the Company believes would be the most likely market for the Company’s loan investments given the nature of the collateral securing such loans and the types of borrowers. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820, these inputs are summarized in the three broad levels listed below:

Level 1 -	Quoted prices for identical assets or liabilities in an active market.
Level 2 -	Financial assets and liabilities whose values are based on the following: (i) Quoted prices for similar assets or liabilities in active markets; (ii) Quoted prices for identical or similar assets or liabilities in non-active markets; (iii) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 -	Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

The carrying values of cash, certain other assets, receivables and payables approximate their fair values due to their short-term nature. These instruments are categorized as Level 1 instruments in the measurement of fair value. The below table summarizes the valuation techniques and inputs used to measure the fair value of items categorized in Level 3 of the fair value hierarchy.

Instrument	Valuation technique and assumptions		Hierarchy classification
Development property investments		Valuations are based using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date.		Level 3
Development property investments with a profits interest (a)		Valuations are based using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests. An option-pricing method (OPM) framework is utilized to calculate the value of the profits interests.		Level 3
Operating property loans		Valuations are based using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable.		Level 3

(a) Certain of the Company's development property investments include profits interests.

The Company’s development property investments and operating property loan investments are valued using two different valuation techniques based on the early stage of the Company’s investments. The first valuation technique is an income approach analysis of the debt instrument components of the Company’s investments. The second valuation technique is an option pricing model that is used to determine the fair value of any profits interests associated with an investment. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests. At the issuance date of each development property investment, generally the value of the property underlying such investment approximates the sum of the net investment drawn amount plus the developer’s equity investment.

For development property investments with a profits interest, at a certain stage of construction, the option pricing method incorporates an adjustment to measure entrepreneurial profit. Entrepreneurial profit is a monetary return above total construction costs that provides compensation for the risk of a development project. Under this method, the value of each property is estimated based on the cost incurred to date, plus an estimated earned entrepreneurial profit.  Total entrepreneurial profit is estimated as the difference between the projected value of a property at stabilization and the total development costs, including land, building improvements, and lease-up costs.  Utilizing information obtained from the market coupled with the Company’s own experience, the Company has estimated that in most cases, approximately one-third of the entrepreneurial profit is earned during the construction period beginning when construction is approximately 40% complete and ending when construction is 100% complete, and approximately two-thirds of the entrepreneurial profit is earned from construction completion through stabilization. For properties between 40% and 100% complete, the Company has estimated the entrepreneurial profit adjustment to the enterprise value input used in the option pricing model to be equal to one-third of the estimated entrepreneurial profit, allocated on a straight-line basis. No properties have reached construction completion at March 31, 2016. For the Company’s development property investments at or around completion of construction, a discounted cash flow model will be the primary method for projecting value of a project. The Company also will consider inputs such as appraisals which differ from the developer’s equity investment, bona fide third-party offers to purchase development projects, sales of development projects, or sales of comparable properties in its markets.

 

Level 3 Fair Value Measurements

The following table summarizes the significant unobservable inputs the Company used to value its investments categorized within Level 3 as of March 31, 2016 and December 31, 2015. The table is not intended to be all-inclusive, but instead to capture the significant unobservable inputs relevant to the Company’s determination of fair values.

As of March 31, 2016
		Unobservable Inputs
Asset Category	Primary Valuation Techniques	Input	Estimated Range			Weighted Average
Development property investments	Income approach analysis	Market yields/ discount rate		7.73 - 9.00	%		8.51	%
		Exit date		0.92 - 3.58 years			2.86 years
Development property investments with a profits interest (a)	Option pricing model	Volatility		73.39 – 74.07	%		73.74	%
		Exit date		3.06 - 3.58 years			3.25 years
		Capitalization rate (b)		5.50 – 5.75	%		5.61	%
Operating property loans	Income approach analysis	Market yields/ discount rate		5.80 – 7.12	%		6.50	%
		Exit date (c)		5.25 - 6.34 years			5.70 years

(a) The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investment with a profits interest only requires incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.

(b) Six properties were between 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit.

(c) The exit dates for the operating property loans are the contractual maturity dates.

As of December 31, 2015
		Unobservable Inputs
Asset Category	Primary Valuation Techniques	Input	Estimated Range			Weighted Average
Development property investments	Income approach analysis	Market yields/ discount rate		7.74 - 9.35	%		8.77	%
		Exit date		1.17 - 3.83 years			3.02 years
Development property investments with a profits interest (a)	Option pricing model	Volatility		72.46 - 73.12	%		72.82	%
		Exit date		3.31 - 3.83 years			3.49 years
		Capitalization rate (b)		6.00 - 6.50	%		6.38	%
Operating property loans	Income approach analysis	Market yields/ discount rate		6.22 - 7.53	%		6.91	%
		Exit date (c)		5.50 - 6.68 years			5.97 years

(a) The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investment with a profits interest only requires incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.

(b) Four properties were between 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit.

(c) The exit dates for the operating property loans are the contractual maturity dates.

The fair value measurements are sensitive to changes in unobservable inputs. A change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. The following provides a discussion of the impact of changes in each of the unobservable inputs on the fair value measurement.

Market yields - changes in market yields and discount rates, each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase in market yields or discount rates may result in a decrease in the fair value of certain of the Company’s investments. The following fluctuations in the market yields/discount rates would have had the following impact on the fair value of our investments: 

	Increase (decrease) in fair value of investments
Change in market yields/discount rates (in millions)	March 31, 2016		December 31, 2015
Up 100 basis points	$	(2.3)	$	(1.6)
Down 50 basis points, subject to a minimum yield/rate of 10 basis points		1.2		0.8

Capitalization rate - changes in capitalization rate, in isolation and all else equal, may change the fair value of certain of the Company’s development investments containing profits interests. Generally an increase in the capitalization rate assumption may result in a decrease in the fair value of the entrepreneurial profit associated with certain of the Company’s investments. The following fluctuations in the capitalization rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in capitalization rates (in millions)	March 31, 2016		December 31, 2015
Up 100 basis points	$	(1.1)	$	(0.3)
Down 100 basis points		1.6		0.4

Exit date - changes in exit date, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an increase in the exit date assumption may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

Volatility - changes in volatility, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an increase in volatility may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

The Company also evaluates the impact of changes in instrument-specific credit risk in determining the fair value of investments. There were no gains or losses attributable to changes in instrument-specific credit risk in the three months ended March 31, 2016.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate an investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.

The following table presents changes in investments that use Level 3 inputs for the three months ended March 31, 2016:

Balance as of December 31, 2015	$	59,822
Net realized gains		-
Net unrealized gains		3,791
Fundings of principal, net of accretion of origination fees		10,751
Payment-in-kind interest		730
Contribution of assets to Heitman Joint Venture		(7,693)
Net transfers in or out of Level 3		-
Balance as of March 31, 2016	$	67,401

There is no comparative data for the three months ended March 31, 2015 as there were no investments as of March 31, 2015.

As of March 31, 2016 and December 31, 2015, the total net unrealized appreciation on the investments that use Level 3 inputs was $4.7 million and $0.9 million, respectively.

 

For the three months ended March 31, 2016, all of the change in fair value of investments in the Company’s Consolidated Statement of Operations was attributable to unrealized gains relating to the Company’s Level 3 assets still held as of March 31, 2016.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

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INVESTMENT IN REAL ESTATE VENTURE

3 Months Ended

Mar. 31, 2016

Banking and Thrift [Abstract]

Investment In Real Estate Venture [Text Block]

5. INVESTMENT IN REAL ESTATE VENTURE

On March 7, 2016, the Company, through its Operating Company, entered into the Limited Liability Company Agreement (the “JV Agreement”) of Storage Lenders LLC, a Delaware limited liability company, to form a real estate venture (the “SL1 Venture”) with HVP III Storage Lenders Investor, LLC (“HVP III”), an investment vehicle managed by Heitman Capital Management LLC (“Heitman”). The SL1 Venture was formed for the purpose of providing capital to developers of self-storage facilities identified and underwritten by the Company. HVP III committed $110.0 million for a 90% interest in the SL1 Venture, and the Company committed $12.2 million for a 10% interest.

On March 31, 2016, the Company contributed to the SL1 Venture three of its existing development property investments with a profits interest located in Miami and Fort Lauderdale, Florida that were not yet under construction. These investments had an aggregate committed principal amount of approximately $41.9 million and an aggregate drawn balance of $8.1 million. In exchange, the Company’s funding commitment of $12.2 million was reduced by $8.1 million, representing the Company’s initial “Net Invested Capital” balance as defined in the JV Agreement. The Company accounted for this contribution in accordance with ASC 845, Nonmonetary Transactions, and recorded an investment in the SL1 Venture based on the fair value of the contributed development property investments, which is the same as carryover basis. The fair value of the contributed development property investments as of March 31, 2016 was $7.7 million.

As of March 31, 2016, the SL1 Venture had assets of $7.7 million related to the three development property investments with a profits interest contributed by the Company and no liabilities. Pursuant to the JV Agreement, Heitman, in fulfilling its $110.0 million commitment, will provide capital to the SL1 Venture as cash is required, including funding draws on the three contributed development property investments. During the period from inception to March 31, 2016, there was no income earned or expenses incurred by the SL1 Venture. The SL1 Venture has elected the fair value option of accounting for its development property investments with a profits interest.

During the three months ended March 31, 2016, $0.2 million of transaction expenses were incurred by the Company and included in the carrying amount of the Company’s investment in the SL1 Venture.

In accordance with the JV Agreement, for each development property investment, the borrower must deliver to SL1 Venture a completion guarantee whereby the borrower agrees to cover all costs in excess of the agreed upon budget amount. Additionally, the Company is required to deliver to the SL1 Venture a backstop completion guarantee for each development property investment to guarantee completion in the event the borrower does not satisfy its obligations. The Company concluded that the likelihood of loss is remote and assigned no value to this guarantee as of March 31, 2016.

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VARIABLE INTEREST ENTITIES

3 Months Ended

Mar. 31, 2016

Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]

Variable Interest Entity Disclosure [Text Block]

6. VARIABLE INTEREST ENTITIES

Development Property Investments

The Company holds variable interests in its development property investments. The Company has determined that these investees qualify as VIEs because the entities do not have enough equity to finance their activities without additional subordinated financial support. In determining whether the Company is the primary beneficiary of the VIEs, the Company identified the activities that most significantly impact the VIEs’ economic performance. Such activities are (1) managing the construction and operations of the project, (2) selecting the property manager, (3) financing decisions, (4) authorizing capital expenditures and (5) disposition of the property. Although the Company has certain participating and protective rights, it does not have the power to direct the activities that most significantly impact the VIEs’ economic performance and is not the primary beneficiary; therefore, the Company does not consolidate the VIEs.

The Company has recorded assets of $47.2 million and $40.2 million at March 31, 2016 and December 31, 2015, respectively, for its variable interest in the VIEs which is included in the Development Property Investments at Fair Value line item in the Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its involvement with the VIEs is as follows (in millions):

	March 31, 2016		December 31, 2015
Assets recorded related to VIEs	$	47.2	$	40.2
Unfunded loan commitments to VIEs		69.5		114.6
Maximum exposure to loss	$	116.7	$	154.8

The Company has a construction completion guaranty from the managing members of the VIEs or individual affiliates/owners of such managing members.

Investment in Real Estate Venture

The Company determined that the SL1 Venture qualifies as a VIE because it does not have enough equity to finance its activities without additional subordinated financial support. In determining whether the Company is the primary beneficiary of the entity, the Company identified the activities that most significantly impact the entity’s economic performance. Such activities are (1) approving self-storage development investments and acquiring self-storage properties, (2) managing directly-owned properties, (3) obtaining debt financing, and (4) disposing of investments. Although the Company has certain rights, it does not have the power to direct the activities that most significantly impact the entity’s economic performance and thus is not the primary beneficiary. As such, the Company does not consolidate the entity and accounts for its unconsolidated interest in the SL1 Venture using the equity method of accounting. The Company’s investment in the SL1 Venture is included in the Investment in Real Estate Venture balance in the Consolidated Balance Sheet, and future earnings attributed to the SL1 Venture will be presented in the Company’s Consolidated Statements of Operations. The Company’s maximum contribution to the SL1 Venture is $12.2 million.

The JV Agreement permits Heitman to cause us to repurchase from Heitman its Developer Equity Interests (as defined in the JV Agreement). Under the JV Agreement, if a developer causes to be refinanced a self-storage facility with respect to which the SL1 Venture has made a development property investment and such refinancing does not coincide with a sale of the underlying self-storage facility, then at any time after the fourth anniversary of the commencement of the SL1 Venture, Heitman may either put to the Company its share of the Developer Equity Interests in respect of each such development property investment, or sell Heitman’s Developer Equity Interests to a third party.

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OTHER ASSETS

3 Months Ended

Mar. 31, 2016

Other Assets [Abstract]

Other Assets Disclosure [Text Block]

7. OTHER ASSETS

The Company has four revolving loan agreements with an aggregate outstanding principal amount of $1.0 million at March 31, 2016. At December 31, 2015, the Company had three revolving loan agreements with an aggregate outstanding principal amount of $0.5 million. Three of the agreements are with individuals who are owners of limited liability companies, and the fourth agreement is with a limited liability company and is personally guaranteed. All of the borrowers are either directly or indirectly owners of certain of the Company’s development property investments. The agreements provide for borrowings of up to $0.5 million (total of $2.0 million) to fund expenses for initial costs to contract for additional self-storage sites. The loan to the limited liability company is secured by a first priority security interest and assignment of its 100% interest in a limited liability company which owns one of the Company’s development investment properties. The loans bear interest at 6.9-7.0% per annum and are due in full in three years. These loans are accounted for under the cost method.

The Company also has a loan of $0.7 million extended to a limited liability company that is under common control with a borrower in a development property investment. This loan is secured by a mortgage on real and personal property, is interest-only with a fixed interest rate of 6.9% per annum, and matures in June 2016. This loan is accounted for under the cost method.

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

8. STOCKHOLDERS’ EQUITY

The Company was organized in Maryland on October 1, 2014, and under the Company’s Articles of Incorporation, as amended, the Company is authorized to issue up to 500,000,000 shares of common stock and 100,000,000 shares of preferred stock. The sole stockholder of the Company prior to the closing of its IPO was the founder and chief executive officer, who is an affiliate of the Company. The founder’s initial capital contribution to the Company was $1.0 thousand made on October 2, 2014, in exchange for 1,000 shares of common stock. These shares were retired effective with the IPO.

 

Common Stock Offering

On April 1, 2015, the Company closed its IPO and received $93.0 million in proceeds, net of underwriter’s discount. Simultaneously, the Company received $5.0 million in proceeds from the concurrent private placement with an affiliate of its founder. In connection with these transactions, the Company issued 5,000,000 and 250,000 shares of common stock, respectively and the initial 1,000 shares of common stock issued on October 2, 2014 were retired.

 

On April 9, 2015, the Company completed the sale of shares of common stock to the underwriters of its IPO pursuant to the underwriters’ over-allotment option. The Company issued 750,000 shares of common stock and received $14.0 million, net of underwriters’ discount.

 

Equity Incentive Plan

In connection with the IPO, the Company established the 2015 Equity Incentive Plan for the purpose of attracting and retaining directors, executive officers, investment professionals and other key personnel and service providers, including officers and employees of the Manager and other affiliates, and to stimulate their efforts toward the Company’s continued success, long-term growth and profitability. The 2015 Equity Incentive Plan provides for the grant of stock options, share awards (including restricted common stock and restricted stock units), stock appreciation rights, dividend equivalent rights, performance awards, annual incentive cash awards and other equity-based awards, including Long-Term Incentive Plan (“LTIP”) units, which are convertible on a one-for-one basis into Operating Company Units (“OC Units”).  A total of 200,000 shares of common stock are reserved for issuance pursuant to the 2015 Equity Incentive Plan, subject to certain adjustments set forth in the plan. On April 1, 2015, each non-employee director of the Company received an award of 2,500 shares of restricted common stock (total of 10,000 shares) which vest ratably over a three-year period. On June 15, 2015, in connection with the appointment of the Company’s President and Chief Operating Officer (an employee of the Manager), 100,000 shares of restricted common stock were granted, which shares vest ratably over a five-year period. During the quarter ended September 30, 2015, the Company granted 52,500 shares of restricted common stock to an executive officer (an employee of the Manager) and key employees of the Manager, which shares vest ratably over a three-year period. The Manager provides services to the Company.

 

Restricted Stock Awards

The 2015 Equity Incentive Plan permits the issuance of restricted stock awards to employees and non-employee directors. Non-vested shares at March 31, 2016 and December 31, 2015 aggregated 162,500 service-based stock awards, of which none vested during the three months ended March 31, 2016, 40,833 will vest in 2016, 2017 and 2018, and 20,000 will vest in 2019 and 2020. Non-vested shares are earned over the respective vesting period based on a service condition only. Expenses related to restricted stock awards are charged to compensation expense and are recognized over the respective vesting period (three to five years) of the awards. For restricted stock issued to non-employee directors of the Company, compensation expense is based on the market value of the shares at the grant date. For restricted stock awards issued to employees of the Manager, compensation expense is remeasured at each reporting date based on the then current value of the Company’s common stock.

The Company recognized approximately $0.2 million of stock-based compensation expense for the three months ended March 31, 2016. No stock-based compensation expense was recorded for the three months ended March 31, 2015. As of March 31, 2016 and December 31, 2015, the total unrecognized compensation cost related to the Company’s restricted shares was approximately $2.1 million and $2.2 million, respectively, based on the grant date market value for awards issued to non-employee directors of the Company and based on the measurement of awards using the Company’s stock price of $15.62 and $14.95 as of March 31, 2016 and December 31, 2015, respectively, for awards issued to employees of the Manager. This cost is expected to be recognized over the remaining weighted average period of 3.5 years. The Company presents stock-based compensation expense in general and administrative expenses in the Consolidated Statement of Operations.

 

A summary of changes in the Company’s restricted shares for the three months ended March 31, 2016 is as follows:

			Weighted
			average grant
	Shares		date fair value
Nonvested at December 31, 2015		162,500	$	20.08
Granted		-		-
Vested		-		-
Forfeited		-		-
Nonvested at March 31, 2016		162,500	$	20.08

There were no restricted shares issued at March 31, 2015.

Nonvested restricted shares receive dividends which are nonforfeitable.

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

9. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period.  All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share. Both the unvested restricted shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis with our diluted earnings per share being the more dilutive of the treasury stock or two-class methods.  Redeemable Operating Company Units are included in dilutive earnings per share calculations when they are dilutive to earnings per share. For the three months ended March 31, 2016, the Company’s basic earnings per share is computed using the two-class method, and our diluted earnings per share is computed using the more dilutive of the treasury stock method or two-class method:

Shares outstanding
Weighted average common shares - basic		6,000,000
Effect of dilutive securities (1)		-
Weighted average common shares - diluted		6,000,000
Calculation of Earnings per Share - basic
Net income	$	1,122
Net income allocated to unvested restricted shares		(30)
Net income, adjusted	$	1,092
Weighted average common shares - basic		6,000,000
Earnings per share - basic	$	0.18
Calculation of Earnings per Share - diluted
Net income	$	1,122
Net income allocated to unvested restricted shares		(30)
Net income, adjusted (2)	$	1,092
Weighted average common shares - diluted		6,000,000
Earnings per share - diluted	$	0.18

(1) For the three months ended March 31, 2016, potentially dilutive securities are not included in the diluted earnings per share calculation as they are not dilutive.

(2) The Company has no undistributed earnings and accordingly reallocation of undistributed earnings between potential common stock and participating securities is not necessary.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

10. RELATED PARTY TRANSACTIONS

The Company’s founder was reimbursed for $0.1 million of organizational costs and $0.1 million of offering costs in April 2015 following the closing of the Company’s IPO.

Equity Method Investments

Certain of the Company’s development property investments are equity method investments for which the Company has elected the fair value option of accounting. The fair value of these equity method investments at March 31, 2016 and December 31, 2015 were $37.2 million and $31.3 million, respectively, and the interest income realized and the change in fair value from these equity method investments for the three months ended March 31, 2016 was $0.5 million and $3.3 million respectively.

The Company’s investment in the real estate venture, SL1Venture, has a carrying amount of $7.9 million at March 31, 2016 and no earnings for the three months ended March 31, 2016

There were no equity method investments at March 31, 2015.

Management Agreement

On April 1, 2015, the Company entered into a management agreement with its Manager (the “Management Agreement”). Pursuant to the terms of the Management Agreement, the Manager will be responsible for (a) the Company’s day-to-day operations, (b) determining investment criteria and strategy in conjunction with the Company’s Board of Directors, (c) sourcing, analyzing, originating, underwriting, structuring, and acquiring the Company’s portfolio investments, and (d) performing portfolio management duties. The Manager has an Investment Committee that approves investments in accordance with the Company’s investment guidelines, investment strategy, and financing strategy.

The initial term of the Management Agreement will be five years, with up to a maximum of three, one-year extensions that end on the applicable anniversary of the completion of the Company’s offering. The Company’s independent directors will review the Manager’s performance annually. Following the initial term, the Management Agreement may be terminated annually upon the affirmative vote of at least two-thirds of the Company’s independent directors based upon: (a) the Manager’s unsatisfactory performance that is materially detrimental to the Company; or (b) the Company’s determination that the management fees payable to the Manager are not fair, subject to the Manager’s right to prevent termination based on unfair fees by accepting a reduction of management fees agreed to by at least two-thirds of the independent directors. The Company will provide its Manager with 180 days’ prior notice of such a termination. Upon such a termination, the Company will pay the Manager a termination fee except as provided below.

No later than 180 days prior to the end of the initial term of the Management Agreement, the Manager will offer to contribute to the Company’s Operating Company at the end of the initial term all of the assets or equity interests in the Manager at the internalization price and on such terms and conditions included in a written offer provided by the Manager.

Upon receipt of the Manager’s initial internalization offer, a special committee consisting solely of the Company’s independent directors may accept the Manager’s proposal or submit a counter offer to the Manager. If the Manager and the special committee are unable to agree, the Manager and the special committee will repeat this process annually during the term of any extension of the Management Agreement. Acquisition of the Manager pursuant to this process requires a fairness opinion from a nationally recognized investment banking firm and stockholder approval, in addition to approval by the special committee.

If the Company does not acquire the assets or equity interests of the Manager in an internalization transaction as described above and the Management Agreement terminates other than for Cause, voluntary non-renewal by the Manager or the Company being required to register as an investment company under the Investment Company Act of 1940, then the Company shall pay to the Manager, on the date on which such termination is effective, a termination fee equal to the greater of (i) three times the sum of the average annual Base Management Fee and Incentive Fee earned by the Manager during the 24-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination, or (ii) the offer price, which will be based on the lesser of (a) the Manager’s earnings before interest, taxes, depreciation and amortization (adjusted for unusual, extraordinary and non-recurring charges and expenses), or “EBITDA” annualized based on the most recent quarter ended, multiplied by a specific multiple, or EBITDA Multiple, depending on the Company’s achieved total annual return, and (b) the Company’s equity market capitalization multiplied by a specific percentage, or Capitalization Percentage, depending on the Company’s achieved total return (the Internalization Price). Any Termination Fee will be payable by the Operating Company in OC Units equal to the Termination Fee divided by the average of the daily market price of the Common Stock for the ten consecutive trading days immediately preceding the date of termination within 90 days after occurrence of the event requiring the payment of the Termination Fee. In accordance with ASC 505-50, Equity - Equity-based Payments to Non-Employees, since the number of OC Units to be issued is dependent upon different possible outcomes, the Company recognized the lowest aggregate amount within the range of outcomes. Accordingly, the Company estimates the deferred termination fee payable and accrues the expense over the term of the Management Agreement. The Company recorded $0.2 million of expense for the deferred termination fee for the three months ended March 31, 2016. There was no deferred termination fee for the three months ended March 31, 2015.

The Company also may terminate the Management Agreement at any time, including during the initial term, without the payment of any termination fee, with 30 days’ prior written notice from the Board of Directors, for cause. “Cause” is defined as: (i) the Manager’s continued breach of any material provision of the Management Agreement following a prescribed period; (ii) the occurrence of certain events with respect to the bankruptcy or insolvency of the Manager; (iii) a change of control of the Manager that a majority of the Company’s independent directors determines is materially detrimental to the Company; (iv) the Manager committing fraud against the Company, misappropriating or embezzling the Company’s funds, or acting grossly negligent in the performance of its duties under the Management Agreement; (v) the dissolution of the Manager; (vi) the Manager fails to provide adequate or appropriate personnel that are reasonably necessary for the Manager to identify investment opportunities for the Company and to manage and develop the Company’s investment portfolio if such default continues uncured for a period of 60 days after written notice thereof, which notice must contain a request that the same be remedied; (vii) the Manager is convicted (including a plea of nolo contendere) of a felony; or (viii) the departure of Mr. Jernigan from the senior management of the Manager, or the Company, during the term of the Management Agreement other than by reason of death or disability.

The Manager may terminate the Management Agreement if the Company becomes required to register as an investment company under the 1940 Act, with such termination deemed to occur immediately before such event, in which case the Company would not be required to pay the Manager a termination fee. The Manager may also decline to renew the Management Agreement by providing the Company with 180 days’ written notice, in which case the Company would not be required to pay a termination fee.

The Management Agreement provides for the Manager to earn a base management fee and an incentive fee. In addition, the Company will reimburse certain expenses of the Manager, excluding the salaries and cash bonuses of the Manager’s chief executive officer and chief financial officer, half of the salary of the president and chief operating officer, and certain other costs as determined by the Manager in accordance with the Management Agreement. Certain prepaid expenses and fixed assets are also purchased through the Manager and reimbursed by the Company. In the event that the Company terminates the Management Agreement per the terms of the agreement, other than for cause or the Company being required to register as an investment company, there will be a termination fee due to the Manager. Amounts reimbursable to the Manager for expenses totaled $0.8 million for the three months ended March 31, 2016. There were no expenses reimbursable to the Manager for the three months ended March 31, 2015.

Management Fees

As of March 31, 2016, the Company did not have any personnel. As a result, the Company is relying on the properties, resources and personnel of the Manager to conduct operations. The Company has agreed to pay the Manager a base management fee in an amount equal to 0.375% of the Company’s stockholders’ equity (a 1.5% annual rate) calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, the Company’s stockholder’s equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) any amount that the Company pays to repurchase the Company’s common stock since inception. It also excludes (x) any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and (y) one-time events pursuant to changes in GAAP (such as a cumulative change to the Company’s operating results as a result of a codification change pursuant to GAAP), and certain non-cash items not otherwise described above (such as depreciation and amortization), in each case after discussions between the Company’s Manager and the Company’s independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the base management fee, could be greater or less than the amount of stockholders’ equity shown on the Company’s financial statements. The base management fee is payable independent of the performance of the Company’s portfolio. The Manager computes the base management fee within 30 days after the end of the fiscal quarter with respect to which such installment is payable and promptly delivers such calculation to the Company’s Board of Directors. The amount of the installment shown in the calculation is due and payable no later than the date which is five business days after the date of delivery of such computation to the Board of Directors. The calculation generally will be reviewed by the Board of Directors at their regularly scheduled quarterly board meeting. The base management fee for the three months ended March 31, 2016 was $0.4 million. There was no base management fee for the three months ended March 31, 2015.

Incentive Fee

The Manager is entitled to an incentive fee with respect to each fiscal quarter (or part thereof that the Management Agreement is in effect) in arrears in cash. The incentive fee will be an amount, not less than zero, determined pursuant to the following formula:

IF = .20 times (A minus (B times .08)) minus C

In the foregoing formula:

· A equals the Company’s Core Earnings (as defined below) for the previous 12-month period;

· B equals (i) the weighted average of the issue price per share of the Company’s common stock of all of its public offerings of common stock, multiplied by (ii) the weighted average number of all shares of common stock outstanding (including (i) any restricted stock units and any restricted shares of common stock in the previous 12-month period and (ii) shares of common stock issuable upon conversion of outstanding OC Units); and

· C equals the sum of any incentive fees earned by the Manager with respect to the first three fiscal quarters of such previous 12-month period.

Notwithstanding application of the incentive fee formula, no incentive fee shall be paid with respect to any fiscal quarter unless cumulative annual stockholder total return for the four most recently completed fiscal quarters is greater than 8%. Any computed incentive fee earned but not paid because of the foregoing hurdle will accrue until such 8% cumulative annual stockholder total return is achieved. The total return is calculated by adding stock price appreciation (based on the volume-weighted average of the closing price of the Company’s common stock on the NYSE (or other applicable trading market) for the last ten consecutive trading days of the applicable computation period minus the volume-weighted average of the closing market price of the Company’s common stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period) plus dividends per share paid during such computation period, divided by the volume-weighted average of the closing market price of the Company’s common stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period. For purposes of computing the Incentive Fee, “Core Earnings” is defined as net income (loss) determined under GAAP, plus non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that the Company forecloses on any facilities underlying the Company’s target investments), any unrealized losses or other non-cash expense items reflected in GAAP net income (loss), less any unrealized gains reflected in GAAP net income. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and the Company’s independent directors and after approval by a majority of the independent directors.

For purposes of calculating the incentive fee prior to the completion of a 12-month period following this offering, Core Earnings is calculated on the basis of the number of days that the Management Agreement has been in effect on an annualized basis.

The Manager computes each quarterly installment of the incentive fee within 45 days after the end of the fiscal quarter with respect to which such installment is payable and promptly delivers such calculation to the Company’s Board of Directors. The amount of the installment shown in the calculation is due and payable no later than the date which is five business days after the date of delivery of such computation to the Board of Directors. The calculation generally will be reviewed by the Board of Directors at their regularly scheduled quarterly board meeting. The Manager has not earned an incentive fee for the three months ended March 31, 2016 and 2015.

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RESTRUCTURING COSTS

3 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

11. RESTRUCTURING COSTS

On August 11, 2015, the Company’s Board of Directors approved consolidating its offices and moving the corporate headquarters to Memphis, Tennessee. In connection with the consolidation and moving of the Company’s headquarters, the Company added legal, accounting, loan administration and business development personnel in Memphis and closed its offices in Miami, Florida and Cleveland, Ohio. The consolidation was completed by the end of the third quarter.

Restructuring costs reflected in the accompanying Consolidated Statement of Operations relate primarily to one-time termination benefits and lease termination costs. The Company recognizes these severance and other charges when the requirements of ASC 420 have been met regarding a plan of termination and when communication has been made to employees. During the three months ended March 31, 2016, the Company recorded approximately $7.0 thousand in restructuring costs in the Consolidated Statement of Operations. There were no restructuring costs for the three months ended March 31, 2015.

 

As of March 31, 2016
Cost Type	Restructuring costs liability at December 31, 2015		Restructuring costs incurred		Cash payments		Non-cash activity		Restructuring costs liability at March 31, 2016		Total cumulative restructuring costs incurred or expected to be incurred
Severance	$	-	$	-	$	-	$	-	$	-	$	97
Fixed asset disposal		-		-		-		-		-		33
Lease termination		85		16		(21)		-		80		140
Other		10				-		(10)		-		13
Total restructuring costs	$	95	$	16	$	(21)	$	(10)	$	80	$	283

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent Events [Text Block]

12. SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. Other than those disclosed below, there have been no subsequent events that occurred during such period that require disclosure or recognition in the accompanying consolidated financial statements as of and for the three month period ended March 31, 2016.

On April 29, 2016, the Company sold 65.0% senior participations (the “FirstBank A Notes”) in two separate operating property loans in the Nashville, Tennessee and New Orleans, Louisiana MSAs, having an aggregate outstanding principal balance of $7.8 million, to FirstBank, a Tennessee banking corporation, in exchange for cash consideration of $5.0 million (the “FirstBank A Note Sale”). The FirstBank A Note Sale was effected pursuant to participation agreements between FirstBank and the Company (the “Participation Agreements”). Under the Participation Agreements, the Company will continue to service the underlying loans so long as the Company is not in default under the Participation Agreements. FirstBank has the option to “put” either of the senior participations to the Company in the event the underlying borrower defaults on the underlying loan or if the Company defaults under the applicable Participation Agreement. The Company will pay to FirstBank interest on the outstanding balance of the FirstBank A Notes at the rate of 30-day LIBOR plus 3.85%, which translates to a current rate of approximately 4.30%. The FirstBank A Notes mature on April 1, 2019, at which time the Company is obligated to repurchase the FirstBank A Notes at the then outstanding principal balances thereof. As part of the Participation Agreements, the Company will maintain a minimum aggregate balance of $0.5 million in depository or money market accounts at FirstBank.

On May 3, 2016, the Company terminated negotiations with its proposed credit facility provider under the previously announced term sheet for a proposed $60.0 million credit facility.

On May 4, 2016, the Company executed a non-binding term sheet with FirstBank for the sale of an additional 56.4% senior participation in an approximately $17.7 million self-storage construction loan on a facility in Miami, Florida, which will provide net proceeds of $10.0 million. The term sheet is subject to completion of due diligence and definitive documentation, and the sale of the senior participation is expected to close before May 31, 2016.

On May 9, 2016, the Company received $5.6 million (including prepayment penalty) for the early payoff of an operating property loan in the Sacramento, California MSA.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Basis of Presentation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying interim consolidated financial statements include all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods included therein. Substantially all operations are conducted through the Operating Company, and all significant intercompany transactions and balances have been eliminated in consolidation.

Liquidity [Policy Text Block]

Liquidity

As of March 31, 2016, the Company had unrestricted cash of $28.8 million and unfunded commitments of $69.8 million related to its investment portfolio, a difference of approximately $41.0 million. On May 3, 2016, the Company terminated negotiations with its proposed credit facility provider under the previously announced term sheet for a proposed $60.0 million credit facility. The Company intends to fund the shortfall of $41.0 million as follows:

a) On April 29, 2016 the Company received $5.0 million of proceeds from the sale of 65.0% senior participations (the “FirstBank A Notes”) in two separate operating property loans. See Note 12, Subsequent Events.

b) On May 4, 2016 the Company executed a non-binding term sheet for the sale of a 56.4% senior participation to FirstBank in a construction loan, which will provide net proceeds of $10.0 million. See Note 12, Subsequent Events.

c) On May 9, 2016, the Company received $5.6 million (including prepayment penalty) for the early payoff of an operating property loan.

d) Prior to December 31, 2016, the Company expects full principal repayments on three construction loans in the Chicago, West Palm Beach and Sarasota MSAs with an aggregate principal balance of approximately $19.1 million (of which $14.3 million is unfunded as of March 31, 2016). Each of the self-storage facilities collateralizing these loans is subject to a definitive binding purchase and sale agreement between the developer and a third-party purchaser, containing certain conditions, pursuant to which the financed project is anticipated to be sold and the Company’s loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility. These loans have maturities of either March 1, 2017 or May 31, 2017, subject to acceleration upon a sale of the project. The Company anticipates certificates of occupancy to be issued for all three facilities between September 1, 2016 and December 31, 2016.

e) As of  March 31, 2016, the Company has development property investments (with profits interests) of an aggregate of $33.3 million of funded principal, with a total aggregate investment commitment of $76.5 million. The Company has additional operating property loans (excluding such loans described in (a) and (c) above) with an aggregate funded principal balance of $7.0 million. The Company believes, based on the nature of these investments and current market conditions in the self-storage real estate sector, that it could successfully sell senior participations in these loans at 50% or more of the total investment commitment which would provide funding of  at least approximately $41.0 million.

Additionally, the Company could generate additional cash to fund its remaining unfunded commitments by one or more of the following means: (1) reducing general and administrative expenses (primarily marketing, travel, and certain cash compensation expenses); (2) issuing common and/or preferred stock in public or private offerings (which could be at prices dilutive to current stockholders or at cumulative yields that are in excess of the Company’s current dividend yield on our common stock); and/or (3) reducing or eliminating the Company’s dividend. Based on the above, the Company believes it is likely that it can successfully implement the aforementioned plan in meeting funding commitments for at least the next twelve months. If the Company is unable to complete the aforementioned planned transactions and actions, it could impact its ability to realize its assets at their recorded values, specifically the Company’s development property investments and operating property loans, and to meet its funding commitments in the normal course of business.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities

The Company invests in entities that may qualify as variable interest entities (“VIEs”). A VIE is a legal entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. Management bases the qualitative analysis on its review of the design of the entity, its organizational structure including allocation of decision-making authority and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. Management reassesses the initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party that, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the Company’s business activities and the other interests. Management reassesses the determination of whether the Company is the primary beneficiary of a VIE each reporting period.

Equity Method Investments, Policy [Policy Text Block]

Equity Investments

Investments in real estate ventures and entities over which the Company exercises significant influence but not control are accounted for using the equity method. In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825-10”), issued by the Financial Accounting Standards Board (“FASB”), the Company has elected the fair value option of accounting for its development property investments, which are equity method investments. The Company’s investment in real estate venture is an equity method investment that is accounted for under the equity method of accounting.

Policy Loans Receivable, Policy [Policy Text Block]

Loan Investments and Election of Fair Value Option of Accounting for Loan Investments

The Company has elected the fair value option of accounting for all of its investment portfolio loan investments, including those that are required under GAAP to be accounted for under the equity method, in order to provide better transparency into the Company’s revenues and value inherent in the Company’s equity participation in development projects. Changes in the fair value of these investments are recorded in change in fair value of investments within other income. All direct loan costs are charged to expense as incurred.

Each loan investment is evaluated for impairment on a periodic basis. A loan will be considered impaired when, based on current information and events, it is probable that the loan will not be collected according to the contractual terms of the loan agreement. Factors to be considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. At March 31, 2016 and December 31, 2015, there were no loans in default.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurement

The Company carries certain financial instruments at fair value because it has elected to apply the fair value option on an instrument by instrument basis under ASC 825-10. The Company’s financial instruments consist of cash, development property investments (which are typically comprised of a first mortgage loan, a mezzanine loan, and a 49.9% profits interest in the development project), operating property loans (loans secured by operating properties), the investment in real estate venture, certain other assets, receivables and payables.

 

The following table presents the financial instruments measured at fair value on a recurring basis at March 31, 2016:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	47,223	$	-	$	-	$	47,223
Operating property loans		20,178		-		-		20,178
Total investments	$	67,401	$	-	$	-	$	67,401

The following table presents the financial instruments measured at fair value on a recurring basis at December 31, 2015:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	40,222	$	-	$	-	$	40,222
Operating property loans		19,600		-		-		19,600
Total investments	$	59,822	$	-	$	-	$	59,822

Estimating fair value requires the use of judgment. The types of judgments involved depend upon the availability of observable market information. Management’s judgments include determining the appropriate valuation model to use, estimating unobservable inputs and applying valuation adjustments. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions, as well as the election of the fair value option for certain financial instruments.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Cash, investments in money market accounts and certificates of deposit with original maturities of three months or less are considered to be cash equivalents. The Company places its cash and cash equivalents primarily with a single financial institution and, at times, cash held may exceed the Federal Deposit Insurance Corporation insurance limit. 

Prepaid Expenses and Other Assets [Policy Text Block]

Prepaid Expenses and Other Assets

The Company’s prepaid expenses and other assets balance at March 31, 2016 includes principal balances for four revolving loan agreements and one mortgage loan. The Company’s prepaid expenses and other assets balance at December 31, 2015 includes principal balances for three revolving loan agreements and one mortgage loan. Because these loans are not part of the Company’s core investment portfolio, these loans are accounted for under the cost method.

Property, Plant and Equipment, Policy [Policy Text Block]

Fixed Assets

Fixed assets are recorded at cost and consist of furniture, office and computer equipment, and software. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from three to seven years. Fixed assets are generally purchased by the Manager and then reimbursed by the Company. As a result, depreciation expense is included in general and administrative expenses reimbursable to Manager in the Consolidated Statement of Operations. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is included in income.

Revenue Recognition, Policy [Policy Text Block]

Revenue recognition

Interest income is recognized as earned on a simple interest basis and is reported in interest income from investments in the Consolidated Statement of Operations. Accrual of interest will be discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. The Company will recognize income on impaired loans when they are placed into non-accrual status on a cash basis when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. If these factors do not exist, the Company will not recognize income on such loans. Accrued interest generally is reversed when a loan is placed on non-accrual status.

The Company’s loan origination fees are accreted into interest income over the term of the investment using the effective yield method.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

Transaction and other expenses

Transaction and other expenses consist of $2.0 million of advisory fees and other expenses incurred in connection with various financing transactions and investment transactions and are expensed as incurred.

Offering Costs [Policy Text Block]

Offering Costs

Underwriting commissions and offering costs incurred in connection with the Company’s stock offerings are reflected as a reduction of additional paid-in capital. Offering costs represent professional fees, fees paid to various regulatory agencies, and other costs incurred in connection with the registration and sale of the Company’s common stock.

Origination Fees and Costs [Policy Text Block]

Organization Costs

Costs incurred to organize the Company were expensed as incurred.

Costs Associated with Exit or Disposal Activities or Restructurings, Policy [Policy Text Block]

Restructuring Costs

Restructuring costs consist of severance and benefits costs, lease termination costs, and other costs incurred by the Company in conjunction with consolidating its offices and moving its corporate headquarters. The Company recognizes these severance and other charges when the requirements of ASC 420, Exit or Disposal Cost Obligations (“ASC 420”), have been met regarding a plan of termination and when communication has been made to employees. All restructuring activities were completed during the quarter ended September 30, 2015.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company intends to elect to be taxed as a REIT and to comply with the related provisions of the Code commencing with its taxable year ended December 31, 2015. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. The Company had no taxable income for the three months ended March 31, 2016 and March 31, 2015. To qualify as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements.

Earnings Per Share, Policy [Policy Text Block]

Earnings per Share (“EPS”)

Basic EPS includes only the weighted average number of common shares outstanding during the period. Diluted EPS includes the weighted average number of common shares and the dilutive effect of restricted stock and redeemable Operating Company units when such instruments are dilutive.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are treated as participating in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted EPS must be applied.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

For the three months ended March 31, 2016 and March 31, 2015, comprehensive income equaled net income; therefore, a separate Consolidated Statement of Comprehensive Income is not included in the accompanying consolidated financial statements.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

The Company does not evaluate performance on a relationship specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In February 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis. This ASU amends the assessment of whether a limited partnership or limited liability company is a variable interest entity; the effect that fees paid to a decision maker have on the consolidation analysis; how variable interests held by a reporting entity’s related parties or de facto agents affect its consolidation conclusion; and for entities other than limited partnerships and limited liability companies, clarifies how to determine whether the equity holders as a group have power over an entity. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption being allowed. The Company early adopted the provisions of this ASU in 2015, and there was no impact on our consolidated financial statements as a result of the adoption.

In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This guidance simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related debt liability, consistent with debt discount or premiums. The recognition guidance for debt issuance costs is not affected by amendments in this update, which is effective for annual reporting periods beginning after December 15, 2015. The adoption did not have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2016. In August 2015, the FASB extended the effective date by one year to years beginning on and after December 15, 2017. The standard may be adopted as early as the original effective date but early adoption prior to that date is not permitted. This ASU outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable) and, if so, disclose that fact. This ASU is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements and disclosures.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

The following table presents the financial instruments measured at fair value on a recurring basis at March 31, 2016:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	47,223	$	-	$	-	$	47,223
Operating property loans		20,178		-		-		20,178
Total investments	$	67,401	$	-	$	-	$	67,401

The following table presents the financial instruments measured at fair value on a recurring basis at December 31, 2015:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	40,222	$	-	$	-	$	40,222
Operating property loans		19,600		-		-		19,600
Total investments	$	59,822	$	-	$	-	$	59,822

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INVESTMENTS (Tables)

3 Months Ended

Mar. 31, 2016

Schedule of Investments [Abstract]

Investment Holdings, Schedule of Investments [Table Text Block]

As of March 31, 2016, the aggregate committed principal amount of the Company’s investment portfolio was approximately $133.8 million and outstanding principal was $64.0 million, as described in more detail in the table below:

Closing Date	Metropolitan Statistical Area ("MSA")	Total Investment Commitment		Funded Investment (1)		Remaining Unfunded Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando	$	5,372	$	4,356	$	1,016	$	5,383
6/10/2015	Atlanta		8,132		6,164		1,968		7,000
6/19/2015	Tampa		5,369		4,520		849		4,863
6/26/2015	Atlanta		6,050		4,199		1,851		5,057
6/29/2015	Charlotte		7,624		2,657		4,967		3,202
7/2/2015	Milwaukee		7,650		2,677		4,973		2,645
7/31/2015	New Haven		6,930		1,810		5,120		1,810
8/10/2015	Pittsburgh		5,266		1,688		3,578		1,711
8/14/2015	Raleigh		8,998		1,072		7,926		995
9/30/2015	Jacksonville		6,445		3,330		3,115		3,738
10/27/2015	Austin		8,658		865		7,793		785
		$	76,494	$	33,338	$	43,156	$	37,189
Construction loans:
8/5/2015	West Palm Beach		7,500		2,324		5,176		2,267
8/5/2015	Sarasota		4,792		1,054		3,738		1,018
11/17/2015	Chicago		6,808		1,394		5,414		1,327
12/23/2015	Miami		17,733		5,753		11,980		5,422
		$	36,833	$	10,525	$	26,308	$	10,034
	Subtotal	$	113,327	$	43,863	$	69,464	$	47,223
Operating property loans:
6/19/2015	New Orleans		2,800		2,800		-		2,788
7/7/2015	Newark		3,480		3,480		-		3,496
10/30/2015	Nashville		1,210		1,210		-		1,216
11/10/2015	Sacramento		5,500		5,500		-		5,514
11/24/2015	Nashville		4,968		4,863		105		4,853
12/22/2015	Chicago		2,502		2,295		207		2,311
	Subtotal	$	20,460	$	20,148	$	312	$	20,178
	Total investments	$	133,787	$	64,011	$	69,776	$	67,401

⁽¹⁾ Represents principal balance of loan gross of origination fees

As of December 31, 2015, the aggregate committed principal amount of the Company’s investment portfolio was approximately $175.7 million and outstanding principal was $60.7 million, as described in more detail in the table below:

Closing Date	Metropolitan Statistical Area ("MSA")	Total Investment Commitment		Funded Investment (1)		Remaining Unfunded Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando	$	5,372	$	3,254	$	2,118	$	3,400
5/14/2015	Miami (2)		13,867		2,258		11,609		2,115
5/14/2015	Miami (2)		14,849		3,076		11,773		2,929
6/10/2015	Atlanta		8,132		4,723		3,409		4,829
6/19/2015	Tampa		5,369		3,720		1,649		3,820
6/26/2015	Atlanta		6,050		2,799		3,251		2,823
6/29/2015	Charlotte		7,624		1,124		6,500		1,554
7/2/2015	Milwaukee		7,650		2,529		5,121		2,463
7/31/2015	New Haven		6,930		997		5,933		960
8/10/2015	Pittsburgh		5,266		1,542		3,724		1,542
8/14/2015	Raleigh		8,998		1,026		7,972		934
9/25/2015	Fort Lauderdale (2)		13,230		2,144		11,086		2,009
9/30/2015	Jacksonville		6,445		1,213		5,232		1,180
10/27/2015	Austin		8,658		800		7,858		708
		$	118,440	$	31,205	$	87,235	$	31,266
Construction loans:
8/5/2015	West Palm Beach		7,500		2,011		5,489		1,951
8/5/2015	Sarasota		4,792		1,036		3,756		998
11/17/2015	Chicago		6,808		775		6,033		706
12/23/2015	Miami		17,733		5,655		12,078		5,301
		$	36,833	$	9,477	$	27,356	$	8,956
	Subtotal	$	155,273	$	40,682	$	114,591	$	40,222
Operating property loans:
6/19/2015	New Orleans		2,800		2,800		-		2,736
7/7/2015	Newark		3,480		3,480		-		3,416
10/30/2015	Nashville		1,210		1,210		-		1,192
11/10/2015	Sacramento		5,500		5,500		-		5,401
11/24/2015	Nashville		4,968		4,863		105		4,755
12/22/2015	Chicago		2,502		2,130		372		2,100
	Subtotal	$	20,460	$	19,983	$	477	$	19,600
	Total investments	$	175,733	$	60,665	$	115,068	$	59,822

⁽¹⁾ Represents principal balance of loan gross of origination fees

⁽²⁾ These development property investments (having approximately $8.1 million of outstanding principal balances as of the time of contribution on March 31, 2016) were contributed to the SL1 Venture (defined in Note 5, Investment in Real Estate Venture) in partial satisfaction of our required $12.2 million capital commitment to the SL1 Venture. See Note 5, Investment in Real Estate Venture.

Schedule Of Changes In Fair Value Of Investments [Table Text Block]

The following table provides a reconciliation of the funded principal to the fair market value of investments at March 31, 2016:

Funded principal	$	64,011
Adjustments:
Unamortized origination fees		(1,273	)
Net increase in fair value of investments		4,663
Fair value of investments	$	67,401

The following table provides a reconciliation of the funded principal to the fair market value of investments at December 31, 2015:

Funded principal	$	60,665
Adjustments:
Unamortized origination fees		(1,715	)
Net increase in fair value of investments		872
Fair value of investments	$	59,822

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block]

The following table summarizes the significant unobservable inputs the Company used to value its investments categorized within Level 3 as of March 31, 2016 and December 31, 2015. The table is not intended to be all-inclusive, but instead to capture the significant unobservable inputs relevant to the Company’s determination of fair values.

As of March 31, 2016
		Unobservable Inputs
Asset Category	Primary Valuation Techniques	Input	Estimated Range			Weighted Average
Development property investments	Income approach analysis	Market yields/ discount rate		7.73 - 9.00	%		8.51	%
		Exit date		0.92 - 3.58 years			2.86 years
Development property investments with a profits interest (a)	Option pricing model	Volatility		73.39 – 74.07	%		73.74	%
		Exit date		3.06 - 3.58 years			3.25 years
		Capitalization rate (b)		5.50 – 5.75	%		5.61	%
Operating property loans	Income approach analysis	Market yields/ discount rate		5.80 – 7.12	%		6.50	%
		Exit date (c)		5.25 - 6.34 years			5.70 years

(a) The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investment with a profits interest only requires incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.

(b) Six properties were between 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit.

(c) The exit dates for the operating property loans are the contractual maturity dates.

As of December 31, 2015
		Unobservable Inputs
Asset Category	Primary Valuation Techniques	Input	Estimated Range			Weighted Average
Development property investments	Income approach analysis	Market yields/ discount rate		7.74 - 9.35	%		8.77	%
		Exit date		1.17 - 3.83 years			3.02 years
Development property investments with a profits interest (a)	Option pricing model	Volatility		72.46 - 73.12	%		72.82	%
		Exit date		3.31 - 3.83 years			3.49 years
		Capitalization rate (b)		6.00 - 6.50	%		6.38	%
Operating property loans	Income approach analysis	Market yields/ discount rate		6.22 - 7.53	%		6.91	%
		Exit date (c)		5.50 - 6.68 years			5.97 years

(a) The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investment with a profits interest only requires incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.

(b) Four properties were between 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit.

(c) The exit dates for the operating property loans are the contractual maturity dates.

Schedule Of Change In Fair Value Of Investments Due To Change In Market Yield Discount Rates [Table Text Block]

The following fluctuations in the market yields/discount rates would have had the following impact on the fair value of our investments: 

	Increase (decrease) in fair value of investments
Change in market yields/discount rates (in millions)	March 31, 2016		December 31, 2015
Up 100 basis points	$	(2.3)	$	(1.6)
Down 50 basis points, subject to a minimum yield/rate of 10 basis points		1.2		0.8

Schedule Of Change In Fair Value Of Investments Due To Change In Capitalization Rates [Table Text Block]

The following fluctuations in the capitalization rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in capitalization rates (in millions)	March 31, 2016		December 31, 2015
Up 100 basis points	$	(1.1)	$	(0.3)
Down 100 basis points		1.6		0.4

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following table presents changes in investments that use Level 3 inputs for the three months ended March 31, 2016:

Balance as of December 31, 2015	$	59,822
Net realized gains		-
Net unrealized gains		3,791
Fundings of principal, net of accretion of origination fees		10,751
Payment-in-kind interest		730
Contribution of assets to Heitman Joint Venture		(7,693)
Net transfers in or out of Level 3		-
Balance as of March 31, 2016	$	67,401

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VARIABLE INTEREST ENTITIES (Tables)

3 Months Ended

Mar. 31, 2016

Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]

Schedule of Variable Interest Entities [Table Text Block]

The Company’s maximum exposure to loss as a result of its involvement with the VIEs is as follows (in millions):

	March 31, 2016		December 31, 2015
Assets recorded related to VIEs	$	47.2	$	40.2
Unfunded loan commitments to VIEs		69.5		114.6
Maximum exposure to loss	$	116.7	$	154.8

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STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

A summary of changes in the Company’s restricted shares for the three months ended March 31, 2016 is as follows:

			Weighted
			average grant
	Shares		date fair value
Nonvested at December 31, 2015		162,500	$	20.08
Granted		-		-
Vested		-		-
Forfeited		-		-
Nonvested at March 31, 2016		162,500	$	20.08

XML

EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

For the three months ended March 31, 2016, the Company’s basic earnings per share is computed using the two-class method, and our diluted earnings per share is computed using the more dilutive of the treasury stock method or two-class method:

Shares outstanding
Weighted average common shares - basic		6,000,000
Effect of dilutive securities (1)		-
Weighted average common shares - diluted		6,000,000
Calculation of Earnings per Share - basic
Net income	$	1,122
Net income allocated to unvested restricted shares		(30)
Net income, adjusted	$	1,092
Weighted average common shares - basic		6,000,000
Earnings per share - basic	$	0.18
Calculation of Earnings per Share - diluted
Net income	$	1,122
Net income allocated to unvested restricted shares		(30)
Net income, adjusted (2)	$	1,092
Weighted average common shares - diluted		6,000,000
Earnings per share - diluted	$	0.18

(1) For the three months ended March 31, 2016, potentially dilutive securities are not included in the diluted earnings per share calculation as they are not dilutive.

(2) The Company has no undistributed earnings and accordingly reallocation of undistributed earnings between potential common stock and participating securities is not necessary.

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RESTRUCTURING COSTS (Tables)

3 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Related Costs [Table Text Block]

There were no restructuring costs for the three months ended March 31, 2015.

 

As of March 31, 2016
Cost Type	Restructuring costs liability at December 31, 2015		Restructuring costs incurred		Cash payments		Non-cash activity		Restructuring costs liability at March 31, 2016		Total cumulative restructuring costs incurred or expected to be incurred
Severance	$	-	$	-	$	-	$	-	$	-	$	97
Fixed asset disposal		-		-		-		-		-		33
Lease termination		85		16		(21)		-		80		140
Other		10				-		(10)		-		13
Total restructuring costs	$	95	$	16	$	(21)	$	(10)	$	80	$	283

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SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Development property investments	$ 47,223	$ 40,222
Operating property loans	20,178	19,600
Total investments	67,401	59,822
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Development property investments	0	0
Operating property loans	0	0
Total investments	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Development property investments	0	0
Operating property loans	0	0
Total investments	0	0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Development property investments	47,223	40,222
Operating property loans	20,178	19,600
Total investments	$ 67,401	$ 59,822

XML

SIGNIFICANT ACCOUNTING POLICIES (Details Textual) - USD ($) $ in Thousands		1 Months Ended			3 Months Ended
		May. 09, 2016	May. 04, 2016	Apr. 29, 2016	Mar. 31, 2016	Mar. 31, 2015	May. 03, 2016	Dec. 31, 2015
Significant Accounting Policies [Line Items]
Cash					$ 28,800
Proceeds from Collection of Notes Receivable					19,100
Proceeds from Prepayment Penalties					14,300
Loans Receivable, Net, Total	[1]				64,011			$ 60,665
Payments to Acquire Equity Method Investments					10,551	$ 0
Transaction and Other Expenses					2,000
Terminated Credit Facility [Member]
Significant Accounting Policies [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity					60,000		$ 60,000
Operating Property Loans [Member]
Significant Accounting Policies [Line Items]
Loans Receivable, Net, Total					7,000
Payments to Acquire Equity Method Investments					41,000
Operating Property Loans [Member] | Subsequent Event [Member]
Significant Accounting Policies [Line Items]
Proceeds from Collection of Notes Receivable		$ 5,600
First Bank A Notes [Member] | Subsequent Event [Member]
Significant Accounting Policies [Line Items]
Percentage Of Sale Of Senior Participations Operating Property Loans				65.00%
Proceeds from Notes Payable				$ 5,000
Loans Receivable, Net, Total				$ 7,800
First Bank [Member] | Subsequent Event [Member]
Significant Accounting Policies [Line Items]
Percentage Of Sale Of Senior Participations Operating Property Loans			56.40%
Proceeds from Notes Payable			$ 10,000
Heitman Joint Venture [Member]
Significant Accounting Policies [Line Items]
Loans and Leases Receivable, Commitments, Fixed Rates					41,000
Scenario, Previously Reported [Member]
Significant Accounting Policies [Line Items]
Long-term Purchase Commitment, Amount					$ 69,800
Development Property Investment [Member]
Significant Accounting Policies [Line Items]
Equity Method Investment, Ownership Percentage					49.90%			49.90%
Loans Receivable Commercial Real Estate Commitment Amount					$ 76,500
Loans Receivable, Net, Total	[1]				43,863			$ 40,682
Development Property Investment [Member] | Operating Property Loans [Member]
Significant Accounting Policies [Line Items]
Loans Receivable, Net, Total					$ 33,300

[1] Represents principal balance of loan gross of origination fees

XML

INVESTMENTS (Details) - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
		Mar. 31, 2016	Dec. 31, 2015
Schedule of Investments [Line Items]
Total Investment Commitment		$ 133,787	$ 175,733
Funded Investment	[1]	64,011	60,665
Remaining Unfunded Commitment		69,776	115,068
Development property investments, Fair Value		47,223	40,222
Operating property loans, Fair Value		20,178	19,600
Operating Property Loans [Member]
Schedule of Investments [Line Items]
Total Investment Commitment		20,460	20,460
Funded Investment	[1]	20,148	19,983
Remaining Unfunded Commitment		312	477
Development property investments, Fair Value		20,178	19,600
Development Property Investment [Member]
Schedule of Investments [Line Items]
Total Investment Commitment		113,327	155,273
Funded Investment	[1]	43,863	40,682
Remaining Unfunded Commitment		69,464	114,591
Development property investments, Fair Value		47,223	40,222
Development Property Investment [Member] | Construction Loans [Member]
Schedule of Investments [Line Items]
Total Investment Commitment		36,833	36,833
Funded Investment	[1]	10,525	9,477
Remaining Unfunded Commitment		26,308	27,356
Development property investments, Fair Value		10,034	8,956
Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Total Investment Commitment		76,494	118,440
Funded Investment	[1]	33,338	31,205
Remaining Unfunded Commitment		43,156	87,235
Development property investments, Fair Value		$ 37,189	$ 31,266
Investment Portfolio One [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		4/21/2015	4/21/2015
Metropolitan Statistical Area (MSA)		Orlando	Orlando
Total Investment Commitment		$ 5,372	$ 5,372
Funded Investment	[1]	4,356	3,254
Remaining Unfunded Commitment		1,016	2,118
Development property investments, Fair Value		$ 5,383	$ 3,400
Investment Portfolio Two [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		6/10/2015	5/14/2015
Metropolitan Statistical Area (MSA)		Atlanta	Miami	[2]
Total Investment Commitment		$ 8,132	$ 13,867
Funded Investment	[1]	6,164	2,258
Remaining Unfunded Commitment		1,968	11,609
Development property investments, Fair Value		$ 7,000	$ 2,115
Investment Portfolio Three [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		6/19/2015	5/14/2015
Metropolitan Statistical Area (MSA)		Tampa	Miami	[2]
Total Investment Commitment		$ 5,369	$ 14,849
Funded Investment	[1]	4,520	3,076
Remaining Unfunded Commitment		849	11,773
Development property investments, Fair Value		$ 4,863	$ 2,929
Investment Portfolio Four [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		6/26/2015	6/10/2015
Metropolitan Statistical Area (MSA)		Atlanta	Atlanta
Total Investment Commitment		$ 6,050	$ 8,132
Funded Investment	[1]	4,199	4,723
Remaining Unfunded Commitment		1,851	3,409
Development property investments, Fair Value		$ 5,057	$ 4,829
Investment Portfolio Five [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		6/29/2015	6/19/2015
Metropolitan Statistical Area (MSA)		Charlotte	Tampa
Total Investment Commitment		$ 7,624	$ 5,369
Funded Investment	[1]	2,657	3,720
Remaining Unfunded Commitment		4,967	1,649
Development property investments, Fair Value		$ 3,202	$ 3,820
Investment Portfolio Six [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		7/2/2015	6/26/2015
Metropolitan Statistical Area (MSA)		Milwaukee	Atlanta
Total Investment Commitment		$ 7,650	$ 6,050
Funded Investment	[1]	2,677	2,799
Remaining Unfunded Commitment		4,973	3,251
Development property investments, Fair Value		$ 2,645	$ 2,823
Investment Portfolio Seven [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		7/31/2015	6/29/2015
Metropolitan Statistical Area (MSA)		New Haven	Charlotte
Total Investment Commitment		$ 6,930	$ 7,624
Funded Investment	[1]	1,810	1,124
Remaining Unfunded Commitment		5,120	6,500
Development property investments, Fair Value		$ 1,810	$ 1,554
Investment Portfolio Eight [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		8/10/2015	7/2/2015
Metropolitan Statistical Area (MSA)		Pittsburgh	Milwaukee
Total Investment Commitment		$ 5,266	$ 7,650
Funded Investment	[1]	1,688	2,529
Remaining Unfunded Commitment		3,578	5,121
Development property investments, Fair Value		$ 1,711	$ 2,463
Investment Portfolio Nine [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		8/14/2015	7/31/2015
Metropolitan Statistical Area (MSA)		Raleigh	New Haven
Total Investment Commitment		$ 8,998	$ 6,930
Funded Investment	[1]	1,072	997
Remaining Unfunded Commitment		7,926	5,933
Development property investments, Fair Value		$ 995	$ 960
Investment Portfolio Ten [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		9/30/2015	8/10/2015
Metropolitan Statistical Area (MSA)		Jacksonville	Pittsburgh
Total Investment Commitment		$ 6,445	$ 5,266
Funded Investment	[1]	3,330	1,542
Remaining Unfunded Commitment		3,115	3,724
Development property investments, Fair Value		$ 3,738	$ 1,542
Investment Portfolio Eleven [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date		10/27/2015	8/14/2015
Metropolitan Statistical Area (MSA)		Austin	Raleigh
Total Investment Commitment		$ 8,658	$ 8,998
Funded Investment	[1]	865	1,026
Remaining Unfunded Commitment		7,793	7,972
Development property investments, Fair Value		$ 785	$ 934
Investment Portfolio Twelve [Member] | Development Property Investment [Member] | Construction Loans [Member]
Schedule of Investments [Line Items]
Closing Date		8/5/2015
Metropolitan Statistical Area (MSA)		West Palm Beach
Total Investment Commitment		$ 7,500
Funded Investment	[1]	2,324
Remaining Unfunded Commitment		5,176
Development property investments, Fair Value		$ 2,267
Investment Portfolio Twelve [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date			9/25/2015
Metropolitan Statistical Area (MSA)	[2]		Fort Lauderdale
Total Investment Commitment			$ 13,230
Funded Investment	[1]		2,144
Remaining Unfunded Commitment			11,086
Development property investments, Fair Value			$ 2,009
Investment Portfolio Thirteen [Member] | Development Property Investment [Member] | Construction Loans [Member]
Schedule of Investments [Line Items]
Closing Date		8/5/2015
Metropolitan Statistical Area (MSA)		Sarasota
Total Investment Commitment		$ 4,792
Funded Investment	[1]	1,054
Remaining Unfunded Commitment		3,738
Development property investments, Fair Value		$ 1,018
Investment Portfolio Thirteen [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date			9/30/2015
Metropolitan Statistical Area (MSA)			Jacksonville
Total Investment Commitment			$ 6,445
Funded Investment	[1]		1,213
Remaining Unfunded Commitment			5,232
Development property investments, Fair Value			$ 1,180
Investment Portfolio Fourteen [Member] | Development Property Investment [Member] | Construction Loans [Member]
Schedule of Investments [Line Items]
Closing Date		11/17/2015
Metropolitan Statistical Area (MSA)		Chicago
Total Investment Commitment		$ 6,808
Funded Investment	[1]	1,394
Remaining Unfunded Commitment		5,414
Development property investments, Fair Value		$ 1,327
Investment Portfolio Fourteen [Member] | Development Property Investment [Member] | Loan Investments With Profits Interest [Member]
Schedule of Investments [Line Items]
Closing Date			10/27/2015
Metropolitan Statistical Area (MSA)			Austin
Total Investment Commitment			$ 8,658
Funded Investment	[1]		800
Remaining Unfunded Commitment			7,858
Development property investments, Fair Value			$ 708
Investment Portfolio Fifteen [Member] | Development Property Investment [Member] | Construction Loans [Member]
Schedule of Investments [Line Items]
Closing Date		12/23/2015	8/5/2015
Metropolitan Statistical Area (MSA)		Miami	West Palm Beach
Total Investment Commitment		$ 17,733	$ 7,500
Funded Investment	[1]	5,753	2,011
Remaining Unfunded Commitment		11,980	5,489
Development property investments, Fair Value		$ 5,422	$ 1,951
Investment Portfolio Sixteen [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date		6/19/2015
Metropolitan Statistical Area (MSA)		New Orleans
Total Investment Commitment		$ 2,800
Funded Investment	[1]	2,800
Remaining Unfunded Commitment		0
Development property investments, Fair Value		$ 2,788
Investment Portfolio Sixteen [Member] | Development Property Investment [Member] | Construction Loans [Member]
Schedule of Investments [Line Items]
Closing Date			8/5/2015
Metropolitan Statistical Area (MSA)			Sarasota
Total Investment Commitment			$ 4,792
Funded Investment	[1]		1,036
Remaining Unfunded Commitment			3,756
Development property investments, Fair Value			$ 998
Investment Portfolio Seventeen [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date		7/7/2015
Metropolitan Statistical Area (MSA)		Newark
Total Investment Commitment		$ 3,480
Funded Investment	[1]	3,480
Remaining Unfunded Commitment		0
Development property investments, Fair Value		$ 3,496
Investment Portfolio Seventeen [Member] | Development Property Investment [Member] | Construction Loans [Member]
Schedule of Investments [Line Items]
Closing Date			11/17/2015
Metropolitan Statistical Area (MSA)			Chicago
Total Investment Commitment			$ 6,808
Funded Investment	[1]		775
Remaining Unfunded Commitment			6,033
Development property investments, Fair Value			$ 706
Investment Portfolio Eighteen [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date		10/30/2015
Metropolitan Statistical Area (MSA)		Nashville
Total Investment Commitment		$ 1,210
Funded Investment	[1]	1,210
Remaining Unfunded Commitment		0
Development property investments, Fair Value		$ 1,216
Investment Portfolio Eighteen [Member] | Development Property Investment [Member] | Construction Loans [Member]
Schedule of Investments [Line Items]
Closing Date			12/23/2015
Metropolitan Statistical Area (MSA)			Miami
Total Investment Commitment			$ 17,733
Funded Investment	[1]		5,655
Remaining Unfunded Commitment			12,078
Development property investments, Fair Value			$ 5,301
Investment Portfolio Nineteen [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date		11/10/2015	6/19/2015
Metropolitan Statistical Area (MSA)		Sacramento	New Orleans
Total Investment Commitment		$ 5,500	$ 2,800
Funded Investment	[1]	5,500	2,800
Remaining Unfunded Commitment		0	0
Development property investments, Fair Value		$ 5,514
Operating property loans, Fair Value			$ 2,736
Investment Portfolio Twenty [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date		11/24/2015	7/7/2015
Metropolitan Statistical Area (MSA)		Nashville	Newark
Total Investment Commitment		$ 4,968	$ 3,480
Funded Investment	[1]	4,863	3,480
Remaining Unfunded Commitment		105	0
Development property investments, Fair Value		$ 4,853
Operating property loans, Fair Value			$ 3,416
Investment Portfolio Twenty One [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date		12/22/2015	10/30/2015
Metropolitan Statistical Area (MSA)		Chicago	Nashville
Total Investment Commitment		$ 2,502	$ 1,210
Funded Investment	[1]	2,295	1,210
Remaining Unfunded Commitment		207	0
Development property investments, Fair Value		$ 2,311
Operating property loans, Fair Value			$ 1,192
Investment Portfolio Twenty Two [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date			11/10/2015
Metropolitan Statistical Area (MSA)			Sacramento
Total Investment Commitment			$ 5,500
Funded Investment	[1]		5,500
Remaining Unfunded Commitment			0
Operating property loans, Fair Value			$ 5,401
Investment Portfolio Twenty Three [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date			11/24/2015
Metropolitan Statistical Area (MSA)			Nashville
Total Investment Commitment			$ 4,968
Funded Investment	[1]		4,863
Remaining Unfunded Commitment			105
Operating property loans, Fair Value			$ 4,755
Investment Portfolio Twenty Four [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Closing Date			12/22/2015
Metropolitan Statistical Area (MSA)			Chicago
Total Investment Commitment			$ 2,502
Funded Investment	[1]		2,130
Remaining Unfunded Commitment			372
Operating property loans, Fair Value			$ 2,100

[1] Represents principal balance of loan gross of origination fees

[2] These development property investments (having approximately $8.1 million of outstanding principal balances as of the time of contribution on March 31, 2016) were contributed to the SL1 Venture (defined in Note 5, Investment in Real Estate Venture) in partial satisfaction of our required $12.2 million capital commitment to the SL1 Venture. See Note 5, Investment in Real Estate Venture.

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INVESTMENTS (Details 1) - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
		Mar. 31, 2016	Dec. 31, 2015
Schedule of Investments [Line Items]
Funded principal	[1]	$ 64,011	$ 60,665
Adjustments:
Unamortized origination fees		(1,273)	(1,715)
Net increase in fair value of investments		4,663	872
Fair value of investments		$ 67,401	$ 59,822

[1] Represents principal balance of loan gross of origination fees

XML

INVESTMENTS (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Schedule of Investments [Line Items]
Number Of Investment	11
Heitman Joint Venture [Member]
Schedule of Investments [Line Items]
Investments In The Form Drawn Balances	$ 8.1
Commitment Amount Made	$ 12.2
Construction Loans [Member]
Schedule of Investments [Line Items]
Term Of Mortgage Loans Receivables	18 months
Mortgage Loans on Real Estate, Interest Rate	6.90%
Investments, Total	$ 36.8
First Mortgage [Member]
Schedule of Investments [Line Items]
Medium-term Notes	$ 20.5
Development Property Investment [Member]
Schedule of Investments [Line Items]
Term Of Mortgage Loans Receivables	72 months
Equity Method Investment, Ownership Percentage	49.90%	49.90%
Mortgage Loans on Real Estate, Interest Rate	6.90%
Investments, Total	$ 76.5
Equity Method Investment, Assets, Total	41.8	$ 44.4
Equity Method Investment, Liabilities, Total	$ 33.3	31.2
Operating Property Loans [Member]
Schedule of Investments [Line Items]
Term Of Mortgage Loans Receivables	72 months
Operating Property Loans [Member] | Maximum [Member]
Schedule of Investments [Line Items]
Mortgage Loans on Real Estate, Interest Rate	6.90%
Operating Property Loans [Member] | Minimum [Member]
Schedule of Investments [Line Items]
Mortgage Loans on Real Estate, Interest Rate	5.85%
Total Commitment [Member] | Maximum [Member]
Schedule of Investments [Line Items]
Investments, Total	$ 133.8	175.7
Total Commitment [Member] | Minimum [Member]
Schedule of Investments [Line Items]
Investments, Total	$ 64.0	$ 60.7

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details)		3 Months Ended		12 Months Ended
		Mar. 31, 2016		Dec. 31, 2015
Development Property Investments [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Inputs, Asset Category		Development property investments		Development property investments
Development Property Investments [Member] | Income approach analysis [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Measurements, Valuation Techniques		Market yields/ discount rate		Market yields/ discount rate
Development Property Investments [Member] | Option pricing model [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Measurements, Valuation Techniques		Capitalization rate	[1]	Capitalization rate	[2]
Development Property Investments [Member] | Minimum [Member] | Income approach analysis [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Assumptions, Expected Volatility Rate		7.73%		7.74%
Fair Value Assumptions, Expected Term		11 months 1 day		1 year 2 months 1 day
Development Property Investments [Member] | Maximum [Member] | Income approach analysis [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Assumptions, Expected Volatility Rate		9.00%		9.35%
Fair Value Assumptions, Expected Term		3 years 6 months 29 days		3 years 9 months 29 days
Development Property Investments [Member] | Weighted Average [Member] | Income approach analysis [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Inputs, Discount Rate		8.51%		8.77%
Fair Value Assumptions, Expected Term		2 years 10 months 10 days		3 years 7 days
Loan Investments With Profits Interest [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Measurements, Valuation Techniques		Volatility
Fair Value Inputs, Asset Category	[3]	Development property investments with a profits interest		Development property investments with a profits interest
Loan Investments With Profits Interest [Member] | Minimum [Member] | Option pricing model [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Assumptions, Expected Volatility Rate		73.39%		72.46%
Fair Value Assumptions, Expected Term		3 years 22 days		3 years 3 months 22 days
Fair Value Inputs, Cap Rate		5.50%		6.00%
Loan Investments With Profits Interest [Member] | Maximum [Member] | Option pricing model [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Assumptions, Expected Volatility Rate		74.07%		73.12%
Fair Value Assumptions, Expected Term		3 years 6 months 29 days		3 years 9 months 29 days
Fair Value Inputs, Cap Rate		5.75%		6.50%
Loan Investments With Profits Interest [Member] | Weighted Average [Member] | Option pricing model [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Assumptions, Expected Volatility Rate		73.74%		72.82%
Fair Value Assumptions, Expected Term		3 years 3 months		3 years 5 months 26 days
Fair Value Inputs, Cap Rate		5.61%		6.38%
Operating Property Loans [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Measurements, Valuation Techniques	[4]	Exit date		Exit date
Fair Value Inputs, Asset Category		Operating property loans		Operating property loans
Operating Property Loans [Member] | Income approach analysis [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Measurements, Valuation Techniques		Market yields/ discount rate		Market yields/ discount rate
Operating Property Loans [Member] | Minimum [Member] | Income approach analysis [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Assumptions, Expected Volatility Rate		5.80%		6.22%
Fair Value Assumptions, Expected Term		5 years 3 months		5 years 6 months
Operating Property Loans [Member] | Maximum [Member] | Income approach analysis [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Assumptions, Expected Volatility Rate		7.12%		7.53%
Fair Value Assumptions, Expected Term		6 years 4 months 2 days		6 years 8 months 5 days
Operating Property Loans [Member] | Weighted Average [Member] | Income approach analysis [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value Assumptions, Expected Volatility Rate		6.50%		6.91%
Fair Value Assumptions, Expected Term		5 years 8 months 12 days		5 years 11 months 19 days

[1] Six properties were between 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit.

[2] Four properties were between 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit.

[3] The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investment with a profits interest only requires incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.

[4] The exit dates for the operating property loans are the contractual maturity dates.

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 1) - Market Yield And Discount Rate [Member] - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Up 100 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (Decrease) in fair value of investments	$ (2.3)	$ (1.6)
Down 50 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (Decrease) in fair value of investments	$ 1.2	$ 0.8

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) - Capitalization Rates [Member] - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Up 100 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (Decrease) in fair value of investments	$ (1.1)	$ (0.3)
Down 100 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (Decrease) in fair value of investments	$ 1.6	$ 0.4

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance as of December 31, 2015	$ 59,822
Net realized gains	0
Net unrealized gains	3,791	$ 0
Fundings of principal, net of accretion of origination fees	10,751
Payment-in-kind interest	730	$ 0
Contribution of assets to Heitman Joint Venture	(7,693)
Net transfers in or out of Level 3	0
Balance as of March 31, 2016	$ 67,401

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Concentration of Risk, Financial Statement Captions [Line Items]
Investment Owned, Unrecognized Unrealized Appreciation (Depreciation), Net	$ 4.7	$ 0.9
Minimum [Member]
Fair Value, Concentration of Risk, Financial Statement Captions [Line Items]
Percentage of Completion of construction	40.00%
Maximum [Member]
Fair Value, Concentration of Risk, Financial Statement Captions [Line Items]
Percentage of Completion of construction	100.00%

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INVESTMENT IN REAL ESTATE VENTURE (Details Textual) - USD ($) $ in Thousands		3 Months Ended
	Mar. 07, 2016	Mar. 31, 2016	Dec. 31, 2015
Investment In Real Estate Venture [Line Items]
Real Estate Investments, Joint Ventures		$ 7,919	$ 0
Investments in Affiliates, Subsidiaries, Associates, and Joint Ventures, Fair Value Disclosure		7,693
SL1 Venture [Member]
Investment In Real Estate Venture [Line Items]
Real Estate Investments, Joint Ventures, Transaction Cost		200
Investments in Affiliates, Subsidiaries, Associates, and Joint Ventures, Fair Value Disclosure		7,700
Heitman And Large Institutional Co-Investor [Member]
Investment In Real Estate Venture [Line Items]
Real Estate Investments, Joint Ventures	$ 110,000
Heitman And Large Institutional Co-Investor [Member] | SL1 Venture [Member]
Investment In Real Estate Venture [Line Items]
Limited Liability Company (LLC) or Limited Partnership (LP), Members or Limited Partners, Ownership Interest	90.00%
Parent Company [Member] | SL1 Venture [Member]
Investment In Real Estate Venture [Line Items]
Limited Liability Company (LLC) or Limited Partnership (LP), Members or Limited Partners, Ownership Interest	10.00%
Investment Owned, Balance, Principal Amount		41,900
Investments in Affiliates, Subsidiaries, Associates, and Joint Ventures, Fair Value Disclosure		7,700
Contribution To SL 1 Venture	$ 12,200	$ 8,100

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VARIABLE INTEREST ENTITIES (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Variable Interest Entity [Line Items]
Assets recorded related to VIEs	$ 47.2	$ 40.2
Unfunded loan commitments to VIEs	69.5	114.6
Maximum exposure to loss	$ 116.7	$ 154.8

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VARIABLE INTEREST ENTITIES (Details Textual) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Variable Interest Entity [Line Items]
Variable Interest Entity Carrying Amount Assets	$ 47.2	$ 40.2
Investment in Real Estate Venture [Member]
Variable Interest Entity [Line Items]
Contribution To SL 1 Venture	$ 12.2

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OTHER ASSETS (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Mar. 31, 2016
Line of Credit [Member]
Other Investments and Securities, at Cost	$ 0.5	$ 1.0
Line of Credit Facility, Maximum Borrowing Capacity	$ 2.0
Subsidiary of Limited Liability Company or Limited Partnership, Ownership Interest	100.00%
Line of Credit [Member] | Maximum [Member]
Line of Credit Facility, Interest Rate During Period	7.00%
Line of Credit [Member] | Minimum [Member]
Line of Credit Facility, Interest Rate During Period	6.90%
Secured Debt [Member]
Secured Debt		$ 0.7
Debt Instrument, Interest Rate, Stated Percentage		6.90%

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STOCKHOLDERS' EQUITY (Details) - Restricted Stock [Member] - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Class of Stock [Line Items]
Shares, Nonvested shares at beginning of period	162,500
Shares, Granted	0	162,500
Shares, Vested	0
Shares, Forfeited	0
Shares, Nonvested shares at end of period	162,500	162,500
Weighted average grant date fair value, Nonvested at beginning of period	$ 20.08
Weighted average grant date fair value, Granted	0
Weighted average grant date fair value, Vested	0
Weighted average grant date fair value, Forfeited	0
Weighted average grant date fair value, Nonvested at end of period	$ 20.08	$ 20.08

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STOCKHOLDERS' EQUITY (Details Textual) - USD ($)	1 Months Ended			3 Months Ended		12 Months Ended
	Jun. 15, 2015	Apr. 30, 2015	Oct. 31, 2014	Mar. 31, 2016	Sep. 30, 2015	Dec. 31, 2015
Class of Stock [Line Items]
Common Stock, Shares Authorized				500,000,000		500,000,000
Common Stock, Shares, Issued				6,162,500		6,162,500
Preferred Stock, Shares Authorized				100,000,000		100,000,000
Capital			$ 1,000
Proceeds from Issuance Initial Public Offering		$ 93,000,000
Restricted Stock or Unit Expense				$ 200,000
Share Price				$ 15.62		$ 14.95
Expected Restricted Stock or Unit Expense				$ 2,100,000		$ 2,200,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition				3 years 6 months
Restricted Stock [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period				0		162,500
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period				0
Director [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		2,500
2015 Equity Incentive Plan [Member]
Class of Stock [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance		200,000
2015 Equity Incentive Plan [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	100,000	10,000
2015 Equity Incentive Plan [Member] | Restricted Stock [Member] | Share-based Compensation Award, Tranche One [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period				40,833
2015 Equity Incentive Plan [Member] | Restricted Stock [Member] | Share-based Compensation Award, Tranche Two [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period				40,833
2015 Equity Incentive Plan [Member] | Restricted Stock [Member] | Share-based Compensation Award, Tranche Three [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period				40,833
2015 Equity Incentive Plan [Member] | Restricted Stock [Member] | Share Based Compensation Award Tranche Four [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period				20,000
2015 Equity Incentive Plan [Member] | Restricted Stock [Member] | Share Based Compensation Award Tranche Five [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period				20,000
Founder [Member]
Class of Stock [Line Items]
Proceeds from Issuance of Private Placement		$ 5,000,000
IPO [Member]
Class of Stock [Line Items]
Common Stock, Shares, Issued		5,000,000
Private Placement [Member]
Class of Stock [Line Items]
Common Stock, Shares, Issued		250,000
Over-Allotment Option [Member]
Class of Stock [Line Items]
Proceeds from Issuance of Common Stock		$ 14,000,000
Common Stock [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period					52,500
Common Stock [Member] | IPO [Member]
Class of Stock [Line Items]
Common Stock, Shares, Issued		1,000
Stock Issued During Period, Shares, New Issues			1,000
Common Stock [Member] | Over-Allotment Option [Member]
Class of Stock [Line Items]
Sale of Stock, Number of Shares Issued in Transaction		750,000

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Shares outstanding
Weighted average common shares - basic		6,000,000
Effect of dilutive securities	[1]	0
Weighted average common shares - diluted		6,000,000
Calculation of Earnings per Share - basic
Net income		$ 1,122	$ (147)
Net income allocated to unvested restricted shares		(30)
Net income, adjusted		$ 1,092
Weighted average common shares - basic		6,000,000
Earnings per share - basic		$ 0.18
Calculation of Earnings per Share - diluted
Net income		$ 1,122	$ (147)
Net income allocated to unvested restricted shares		(30)
Net income, adjusted	[2]	$ 1,092
Weighted average common shares - diluted		6,000,000
Earnings per share - diluted		$ 0.18

[1] For the three months ended March 31, 2016, potentially dilutive securities are not included in the diluted earnings per share calculation as they are not dilutive.

[2] The Company has no undistributed earnings and accordingly reallocation of undistributed earnings between potential common stock and participating securities is not necessary.

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RELATED PARTY TRANSACTIONS (Details Textual) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Apr. 30, 2015	Mar. 31, 2016	Dec. 31, 2015
Related Party Transaction [Line Items]
Annual Rate Of Interest		1.50%
Cumulative Annual Stockholder Total Return		8.00%
Percentage Of Base Management Fee		0.375%
Reimbursement Of Organization Costs	$ 100
Reimbursement Of Offering Costs	$ 100
Expenses Reimbursed To Manager		$ 800
Base Management Fee		$ 400
Contract Termination Claims, Description		a termination fee equal to the greater of (i) three times the sum of the average annual Base Management Fee and Incentive Fee earned by the Manager during the 24-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination, or (ii) the offer price, which will be based on the lesser of (a) the Manager’s earnings before interest, taxes, depreciation and amortization (adjusted for unusual, extraordinary and non-recurring charges and expenses), or “EBITDA” annualized based on the most recent quarter ended, multiplied by a specific multiple, or EBITDA Multiple, depending on the Company’s achieved total annual return, and (b) the Company’s equity market capitalization multiplied by a specific percentage, or Capitalization Percentage, depending on the Company’s achieved total return (the Internalization Price).
Amortization of Other Deferred Charges		$ 200
Equity Method Investments, Fair Value Disclosure		47,223	$ 40,222
SL1 Venture [Member]
Related Party Transaction [Line Items]
Commitment Amount Made		7,900
Equity Method Investments [Member]
Related Party Transaction [Line Items]
Change in Fair value from equity investment		3,300
Equity Method Investments, Fair Value Disclosure		37,200	$ 31,300
Income (Loss) from Equity Method Investments		$ 500

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RESTRUCTURING COSTS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Restructuring Cost and Reserve [Line Items]
Restructuring costs liability, Beginning Balance	$ 95
Restructuring costs incurred	7	$ 0
Cash payments	(21)
Non-cash activity	(10)
Restructuring costs liability, Ending Balance	80
Total cumulative restructuring costs expected to be incurred	283
Severance
Restructuring Cost and Reserve [Line Items]
Restructuring costs liability, Beginning Balance	0
Restructuring costs incurred	0
Cash payments	0
Non-cash activity	0
Restructuring costs liability, Ending Balance	0
Total cumulative restructuring costs expected to be incurred	97
Fixed asset disposal
Restructuring Cost and Reserve [Line Items]
Restructuring costs liability, Beginning Balance	0
Restructuring costs incurred	0
Cash payments	0
Non-cash activity	0
Restructuring costs liability, Ending Balance	0
Total cumulative restructuring costs expected to be incurred	33
Lease termination
Restructuring Cost and Reserve [Line Items]
Restructuring costs liability, Beginning Balance	85
Restructuring costs incurred	16
Cash payments	(21)
Non-cash activity	0
Restructuring costs liability, Ending Balance	80
Total cumulative restructuring costs expected to be incurred	140
Other
Restructuring Cost and Reserve [Line Items]
Restructuring costs liability, Beginning Balance	10
Restructuring costs incurred	0
Cash payments	0
Non-cash activity	(10)
Restructuring costs liability, Ending Balance	0
Total cumulative restructuring costs expected to be incurred	$ 13

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RESTRUCTURING COSTS (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Restructuring Cost and Reserve [Line Items]
Restructuring Charges, Total	$ 7	$ 0

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SUBSEQUENT EVENTS (Details Textual) - USD ($) $ in Thousands		1 Months Ended
		May. 09, 2016	May. 04, 2016	Apr. 29, 2016	May. 03, 2016	Mar. 31, 2016	Dec. 31, 2015
Subsequent Event [Line Items]
Proceeds From Early Pay Off Of Operating Property Loan		$ 5,600
Loans Receivable Commercial Real Estate Investment Commitment						$ 133,787	$ 175,733
Loans Receivable, Net	[1]					64,011	$ 60,665
Terminated Credit Facility [Member]
Subsequent Event [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity					$ 60,000	$ 60,000
Subsequent Event [Member] | First Bank A Notes [Member]
Subsequent Event [Line Items]
Percentage Of Sale Of Senior Participations Operating Property Loans				65.00%
Proceeds from Notes Payable				$ 5,000
Debt Instrument, Interest Rate, Basis for Effective Rate				30-day LIBOR plus 3.85%
Debt Instrument, Collateral Amount				$ 500
Debt Instrument, Interest Rate, Effective Percentage				4.30%
Loans Receivable, Net				$ 7,800
Subsequent Event [Member] | First Bank [Member]
Subsequent Event [Line Items]
Percentage Of Sale Of Senior Participations Operating Property Loans			56.40%
Proceeds from Notes Payable			$ 10,000
Loans Receivable Commercial Real Estate Investment Commitment			$ 17,700

[1] Represents principal balance of loan gross of origination fees