SEGMENT DISCLOSURE

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

SEGMENT DISCLOSURE

16. SEGMENT DISCLOSURE

The Company’s reportable segments during the three and six months ended June 30, 2022 and 2021 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, 2021 included in the 2021 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 six months ended June 30, 2022 and 2021 is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Office:
Revenues	$	14,077	$	13,356	$	28,182	$	26,883
Property expenses:
Operating	6,402		5,687		12,523		11,342
General and administrative	35		83		125		168
Total property expenses	6,437		5,770		12,648		11,510
Income from unconsolidated entity	260		—		380
Segment net operating income—office	7,900		7,586		15,914		15,373
Hotel:
Revenues	9,576		3,477		17,369		5,355
Property expenses:
Operating	6,305		3,428		11,676		6,063
General and administrative	24		51		52		101
Total property expenses	6,329		3,479		11,728		6,164
Segment net operating income (loss)—hotel	3,247		(2)		5,641		(809)
Lending:
Revenues	2,750		5,839		5,634		9,313
Lending expenses:
Interest expense	119		182		226		373
Expense reimbursements to related parties—lending segment	604		433		1,073		1,164
General and administrative	338		177		898		623
Total lending expenses	1,061		792		2,197		2,160
Segment net operating income—lending	1,689		5,047		3,437		7,153
Total segment net operating income	$	12,836	$	12,631	$	24,992	$	21,717

A reconciliation of segment net operating income to net income attributable to the Company for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Total segment net operating income	$	12,836	$	12,631	$	24,992	$	21,717
Interest and other income	—		1		—		1
Asset management and other fees to related parties	(920)		(2,260)		(1,841)		(4,519)
Expense reimbursements to related parties—corporate	(526)		(454)		(948)		(1,059)
Interest expense	(2,284)		(2,491)		(4,347)		(4,932)
General and administrative	(880)		(835)		(2,017)		(2,876)
Depreciation and amortization	(4,974)		(5,069)		(9,978)		(10,106)
Income (loss) before provision for income taxes	3,252		1,523		5,861		(1,774)
Provision for income taxes	(321)		(996)		(628)		(1,370)
Net income (loss)	2,931		527		5,233		(3,144)
Net (income) loss attributable to noncontrolling interests	(9)		3		(14)		4
Net income (loss) attributable to the Company	$	2,922	$	530	$	5,219	$	(3,140)

The condensed assets for each of the segments as of June 30, 2022 and December 31, 2021, along with capital expenditures and loan originations for the six months ended June 30, 2022 and 2021, are as follows (in thousands):

	June 30, 2022		December 31, 2021
Condensed assets:
Office	$	470,779	$	449,843
Hotel	99,211		101,308
Lending	83,033		96,729
Non-segment assets(1)	24,722		12,986
Total assets	$	677,745	$	660,866

	Six Months Ended June 30,
	2022		2021
Capital expenditures(2) and loan originations:
Office	$	4,304	$	818
Hotel	963		128
Total capital expenditures	5,267		946
Loan originations	30,682		65,210
Total capital expenditures and loan originations	$	35,949	$	66,156

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(1)Includes investments in real estate of $8.3 million representing two development sites which the Company intends to develop into multifamily assets.

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