OPERATING PROPERTIES, REAL ESTATE HELD FOR SALE AND OTHER REAL ESTATE OWNED

6 Months Ended

Jun. 30, 2019

Real Estate [Abstract]

OPERATING PROPERTIES, REAL ESTATE HELD FOR SALE AND OTHER REAL ESTATE OWNED

OPERATING PROPERTIES, REAL ESTATE HELD FOR SALE AND OTHER REAL ESTATE OWNED

As of June 30, 2019, we held total REO assets of $104.8 million, of which $7.4 million were held for sale, $63.7 million were held as operating properties, and $33.7 million were classified as other real estate owned. As of December 31, 2018, we held total REO assets of $75.0 million, of which $7.4 million were held for sale, $33.9 million were held as operating properties and $33.7 million were classified as other real estate owned.

As described in Note 4, on May 29, 2019, we foreclosed on the membership interests of a limited liability company that was pledged as collateral on a defaulted mezzanine note receivable. The entity owns and operates a commercial office building known as Broadway Tower, located in St. Louis, Missouri. Upon foreclosure, we acquired the membership interests in the limited liability company that owns the office building and related assets, and assumed related liabilities of Broadway Tower, all of which were recorded at fair value in accordance with GAAP. The acquired assets consist of a building, land, furniture and fixtures, operating and reserve cash, and tenant receivables totaling approximately $26.0 million. Liabilities assumed consist of trade accounts payable and accrued liabilities, and accrued interest and principal on the first mortgage loan totaling approximately $16.0 million. In accordance with ASC 842, we recorded a right of use asset and related lease liability of $0.6 million, see Note 14. As described in Note 9, we purchased the Broadway Tower first mortgage note and accrued interest.

During the three and six months ended June 30, 2019, the Company sold one REO asset for $39.0 thousand resulting in a gain on sale of $20.0 thousand. During the three and six months ended June 30, 2018, the Company sold REO assets (or portions thereof) for $0.2 million and $0.5 million (net of transaction costs) resulting in a total net gain on sale of $0.1 million and $0.4 million, respectively.

REO Planned Development and Operations

Costs and expenses related to operating, holding and maintaining our operating properties and REO assets are expensed as incurred and included in operating property direct expenses and as expenses for non-operating real estate owned in the accompanying condensed consolidated statements of operations. For the three months ended June 30, 2019 and 2018, these costs and expenses were $3.7 million and $2.3 million, respectively. For the six months ended June 30, 2019 and 2018, these costs and expenses were $6.2 million and $4.7 million, respectively. Costs related to the development, renovation or improvements of the Company’s real estate assets are generally capitalized, and costs relating to holding the assets are generally charged to expense. Cash outlays for capitalized renovation costs totaled $9.8 million and $3.2 million during the six months ended June 30, 2019 and 2018, respectively.