SEGMENT DISCLOSURE

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

SEGMENT DISCLOSURE

15. SEGMENT DISCLOSURE

The Company’s reportable segments during the three and nine months ended September 30, 2021 and 2020 consist of two types of commercial real estate properties, namely, office and hotel, as well as a segment for the Company’s lending business. Management internally evaluates the operating performance and financial results of the segments based on net operating income. The Company also has certain general and administrative level activities, including public company expenses, legal, accounting, and tax preparation that are not considered separate operating segments. The reportable segments are accounted for on the same basis of accounting as described in the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the 2020 Form 10-K.

For the Company’s real estate segments, the Company defines net operating income (loss) as rental and other property income and expense reimbursements less property related expenses, and excludes non-property income and expenses, interest expense, depreciation and amortization, corporate related general and administrative expenses, gain (loss) on sale of real estate, gain (loss) on early extinguishment of debt, impairment of real estate, transaction costs, and provision (benefit) for income taxes. For the Company’s lending segment, the Company defines net operating income as interest income net of interest expense and general overhead expenses.

The net operating income (loss) of the Company’s segments for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Office:
Revenues	$	12,998	$	13,529	$	39,881	$	42,189
Property expenses:
Operating	5,362		6,026		16,704		17,338
General and administrative	123		61		291		397
Total property expenses	5,485		6,087		16,995		17,735
Segment net operating income—office	7,513		7,442		22,886		24,454
Hotel:
Revenues	5,478		1,762		10,833		11,129
Property expenses:
Operating	4,596		2,796		10,659		11,491
General and administrative	5		35		106		54
Total property expenses	4,601		2,831		10,765		11,545
Segment net operating income (loss)—hotel	877		(1,069)		68		(416)
Lending:
Revenues	5,773		1,981		15,086		5,963
Lending expenses:
Interest expense	105		170		478		650
Expense reimbursements to related parties—lending segment	55		901		1,219		2,581
General and administrative	744		641		1,367		1,562
Total lending expenses	904		1,712		3,064		4,793
Segment net operating income—lending	4,869		269		12,022		1,170
Total segment net operating income	$	13,259	$	6,642	$	34,976	$	25,208

A reconciliation of segment net operating income to net income attributable to the Company for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Total segment net operating income	$	13,259	$	6,642	$	34,976	$	25,208
Interest and other income	—		62		1		98
Asset management and other fees to related parties	(2,262)		(2,387)		(6,781)		(7,408)
Expense reimbursements to related parties—corporate	(533)		(639)		(1,592)		(2,066)
Interest expense	(2,080)		(2,473)		(7,012)		(8,056)
General and administrative	(753)		(999)		(3,629)		(3,125)
Depreciation and amortization	(5,061)		(5,273)		(15,167)		(15,728)
Loss on early extinguishment of debt	—		(281)		—		(281)
Income (loss) before provision for income taxes	2,570		(5,348)		796		(11,358)
(Provision) benefit for income taxes	(946)		18		(2,316)		731
Net income (loss)	1,624		(5,330)		(1,520)		(10,627)
Net (income) loss attributable to noncontrolling interests	—		7		4		1
Net income (loss) attributable to the Company	$	1,624	$	(5,323)	$	(1,516)	$	(10,626)

The condensed assets for each of the segments as of September 30, 2021 and December 31, 2020, along with capital expenditures and loan originations for the nine months ended September 30, 2021 and 2020, are as follows (in thousands):

	September 30, 2021		December 31, 2020
Condensed assets:
Office	$	450,284	$	472,544
Hotel	100,687		100,285
Lending	112,656		94,626
Non-segment assets	11,393		18,162
Total assets	$	675,020	$	685,617

	Nine Months Ended September 30,
	2021		2020
Capital expenditures(1) and loan originations:
Office	$	2,488	$	7,793
Hotel	144		801
Total capital expenditures	2,632		8,594
Loan originations	119,479		48,179
Total capital expenditures and loan originations	$	122,111	$	56,773

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(1)Represents additions and improvements to real estate investments, excluding acquisitions. Includes the activity for dispositions through their respective disposition dates.