Note 3 - Loans Held for Investment, Net

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

3. Loans Held for Investment, Net

The Company’s investments in mortgage loans, mezzanine loans, preferred equity and convertible notes are accounted for as loans held for investment. The mortgage loans are presented as “Mortgage loans, held-for-investment, net” and the mezzanine loans, preferred equity and convertible notes are presented as “Loans, held-for-investment, net” on the Consolidated Balance Sheets. The following tables summarize our loans held-for-investment as of September 30, 2022 and December 31, 2021, respectively (dollars in thousands):

							Weighted Average
Loan Type	Outstanding Face Amount		Carrying Value (1)		Loan Count		Fixed Rate (2)			Coupon (3)			Life (years) (4)
September 30, 2022
Mortgage loans, held-for-investment	$	688,728	$	729,004		15		100.00	%		4.81	%		5.61
Mezzanine loans, held-for-investment		163,021		165,197		23		63.99	%		9.96	%		5.64
Preferred equity, held-for-investment		118,993		118,669		9		78.57	%		10.87	%		5.72
	$	970,742	$	1,012,870		47		91.33	%		6.41	%		5.63

(1) Carrying value includes the outstanding face amount plus unamortized purchase premiums/discounts and any allowance for loan losses.

(2) The weighted-average of loans paying a fixed rate is weighted on current principal balance.

(3) The weighted-average coupon is weighted on outstanding face amount.

(4) The weighted-average life is weighted on outstanding face amount and assumes no prepayments. The maturity date for preferred equity investments represents the maturity date of the senior mortgage, as the preferred equity investments require repayment upon the sale or refinancing of the asset.

							Weighted Average
Loan Type	Outstanding Face Amount		Carrying Value (1)		Loan Count		Fixed Rate (2)			Coupon (3)			Life (years) (4)
December 31, 2021
Mortgage loans, held-for-investment	$	795,223	$	847,364		21		100.00	%		4.85	%		6.45
Mezzanine loans, held-for-investment		152,144		154,516		23		69.28	%		8.03	%		6.50
Preferred equity, held-for-investment		66,697		66,624		6		100.00	%		10.52	%		3.84
Convertible note, held-for-investment		20,478		20,377		1		100.00	%		9.00	%		1.99
	$	1,034,542	$	1,088,881		51		95.48	%		5.77	%		6.20

(1) Carrying value includes the outstanding face amount plus unamortized purchase premiums/discounts and any allowance for loan losses.

(2) The weighted-average of loans paying a fixed rate is weighted on current principal balance.

(3) The weighted-average coupon is weighted on current principal balance.

(4) The weighted-average life is weighted on current principal balance and assumes no prepayments. The maturity date for preferred equity investments represents the maturity date of the senior mortgage, as the preferred equity investments require repayment upon the sale or refinancing of the asset.

For the nine months ended September 30, 2022 and 2021, the loan and preferred equity portfolio activity was as follows (in thousands):

	For the Nine Months Ended September 30,
	2022			2021
Balance at January 1,	$	1,088,881		$	1,045,891
Originations		156,934			28,911
Proceeds from principal repayments		(196,825	)		(42,130	)
Conversion of convertible bonds to common stock		(25,000	)		—
PIK distribution reinvested in Preferred Units		528			—
Amortization of loan premium, net (1)		(11,591	)		(7,340	)
Loan loss provision		(57	)		(101	)
Realized losses		—			(886	)
Balance at September 30,	$	1,012,870		$	1,024,345

(1) Includes net amortization of loan purchase premiums.

As of September 30, 2022, and December 31, 2021, there were $42.7 million and $55.0 million of unamortized premiums on loans, held-for-investment, net, respectively, on the Consolidated Balance Sheets.

As discussed in Note 2, the Company evaluates loans classified as held-for-investment on a loan-by-loan basis every quarter. In conjunction with the review of the portfolio, the Company assesses the risk factors of each loan and assign a risk rating based on a variety of factors. Loans are rated “1” through “5,” from least risk to greatest risk, respectively. See Note 2 for a more detailed discussion of the risk factors and ratings. The following tables allocate the principal balance and net book value of the loan portfolio based on our internal risk ratings (dollars in thousands):

	September 30, 2022
	Number of		Carrying		% of Loan
Risk Rating	Loans		Value		Portfolio
1		—	$	—		—
2		—		—		—
3		47		1,012,870		100.00	%
4		—		—		—
5		—		—		—
		47	$	1,012,870		100.00	%

	December 31, 2021
	Number of		Carrying		% of Loan
Risk Rating	Loans		Value		Portfolio
1		—	$	—		—
2		—		—		—
3		51		1,088,881		100.00	%
4		—		—		—
5		—		—		—
		51	$	1,088,881		100.00	%

As of September 30, 2022, all 47 loans held-for-investment in our portfolio were rated “3,” or “Satisfactory” based on the factors assessed by the Company and discussed in Note 2.

The following tables present the geographies and property types of collateral underlying the Company’s loans held-for-investment as a percentage of the loans’ face amounts. 

Geography	September 30, 2022			December 31, 2021
Georgia		32.14	%		38.93	%
Florida		18.54	%		16.90	%
Texas		10.83	%		7.74	%
Nevada		5.07	%		*
Maryland		5.92	%		5.66	%
Minnesota		5.17	%		4.86	%
California		4.52	%		2.53	%
Alabama		3.57	%		3.35	%
North Carolina		2.43	%		2.23	%
Arkansas		1.38	%		*
Missouri		1.26	%		1.19	%
New Jersey		*			2.83	%
Connecticut		0.00	%		2.87	%
Other (17 and 19 states each at <1%)		9.17	%		10.91	%
		100.00	%		100.00	%

*Included in “Other.”

Collateral Property Type	September 30, 2022			December 31, 2021
Single Family Rental		70.24	%		76.15	%
Multifamily		25.28	%		20.32	%
Life Science		2.75	%		3.53	%
Self-Storage		1.73	%		0.00	%
		100.00	%		100.00	%