BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY	6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY	BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY Our Company IMH Financial Corporation (together with its subsidiaries, the “Company”) is a real estate investment and finance company based in the southwestern United States engaged in various and diverse facets of the real estate lending and investment process, including origination, acquisition, underwriting, servicing, enforcement, development, marketing, and disposition. The Company’s focus is to invest in, manage and dispose of commercial real estate mortgage investments, hospitality assets, and other real estate assets, and to perform all functions reasonably related thereto, including developing, managing and either holding for investment or disposing of real property acquired through acquisition, foreclosure or other means. Over the past several years, we acquired certain operating properties through deed-in-lieu of foreclosure which contributed to our operating revenues and expenses prior to their disposal. In the second quarter of 2019, we conducted a UCC foreclosure on the collateral securing $7.6 million mezzanine note receivable that was in default. That collateral was 100% of the membership interests in a limited liability company that owns a commercial real estate building and operations in St. Louis, Missouri. In the fourth quarter of 2017, we purchased a 64-room operating hotel, spa and restaurant located in Sonoma, California, commonly known as MacArthur Place (“MacArthur Place”), which is presently our sole operating property and is currently undergoing a major renovation. Our History and Structure We were formed from the conversion of our predecessor entity, IMH Secured Loan Fund, LLC (the “Fund”), into a Delaware corporation. The Fund, which was organized in May 2003, commenced operations in August 2003, focusing on investments in senior short-term whole commercial real estate mortgage loans collateralized by first mortgages on real property. The Fund was externally managed by Investors Mortgage Holdings, Inc. (the “Manager”), which was incorporated in Arizona in June 1997 and is licensed as a mortgage banker by the State of Arizona. Through a series of private placements to accredited investors, the Fund raised $875 million of equity capital from May 2003 through December 2008. Due to the cumulative number of investors in the Fund, the Fund registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on April 30, 2007 and began filing periodic reports with the Securities and Exchange Commission (“SEC”). On June 18, 2010, the Fund became internally-managed through the acquisition of the Manager, and converted into a Delaware corporation in a series of transactions that we refer to as the “Conversion Transactions”. The Company continues to explore additional alternative management structures in an effort to reduce Company overhead. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements include the accounts of IMH Financial Corporation and the following wholly-owned operating subsidiaries: 11333, Inc. (formerly known as Investors Mortgage Holdings, Inc.), an Arizona corporation; Investors Mortgage Holdings California, Inc., a California corporation; IMH Holdings, LLC, a Delaware limited liability company (“Holdings”); and various other wholly owned subsidiaries established in connection with the acquisition of real estate either through foreclosure or purchase and/or for borrowing purposes and majority owned or controlled real estate entities and interests in variable interest entities (“VIEs”) in which the Company is considered the primary beneficiary. IMH Management Services, LLC, an Arizona limited liability company, provides us and our affiliates with human resources and administrative services, including the supply of employees. Other entities in which we have invested and have the ability to exercise significant influence over operating and financial policies of the investee, but upon over which we do not possess control, are accounted for by the equity method of accounting within the financial statements and they are therefore not consolidated. All significant intercompany accounts and transactions have been eliminated in consolidation. Liquidity We require liquidity and capital resources for our general working capital needs, including maintenance, development costs and capital expenditures for our operating properties and non-operating REO assets, professional fees, general and administrative operating costs, loan enforcement costs, financing costs, debt service payments, and dividends to our preferred shareholders, as well as to acquire our target assets. As of June 30, 2019, our accumulated deficit aggregated $702.4 million primarily as a result of previous provisions for credit losses recorded relating to the decrease in the fair value of the collateral securing our legacy loan portfolio and impairment charges relating to the value of real estate owned (“REO”) assets acquired primarily through foreclosure, as well as on-going net operating losses resulting from the lack of income-producing assets. The Company has taken a number of steps to maintain an adequate level of on-going liquidity over the years. Our liquidity plan has included obtaining outside financing, selling mortgage loans, and selling the majority of our legacy real estate assets. In 2018, the Company entered into stock subscription agreements with its largest shareholder, JPMorgan Chase Funding Inc., a related party (“Chase Funding”), pursuant to which Chase Funding purchased shares of our Series B-3 Cumulative Convertible Preferred Stock and Series A Senior Redeemable Preferred Stock for a total purchase price of $30.0 million. The Company is using the proceeds from the sale of these shares for general corporate purposes. In the second quarter of 2019, we conducted a UCC foreclosure on the collateral securing a $7.6 million mezzanine note receivable that was in default. That collateral was 100% of the membership interests in an LLC that owns a commercial real estate building and operations in St. Louis, Missouri. In connection with this foreclosure, a subsidiary of the Company purchased the $13.2 million first mortgage note secured by this property. The purchase of the first mortgage note was funded partially with an $11.0 million loan (under a master repurchase agreement) from Chase Funding (related party) and the balance using Company funds. The master repurchase agreement has an initial maturity date of May 22, 2020 with the potential to extend to May 2021 if, among other conditions, certain debt yield and occupancy percentages are achieved. We are working with Chase funding to restructure and extend the maturity date of this facility. In addition, in connection with the acquisition and renovation of MacArthur Place, the Company entered into a building loan agreement and related agreements (the “MacArthur Loan”) in October 2017 with MidFirst Bank in the amount of $32.3 million. As described in Note 9, the MacArthur Loan was modified during the first quarter of 2019 to increase the loan facility to $37.0 million and to establish certain additional reserve accounts in the amount of $2.0 million. The renovation of MacArthur Place is scheduled to be completed in the third quarter of 2019. The modified MacArthur Loan requires the Company to fund minimum equity of $27.7 million, all of which has been funded as of June 30, 2019. The Company has provided a loan repayment guaranty equal to 50% of the original principal amount of the MacArthur Loan along with a guaranty of interest and operating deficits, as well as other customary non-recourse carve-out matters such as bankruptcy and environmental matters. Under the guarantees, the Company is required to maintain a minimum Tangible Net Worth, as defined, of $50.0 million and minimum liquidity of $5.0 million throughout the term of the MacArthur Loan. The Company was in compliance with such financial covenants as of June 30, 2019. The loan includes a provision requiring substantial completion of the project by June 30, 2019, which the lender agreed to waive and extend to September 1, 2019. In addition, the MacArthur Loan requires MacArthur Place to establish various operating and reserve accounts at MidFirst Bank which are subject to a cash management agreement. In the event of default, MidFirst Bank has the ability to take control of such accounts for the allocation and distribution of proceeds in accordance with the cash management agreement. While the Company initially utilized its own equity and proceeds from the MacArthur Loan to fund the purchase of MacArthur Place, the Company sponsored and commenced an offering in November 2017 of up to $25.0 million of preferred limited liability company interests (the “Preferred Interests”) of the L’Auberge de Sonoma Resort Fund, LLC (the “Hotel Fund”). The net proceeds of this offering are being used primarily to (i) reimburse the Company’s for its initial $17.8 million common investment in the Hotel Fund and (ii) fund certain renovations and operating losses at the hotel. As of June 30, 2019, the Hotel Fund had sold Preferred Interests in the aggregate amount of $22.5 million. Since the Company is deemed the primary beneficiary of and controls the Hotel Fund, we have consolidated this entity. As of June 30, 2019, we had cash and cash equivalents of $12.2 million, REO assets held for sale with a carrying value of $7.4 million and other REO assets with a carrying value of $33.7 million that we seek to dispose of within the next 12 months. We continue to evaluate potential disposition strategies for our remaining REO assets and to seek additional sources of debt and equity for investment and working capital purposes. During the second quarter of 2019, a court-ordered stay was issued which prevents the sale of certain assets, pending the outcome of a related hearing in September 2019. At any time after July 24, 2020, each holder of our Series B-1 and B-2 Preferred Stock may require the Company to redeem, out of legally available funds, the shares held by such holder at a price (the “Redemption Price”) equal to the greater of (i) 150% of the sum of the original price per share plus all accrued and unpaid dividends or (ii) the sum of the tangible book value of the Company per share of voting Common Stock and all accrued and unpaid dividends as of the date of redemption. At any time after February 9, 2023, the holder of our Series B-3 Preferred Stock may require the Company to redeem, out of legally available funds, at a Redemption Price equal to the greater of (i) 145% of the sum of the original price per share plus all accrued and unpaid dividends or (ii) the sum of the tangible book value of the Company per share of voting Common Stock and all accrued and unpaid dividends as of the date of redemption. While the Preferred Shareholders have indicated their willingness to potentially extend the redemption period beyond July 24, 2020, a cash payment in the aggregate amount of $2.6 million is due and payable to the holders of the Series B-1 and B-2 Preferred Stock on July 24, 2020 whether or not a redemption is requested. The current holders of our Series B Preferred Stock are collectively referred to herein as the “Series B Investors”. As described in Note 9, the Company’s unsecured exchange offering notes (“EO Notes”) with a face value of $10.2 million matured on April 29, 2019 and were repaid in full. We expect our primary sources of liquidity over the next twelve months to consist of our proceeds from the disposition of our existing REO assets held for sale (assuming that the court-order stay is lifted within that time frame), proceeds from borrowings and equity issuances, current cash, mezzanine and mortgage loan interest income, and revenues from ownership or management of MacArthur Place. If we are able to resolve these matters favorably, we believe that our cash and cash equivalents coupled with our operating and investing revenues, as well as proceeds that we anticipate receiving from the disposition of our real estate held for sale and debt and equity financing efforts will be sufficient to allow us to fund our operations for a period of one year from the date these condensed consolidated financial statements are issued. We have been successful thus far in securing financing through June 30, 2019 to provide adequate funding and funding commitments for working capital purposes, which has been supplemented by proceeds from the sale of certain REO assets, receipts of principal and interest on mortgage and related investments. Moreover, we are continuing to negotiate potential extensions or restructuring of our Series B Preferred Stock and/or our outstanding debt obligations. However, there is no assurance that we will be successful in such negotiations, or in selling our remaining REO assets in a timely manner or in obtaining additional or replacement financing, if needed, to sufficiently fund future operations, repay existing debt, or to implement our investment strategy. Our failure to generate sustainable earning assets and to successfully liquidate a sufficient number of our REO assets may have a material adverse effect on our business, results of operations and financial position. In the absence of favorably resolving the matters described above, the collective nature of these uncertainties create substantial doubt about our ability to continue as a going concern for a period beyond one year from the date of issuance of these condensed consolidated financial statements.

BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY

Our Company

IMH Financial Corporation (together with its subsidiaries, the “Company”) is a real estate investment and finance company based in the southwestern United States engaged in various and diverse facets of the real estate lending and investment process, including origination, acquisition, underwriting, servicing, enforcement, development, marketing, and disposition. The Company’s focus is to invest in, manage and dispose of commercial real estate mortgage investments, hospitality assets, and other real estate assets, and to perform all functions reasonably related thereto, including developing, managing and either holding for investment or disposing of real property acquired through acquisition, foreclosure or other means.

Over the past several years, we acquired certain operating properties through deed-in-lieu of foreclosure which contributed to our operating revenues and expenses prior to their disposal. In the second quarter of 2019, we conducted a UCC foreclosure on the collateral securing $7.6 million mezzanine note receivable that was in default. That collateral was 100% of the membership interests in a limited liability company that owns a commercial real estate building and operations in St. Louis, Missouri. In the fourth quarter of 2017, we purchased a 64-room operating hotel, spa and restaurant located in Sonoma, California, commonly known as MacArthur Place (“MacArthur Place”), which is presently our sole operating property and is currently undergoing a major renovation.

Our History and Structure

We were formed from the conversion of our predecessor entity, IMH Secured Loan Fund, LLC (the “Fund”), into a Delaware corporation. The Fund, which was organized in May 2003, commenced operations in August 2003, focusing on investments in senior short-term whole commercial real estate mortgage loans collateralized by first mortgages on real property. The Fund was externally managed by Investors Mortgage Holdings, Inc. (the “Manager”), which was incorporated in Arizona in June 1997 and is licensed as a mortgage banker by the State of Arizona. Through a series of private placements to accredited investors, the Fund raised $875 million of equity capital from May 2003 through December 2008. Due to the cumulative number of investors in the Fund, the Fund registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on April 30, 2007 and began filing periodic reports with the Securities and Exchange Commission (“SEC”). On June 18, 2010, the Fund became internally-managed through the acquisition of the Manager, and converted into a Delaware corporation in a series of transactions that we refer to as the “Conversion Transactions”. The Company continues to explore additional alternative management structures in an effort to reduce Company overhead.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements include the accounts of IMH Financial Corporation and the following wholly-owned operating subsidiaries: 11333, Inc. (formerly known as Investors Mortgage Holdings, Inc.), an Arizona corporation; Investors Mortgage Holdings California, Inc., a California corporation; IMH Holdings, LLC, a Delaware limited liability company (“Holdings”); and various other wholly owned subsidiaries established in connection with the acquisition of real estate either through foreclosure or purchase and/or for borrowing purposes and majority owned or controlled real estate entities and interests in variable interest entities (“VIEs”) in which the Company is considered the primary beneficiary. IMH Management Services, LLC, an Arizona limited liability company, provides us and our affiliates with human resources and administrative services, including the supply of employees. Other entities in which we have invested and have the ability to exercise significant influence over operating and financial policies of the investee, but upon over which we do not possess control, are accounted for by the equity method of accounting within the financial statements and they are therefore not consolidated.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Liquidity

We require liquidity and capital resources for our general working capital needs, including maintenance, development costs and capital expenditures for our operating properties and non-operating REO assets, professional fees, general and administrative operating costs, loan enforcement costs, financing costs, debt service payments, and dividends to our preferred shareholders, as well as to acquire our target assets.

As of June 30, 2019, our accumulated deficit aggregated $702.4 million primarily as a result of previous provisions for credit losses recorded relating to the decrease in the fair value of the collateral securing our legacy loan portfolio and impairment charges relating to the value of real estate owned (“REO”) assets acquired primarily through foreclosure, as well as on-going net operating losses resulting from the lack of income-producing assets.

The Company has taken a number of steps to maintain an adequate level of on-going liquidity over the years. Our liquidity plan has included obtaining outside financing, selling mortgage loans, and selling the majority of our legacy real estate assets.

In 2018, the Company entered into stock subscription agreements with its largest shareholder, JPMorgan Chase Funding Inc., a related party (“Chase Funding”), pursuant to which Chase Funding purchased shares of our Series B-3 Cumulative Convertible Preferred Stock and Series A Senior Redeemable Preferred Stock for a total purchase price of $30.0 million. The Company is using the proceeds from the sale of these shares for general corporate purposes.

In the second quarter of 2019, we conducted a UCC foreclosure on the collateral securing a $7.6 million mezzanine note receivable that was in default. That collateral was 100% of the membership interests in an LLC that owns a commercial real estate building and operations in St. Louis, Missouri. In connection with this foreclosure, a subsidiary of the Company purchased the $13.2 million first mortgage note secured by this property. The purchase of the first mortgage note was funded partially with an $11.0 million loan (under a master repurchase agreement) from Chase Funding (related party) and the balance using Company funds. The master repurchase agreement has an initial maturity date of May 22, 2020 with the potential to extend to May 2021 if, among other conditions, certain debt yield and occupancy percentages are achieved. We are working with Chase funding to restructure and extend the maturity date of this facility.

In addition, in connection with the acquisition and renovation of MacArthur Place, the Company entered into a building loan agreement and related agreements (the “MacArthur Loan”) in October 2017 with MidFirst Bank in the amount of $32.3 million. As described in Note 9, the MacArthur Loan was modified during the first quarter of 2019 to increase the loan facility to $37.0 million and to establish certain additional reserve accounts in the amount of $2.0 million. The renovation of MacArthur Place is scheduled to be completed in the third quarter of 2019.

The modified MacArthur Loan requires the Company to fund minimum equity of $27.7 million, all of which has been funded as of June 30, 2019. The Company has provided a loan repayment guaranty equal to 50% of the original principal amount of the MacArthur Loan along with a guaranty of interest and operating deficits, as well as other customary non-recourse carve-out matters such as bankruptcy and environmental matters. Under the guarantees, the Company is required to maintain a minimum Tangible Net Worth, as defined, of $50.0 million and minimum liquidity of $5.0 million throughout the term of the MacArthur Loan. The Company was in compliance with such financial covenants as of June 30, 2019. The loan includes a provision requiring substantial completion of the project by June 30, 2019, which the lender agreed to waive and extend to September 1, 2019. In addition, the MacArthur Loan requires MacArthur Place to establish various operating and reserve accounts at MidFirst Bank which are subject to a cash management agreement. In the event of default, MidFirst Bank has the ability to take control of such accounts for the allocation and distribution of proceeds in accordance with the cash management agreement.

While the Company initially utilized its own equity and proceeds from the MacArthur Loan to fund the purchase of MacArthur Place, the Company sponsored and commenced an offering in November 2017 of up to $25.0 million of preferred limited liability company interests (the “Preferred Interests”) of the L’Auberge de Sonoma Resort Fund, LLC (the “Hotel Fund”). The net proceeds of this offering are being used primarily to (i) reimburse the Company’s for its initial $17.8 million common investment in the Hotel Fund and (ii) fund certain renovations and operating losses at the hotel. As of June 30, 2019, the Hotel Fund had sold Preferred Interests in the aggregate amount of $22.5 million. Since the Company is deemed the primary beneficiary of and controls the Hotel Fund, we have consolidated this entity.

As of June 30, 2019, we had cash and cash equivalents of $12.2 million, REO assets held for sale with a carrying value of $7.4 million and other REO assets with a carrying value of $33.7 million that we seek to dispose of within the next 12 months. We continue to evaluate potential disposition strategies for our remaining REO assets and to seek additional sources of debt and equity for investment and working capital purposes. During the second quarter of 2019, a court-ordered stay was issued which prevents the sale of certain assets, pending the outcome of a related hearing in September 2019.

At any time after July 24, 2020, each holder of our Series B-1 and B-2 Preferred Stock may require the Company to redeem, out of legally available funds, the shares held by such holder at a price (the “Redemption Price”) equal to the greater of (i) 150% of the sum of the original price per share plus all accrued and unpaid dividends or (ii) the sum of the tangible book value of the Company per share of voting Common Stock and all accrued and unpaid dividends as of the date of redemption. At any time after February 9, 2023, the holder of our Series B-3 Preferred Stock may require the Company to redeem, out of legally available funds, at a Redemption Price equal to the greater of (i) 145% of the sum of the original price per share plus all accrued and unpaid dividends or (ii) the sum of the tangible book value of the Company per share of voting Common Stock and all accrued and unpaid dividends as of the date of redemption. While the Preferred Shareholders have indicated their willingness to potentially extend the redemption period beyond July 24, 2020, a cash payment in the aggregate amount of $2.6 million is due and payable to the holders of the Series B-1 and B-2 Preferred Stock on July 24, 2020 whether or not a redemption is requested. The current holders of our Series B Preferred Stock are collectively referred to herein as the “Series B Investors”.

As described in Note 9, the Company’s unsecured exchange offering notes (“EO Notes”) with a face value of $10.2 million matured on April 29, 2019 and were repaid in full.

We expect our primary sources of liquidity over the next twelve months to consist of our proceeds from the disposition of our existing REO assets held for sale (assuming that the court-order stay is lifted within that time frame), proceeds from borrowings and equity issuances, current cash, mezzanine and mortgage loan interest income, and revenues from ownership or management of MacArthur Place. If we are able to resolve these matters favorably, we believe that our cash and cash equivalents coupled with our operating and investing revenues, as well as proceeds that we anticipate receiving from the disposition of our real estate held for sale and debt and equity financing efforts will be sufficient to allow us to fund our operations for a period of one year from the date these condensed consolidated financial statements are issued.

We have been successful thus far in securing financing through June 30, 2019 to provide adequate funding and funding commitments for working capital purposes, which has been supplemented by proceeds from the sale of certain REO assets, receipts of principal and interest on mortgage and related investments. Moreover, we are continuing to negotiate potential extensions or restructuring of our Series B Preferred Stock and/or our outstanding debt obligations. However, there is no assurance that we will be successful in such negotiations, or in selling our remaining REO assets in a timely manner or in obtaining additional or replacement financing, if needed, to sufficiently fund future operations, repay existing debt, or to implement our investment strategy. Our failure to generate sustainable earning assets and to successfully liquidate a sufficient number of our REO assets may have a material adverse effect on our business, results of operations and financial position. In the absence of favorably resolving the matters described above, the collective nature of these uncertainties create substantial doubt about our ability to continue as a going concern for a period beyond one year from the date of issuance of these condensed consolidated financial statements.