NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES

9 Months Ended

Sep. 30, 2015

NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES

NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES

NOTE 3. NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES

Notes and interest receivable from related parties is comprised of junior mortgage loans, which are loans secured by mortgages that are subordinate to one or more prior liens on the underlying real estate. Recourse on the loans ordinarily includes the real estate which secures the loan, other collateral and guarantees.

All of the Company’s notes receivable are with Unified Housing Foundation, Inc. (“UHF”). UHF is determined to be a related party to the Company due to our significant reliance in the performance of the collateral secured under the notes receivable. Payments are due from surplus cash flow from operations, sale or refinancing of the underlying properties. These notes are cross collateralized to the extent that any surplus cash available from any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes. Furthermore, any surplus cash available from any of the properties UHF owns, besides the properties underlying these notes, can be used to repay outstanding interest and principal for these notes. The allowance on the notes was a purchase allowance that was netted against the notes when acquired.

At September 30, 2015, we had junior mortgage loans and accrued interest receivable from related parties, net of allowances, totaling $24.3 million. As of September 30, 2015, we recognized interest income of $3.4 million related to these notes receivable. Below is a summary of notes and interest receivable from related parties (dollars in thousands):

	Maturity			Interest
Borrower	Date			Rate			Amount			Collateral
Performing loans:
Unified Housing Foundation, Inc. (Echo Station)		12	/32		12.00	%	$	1,481			Secured
Unified Housing Foundation, Inc. (Lakeshore Villas)		12	/32		12.00	%		2,000			Secured
Unified Housing Foundation, Inc. (Lakeshore Villas)		12	/32		12.00	%		6,363			Secured
Unified Housing Foundation, Inc. (Limestone Canyon)		12	/32		12.00	%		3,057			Secured
Unified Housing Foundation, Inc. (Limestone Ranch)		12	/32		12.00	%		2,250			Secured
Unified Housing Foundation, Inc. (Parkside Crossing)		12	/32		12.00	%		1,936			Secured
Unified Housing Foundation, Inc. (Sendero Ridge)		12	/32		12.00	%		5,174			Secured
Unified Housing Foundation, Inc. (Timbers of Terrell)		12	/32		12.00	%		1,323			Secured
Unified Housing Foundation, Inc. (Tivoli)		12	/32		12.00	%		1,826			Secured
Accrued interest								733
Total Performing							$	26,143
Allowance for doubtful accounts								(1,826	)
Total							$	24,317

All are related party notes.