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Loans
 9 Months Ended
Sep. 30, 2022
Receivables [Abstract]  
Loans

NOTE 4 – LOANS

Loans generally are funded at a fixed interest rate with a loan term of up to five years. Loans acquired are generally done so within the first six months of origination and are purchased at par value, which approximates fair value. See Note 3 (General Partners and Other Related Parties) for a description of loans transferred by executed assignments between the related mortgage funds.

As of September 30, 2022, 21 loans with principal of $59,141,000 (representing 97% of the aggregate principal of the partnership’s loan portfolio) have a term of five years or less. The remaining loans have terms longer than five years. Substantially all loans are written without a prepayment penalty provision.

As of September 30, 2022, 13 loans provide for monthly payments of interest only, with the principal due at maturity, and 10 loans with principal of $22,070,000 (representing 36% of the aggregate principal of the partnership’s loan portfolio) provide for monthly payments of principal and interest, typically calculated on a 30-year amortization, with the remaining principal due at maturity. The remaining loans provide for monthly payments of interest only, with the principal due in full at maturity.

Secured loans unpaid principal balance (principal)

Secured loan transactions for the three and nine months ended September 30, 2022, are summarized in the following table ($ in thousands).

 

 

 

Three Months Ended September 30, 2022

 

 

Nine Months Ended September 30, 2022

 

 

Principal, beginning of period

 

$

63,056

 

 

$

55,099

 

 

Loans funded

 

 

16,331

 

 

 

47,169

 

 

Principal collected(1)

 

 

(12,604

)

 

 

(27,997

)

 

Loans transferred to related mortgage fund

 

 

(2,288

)

 

 

(3,284

)

 

Loans transferred to held for sale(2)

 

 

—

 

 

 

(6,492

)

 

Loans sold to non-affiliate(3)

 

 

(3,242

)

 

 

(3,242

)

 

Principal, end of period

 

$

61,253

 

 

$

61,253

 

 

 

(1)
Includes principal collected and held in trust at September 30, 2022 of approximately $1 offset by principal collected and held in trust at December 31, 2021 of approximately $465,000 which was disbursed to the partnership in January 2022.
(2)
In May 2022, three loans with aggregate principal of approximately $6.5 million were sold to an unaffiliated third-party. The partnership recognized a gain of approximately $81,000 net of commissions to and transaction costs from third parties.
(3)
For the three months ended September 30, 2022, one loan with aggregate principal of $3,250,000 was sold to an unaffiliated third-party. The partnership recognized a gain of approximately $41,000 net of commissions to and transaction costs from third parties.

During the nine months ended September 30, 2022, the partnership extended six maturing (or matured) loans with aggregated principal of approximately $21,117,000, which are not included in the activity shown in the table above. The loans have an average extension period of approximately 10 months. The loans were current and deemed well collateralized (i.e., the LTV for the collateral was within lending guidelines) at the time they were extended. Additionally, interest rates charged to borrowers may be adjusted in conjunction with the loan extensions to reflect current market conditions.

The partnership funds loans with the intent to hold the loans until maturity, although from time to time the partnership may sell certain loans when the manager determines it to be in the best interest of the partnership.

Pursuant to California regulatory requirements borrower payments are deposited into a trust account established by RMC with an independent bank and are presented on the balance sheet as “Loan payments in trust”. Funds are disbursed to the partnership as collected which can range from same day for wire transfers and up to two weeks after deposit for checks. Loan payments in trust at September 30, 2022, were disbursed to the partnership’s account by October 24, 2022. Loan payments in trust at December 31, 2021 were distributed to the partnership’s account by January 14, 2022.

Loan characteristics

Secured loans had the characteristics presented in the following table ($ in thousands).

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Number of secured loans

 

 

23

 

 

 

31

 

Secured loans – principal

 

$

61,253

 

 

$

55,099

 

Secured loans – lowest interest rate (fixed)

 

 

6.8

%

 

 

7.3

%

Secured loans – highest interest rate (fixed)

 

 

10.8

%

 

 

10.8

%

 

 

 

 

 

 

 

Average secured loan – principal

 

$

2,663

 

 

$

1,777

 

Average principal as percent of total principal

 

 

4.3

%

 

 

3.2

%

Average principal as percent of partners’ capital, net of formation loan

 

 

4.7

%

 

 

2.7

%

Average principal as percent of total assets

 

 

3.8

%

 

 

2.6

%

 

 

 

 

 

 

 

Largest secured loan – principal

 

$

9,000

 

 

$

7,994

 

Largest principal as percent of total principal

 

 

14.7

%

 

 

14.5

%

Largest principal as percent of partners’ capital, net of formation loan

 

 

15.8

%

 

 

12.2

%

Largest principal as percent of total assets

 

 

13.0

%

 

 

11.7

%

 

 

 

 

 

 

 

Smallest secured loan – principal

 

$

293

 

 

$

56

 

Smallest principal as percent of total principal

 

 

0.5

%

 

 

0.1

%

Smallest principal as percent of partners’ capital, net of formation loan

 

 

0.5

%

 

 

0.1

%

Smallest principal as percent of total assets

 

 

0.4

%

 

 

0.1

%

 

 

 

 

 

 

 

Number of California counties where security is located

 

 

10

 

 

 

12

 

Largest percentage of principal in one California county

 

 

31.9

%

 

 

32.1

%

As of September 30, 2022, there are four loans with principal balances in excess of 10% of the total outstanding principal balance. The partnership’s largest loan, with principal of approximately $9,000,000 is secured by an office building in the City of Orange in Orange County, bears an interest rate of 7.99% and matures on September 1, 2025. The second loan, with principal of approximately $8,849,000 is secured by a commercial building in the City of Santa Clara in Santa Clara County, bears an interest rate of 8.375% and matures on July 1, 2027. The third loan, with principal of approximately $7,994,000 is secured by a commercial building in the City and County of San Francisco, bears an interest rate of 8.375% and matured on September 1, 2022. The fourth loan, with principal of approximately $6,300,000 is secured by a multifamily building in the City and County of San Francisco, bears an interest rate of 7.75% and matures on April 1, 2023. All four loans were in first lien position.

As of September 30, 2022, the partnership had no commitments to lend outstanding and had no construction or rehabilitation loans outstanding.

Distribution of secured loans-principal by California counties

The distribution of secured loans within California by counties is presented in the following table ($ in thousands).

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

Principal

 

 

Percent

 

 

Principal

 

 

Percent

 

San Francisco Bay Area(4)

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

$

19,507

 

 

 

31.9

%

 

$

17,694

 

 

 

32.1

%

San Mateo

 

 

2,523

 

 

 

4.1

 

 

 

7,696

 

 

 

14.0

 

Santa Clara

 

 

12,279

 

 

 

20.0

 

 

 

4,600

 

 

 

8.4

 

Sonoma

 

 

—

 

 

 

0.0

 

 

 

576

 

 

 

1.0

 

Solano

 

 

3,550

 

 

 

5.8

 

 

 

—

 

 

 

0.0

 

Marin

 

 

1,099

 

 

 

1.8

 

 

 

1,653

 

 

 

3.0

 

Alameda

 

 

730

 

 

 

1.2

 

 

 

6,239

 

 

 

11.3

 

 

 

 

39,688

 

 

 

64.8

 

 

 

38,458

 

 

 

69.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Northern California

 

 

 

 

 

 

 

 

 

 

 

 

Stanislaus

 

 

1,301

 

 

 

2.1

 

 

 

—

 

 

 

0.0

 

Mariposa

 

 

—

 

 

 

0.0

 

 

 

56

 

 

 

0.1

 

 

 

 

1,301

 

 

 

2.1

 

 

 

56

 

 

 

0.1

 

Northern California Total

 

 

40,989

 

 

 

66.9

 

 

 

38,514

 

 

 

69.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles & Coastal

 

 

 

 

 

 

 

 

 

 

 

 

Santa Barbara

 

 

2,049

 

 

 

3.3

 

 

 

2,062

 

 

 

3.7

 

Los Angeles

 

 

6,000

 

 

 

9.8

 

 

 

10,783

 

 

 

19.6

 

Orange

 

 

12,215

 

 

 

20.0

 

 

 

2,192

 

 

 

4.0

 

San Diego

 

 

—

 

 

 

0.0

 

 

 

1,088

 

 

 

2.0

 

 

 

 

20,264

 

 

 

33.1

 

 

 

16,125

 

 

 

29.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Southern California

 

 

 

 

 

 

 

 

 

 

 

 

Riverside

 

 

—

 

 

 

0.0

 

 

 

460

 

 

 

0.8

 

 

 

 

—

 

 

 

0.0

 

 

 

460

 

 

 

0.8

 

Southern California Total

 

 

20,264

 

 

 

33.1

 

 

 

16,585

 

 

 

30.1

 

Total principal, secured loans

 

$

61,253

 

 

 

100.0

%

 

$

55,099

 

 

 

100.0

%

 

(4)
Includes the Silicon Valley

Property type

Secured loans summarized by property type are presented in the following table ($ in thousands).

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

Loans

 

 

Principal

 

 

Percent

 

 

Loans

 

 

Principal

 

 

Percent

 

Single family(5)

 

 

6

 

 

$

5,945

 

 

 

10

%

 

 

16

 

 

$

14,597

 

 

 

26

%

Multi-family

 

 

3

 

 

 

9,401

 

 

 

15

 

 

 

2

 

 

 

7,550

 

 

 

14

 

Commercial

 

 

12

 

 

 

44,606

 

 

 

73

 

 

 

13

 

 

 

32,952

 

 

 

60

 

Land

 

 

2

 

 

 

1,301

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

Total principal, secured loans

 

 

23

 

 

$

61,253

 

 

 

100

%

 

 

31

 

 

$

55,099

 

 

 

100

%

 

(5)
Single family property type at September 30, 2022, consists of 2 loans with aggregate principal of approximately $908,000 that are owner occupied and 4 loans with aggregate principal of approximately $5,037,000 that are non-owner occupied. At December 31, 2021, single family property type consisted of 4 loans with aggregate principal of approximately $2,306,000 that were owner occupied and 12 loans with aggregate principal of approximately $12,291,000 that were non-owner occupied. Single family includes 1-4 unit residential buildings, condominium units, townhouses and condominium complexes.

Lien position

At funding, secured loans had the lien positions presented in the following table ($ in thousands).

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

Loans

 

 

Principal

 

 

Percent

 

 

Loans

 

 

Principal

 

 

Percent

 

First trust deeds

 

 

20

 

 

$

57,922

 

 

 

95

%

 

 

25

 

 

$

45,992

 

 

 

83

%

Second trust deeds

 

 

3

 

 

 

3,331

 

 

 

5

 

 

 

6

 

 

 

9,107

 

 

 

17

 

Total principal, secured loans

 

 

23

 

 

 

61,253

 

 

 

100

%

 

 

31

 

 

 

55,099

 

 

 

100

%

Liens due other lenders at loan closing

 

 

 

 

 

4,041

 

 

 

 

 

 

 

 

 

14,988

 

 

 

 

Total debt

 

 

 

 

$

65,294

 

 

 

 

 

 

 

 

$

70,087

 

 

 

 

Appraised property value at loan closing

 

 

 

 

$

134,329

 

 

 

 

 

 

 

 

$

117,570

 

 

 

 

Percent of total debt to appraised values (LTV)
   at loan closing(6)

 

 

 

 

 

55.2

%

 

 

 

 

 

 

 

 

62.3

%

 

 

 

 

(6)
Based on appraised values and liens due other lenders at loan closing. The weighted-average loan-to-value (LTV) computation above does not take into account subsequent increases or decreases in property values following the loan closing, nor does it include decreases or increases on senior liens to other lenders.

 

Scheduled maturities/Secured loans-principal

Secured loans scheduled to mature in periods as of and after September 30, 2022 are presented in the following table ($ in thousands).

 

 

 

 

 

 

 

 

 

 

 

 

First Trust Deeds

 

 

Second Trust Deeds

 

 

 

Loans

 

 

Principal

 

 

Percent

 

 

Loans

 

 

Principal

 

 

Loans

 

 

Principal

 

2022(7)

 

 

3

 

 

$

3,818

 

 

 

6

%

 

 

2

 

 

$

1,879

 

 

 

1

 

 

$

1,939

 

2023

 

 

11

 

 

 

22,058

 

 

 

36

 

 

 

9

 

 

 

20,666

 

 

 

2

 

 

 

1,392

 

2024

 

 

2

 

 

 

1,248

 

 

 

2

 

 

 

2

 

 

 

1,248

 

 

 

—

 

 

 

—

 

2025

 

 

1

 

 

 

9,000

 

 

 

15

 

 

 

1

 

 

 

9,000

 

 

 

—

 

 

 

—

 

2026

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0

 

 

 

—

 

 

 

—

 

 

 

—

 

Thereafter

 

 

2

 

 

 

12,399

 

 

 

20

 

 

 

2

 

 

 

12,399

 

 

 

—

 

 

 

—

 

Total scheduled maturities

 

 

19

 

 

 

48,523

 

 

 

79

 

 

 

16

 

 

 

45,192

 

 

 

3

 

 

 

3,331

 

Matured at September 30, 2022(8)

 

 

4

 

 

 

12,730

 

 

 

21

 

 

 

4

 

 

 

12,730

 

 

 

—

 

 

 

—

 

Total principal, secured loans

 

 

23

 

 

$

61,253

 

 

 

100

%

 

 

20

 

 

$

57,922

 

 

 

3

 

 

 

3,331

 

 

(7)
Loans scheduled to mature in 2022 after September 30.
(8)
See Delinquency/Secured loans with payments in arrears below for more information on matured loans.

Scheduled maturities are presented based on the most recent in-effect agreement with the borrower, including forbearance agreements. As a result, matured loans at September 30, 2022, for the scheduled maturities table may differ from the same captions in the tables of delinquencies and payments in arrears that are based on the loan terms and do not consider forbearance agreements. For matured loans, the partnership may continue to accept payments while pursuing collection of principal or while negotiating an extension of the loan’s maturity date.

It is the partnership’s experience that the timing of future cash receipts from secured loans will differ from scheduled maturities. Loans may be repaid or renewed before, at or after the contractual maturity date.

Delinquency/Secured loans

Secured loans by payment-delinquency status are presented in the following table ($ in thousands).

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

Loans

 

 

Principal

 

 

Loans

 

 

Principal

 

Current

 

 

17

 

 

$

46,644

 

 

 

25

 

 

$

48,274

 

Past Due

 

 

 

 

 

 

 

 

 

 

 

 

30-89 days

 

 

2

 

 

 

8,904

 

 

 

2

 

 

 

5,782

 

90-179 days

 

 

3

 

 

 

1,985

 

 

 

1

 

 

 

56

 

180 or more days

 

 

1

 

 

 

3,720

 

 

 

3

 

 

 

987

 

Total past due

 

 

6

 

 

 

14,609

 

 

 

6

 

 

 

6,825

 

Total principal, secured loans

 

 

23

 

 

$

61,253

 

 

 

31

 

 

$

55,099

 

The table above presents the unpaid principal balance by delinquency category for all secured loans based on the payment status, including loans that are interest only with no principal due. Secured loans at September 30, 2022 had principal payments in arrears totaling approximately $12,731,000 (6 loans) and interest payments in arrears totaling approximately $453,000.

Payments in arrears for secured loans (i.e., monthly interest and principal payments past due 30 or more days) at September 30, 2022 are presented in the following tables ($ in thousands).

 

 

 

Loans

 

 

Principal

 

 

Interest(9)

 

 

 

 

At September 30, 2022

 

Past
maturity

 

 

Monthly
payments

 

 

Past
maturity

 

 

Monthly
payments

 

 

Past
maturity

 

 

Monthly
payments

 

 

Total
payments
in arrears

 

Past due

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-89 days (1-3 payments)

 

 

1

 

 

 

1

 

 

$

7,994

 

 

$

—

 

 

$

56

 

 

$

12

 

 

$

8,062

 

90-179 days (4-6 payments)

 

 

2

 

 

 

1

 

 

 

1,016

 

 

 

1

 

 

 

31

 

 

 

21

 

 

 

1,069

 

180 or more days (more than 6
   payments)

 

 

1

 

 

 

—

 

 

 

3,720

 

 

 

—

 

 

 

333

 

 

 

—

 

 

 

4,053

 

Total past due

 

 

4

 

 

 

2

 

 

$

12,730

 

 

$

1

 

 

$

420

 

 

$

33

 

 

$

13,184

 

 

(9)
Interest includes foregone interest of approximately $100,000 on non-accrual loans past maturity. Interest for September 2022 is due on October 1, 2022 and is not included in the payments in arrears at September 30, 2022.

At September 30, 2022 and December 31, 2021, there were no loan forbearance agreements in effect.

Secured loans in non-accrual status are summarized in the following table ($ in thousands).

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Number of loans

 

 

1

 

 

 

4

 

Principal

 

$

3,720

 

 

$

1,044

 

Advances

 

 

41

 

 

 

116

 

Accrued interest(10)

 

 

233

 

 

 

13

 

Total recorded investment

 

$

3,994

 

 

$

1,173

 

Foregone interest

 

$

133

 

 

$

1

 

 

(10)
Accrued interest in the table above is the amount of interest accrued prior to the loan being placed on non-accrual status, net of any payments received while in non-accrual status. No interest income was recognized for loans in non-accrual status in the three and nine months ended September 30, 2022. The amortized cost basis of loans in non-accrual status with no specific allowance at September 30, 2022 is equivalent to the entire balance of loans in non-accrual status since there is no specific allowance recorded for any loan.

Non-performing loans are placed on non-accrual status the first of the following month after it is 180 days delinquent or earlier if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued for accounting purposes only (i.e., foregone interest in the table above); however, previously recorded interest is not reversed. Once the payments are made current, interest income is recognized.

At September 30, 2022, three loans with aggregate principal of approximately $1,985,000 were 90 days or more past due and were not in non-accrual status.

At December 31, 2021, there were no loans 90 or more days past due and not in non-accrual status.

Provision/allowance for loan losses and impaired loans

Generally, the partnership has not recorded an allowance for loan losses as all loans have protective equity such that collection is deemed probable for all recorded amounts due on the loan. From time to time, the manager may deem it in the best interest of the partnership to agree to concessions to borrowers to facilitate a sale of collateral or refinance transactions primarily for secured loans in second lien position.

Activity in the allowance for loan losses for the nine months ended September 30, 2022 and 2021 is presented in the following table ($ in thousands).

 

 

 

2022

 

 

2021

 

Balance, January 1

 

$

55

 

 

$

50

 

Provision for loan loss

 

 

—

 

 

 

5

 

Recovery for loan losses

 

 

—

 

 

 

—

 

Balance, September 30

 

$

55

 

 

$

55

 

Loans designated impaired and any associated allowance for loan losses is presented in the following table ($ in thousands).

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Number of loans

 

 

4

 

 

 

4

 

Principal

 

$

5,705

 

 

$

1,044

 

Recorded investment(11)

 

 

6,046

 

 

 

1,173

 

Impaired loans without allowance

 

 

6,046

 

 

 

1,173

 

Impaired loans with allowance

 

 

—

 

 

 

—

 

Allowance for loan losses, impaired loans

 

 

—

 

 

 

—

 

Weighted average LTV at origination

 

 

47.8

%

 

 

45.4

%

 

(11)
Recorded investment is the sum of principal, advances, and accrued interest for financial reporting purposes.

Loans designated impaired had an average recorded investment balance, interest income recognized, and interest income received in cash for the nine months ended September 30, 2022 and the year ended December 31, 2021 as presented in the following table ($ in thousands).

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Average recorded investment

 

$

3,610

 

 

$

8,352

 

Interest income recognized

 

 

294

 

 

 

107

 

Interest income received in cash

 

 

75

 

 

 

98