BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY	9 Months Ended
Sep. 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. 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”. Effective August 1, 2019, the Company entered into a Non-Discretionary Investment Advisory Agreement (“Advisory Agreement”) with Juniper Investment Advisors, LLC (“Juniper Advisors”) pursuant to which Juniper Advisors will manage certain assets of the Company, including the Company’s loan portfolio and certain of its legacy real estate owned properties. 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 September 30, 2019, our accumulated deficit aggregated $710.9 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, 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 primarily 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. As further described in Note 11, during the three months ended September 30, 2019, JPMorgan Chase Funding Inc. (“Chase Funding”) purchased 1,875,000 shares of our Series B-4 Cumulative Convertible Preferred Stock (the “Series B-4 Preferred Stock”), at a price of $3.20 per share, for a total purchase price of $6.0 million. Dividends on the Series B-4 Preferred Stock are cumulative and accrue from the issue date, compounding quarterly at the rate of 5.65% of the issue price per year, and are payable quarterly in arrears. Holders of the Series B-4 Preferred Stock are entitled to receive a liquidation preference of 145% of the sum of the original price per share of the Series B-4 Preferred Stock plus all accrued and unpaid dividends. The Series B-4 Preferred Stock contains redemption features similar in all material respects to the Company’s other outstanding shares of Series B Preferred Stock. 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 and the balance using Company funds. The master repurchase agreement has an initial maturity date of May 22, 2020. The Company has the option to extend the maturity date for one year if, among other conditions, certain debt yield and Broadway Tower occupancy rates are achieved. In addition, in connection with the Company’s acquisition and renovation of the MacArthur Place Hotel in Sonoma, California (“MacArthur Place”), the Company entered into a building loan agreement and related agreements in October 2017 with MidFirst Bank in the amount of $32.3 million (the “MacArthur Loan”). 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 MacArthur Loan has an initial maturity of October 1, 2020 with two one-year extension options available if certain criteria is met. The modified MacArthur Loan required the Company to fund minimum equity of $27.7 million, all of which has been funded as of September 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 September 30, 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. Commencing in November 2017 the Company sponsored an offering under SEC Regulation D 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 were 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 MacArthur Place. As of September 30, 2019, the Hotel Fund had sold all of the Preferred Interests in the aggregate amount of $22.5 million. The Company has guaranteed and funded the payment of monthly 7% distributions to Preferred Interests since the commencement of the Hotel Fund which has totaled $1.6 million through September 30, 2019. As of September 30, 2019, we had cash and cash equivalents of $7.4 million, REO assets held for sale with a carrying value of $7.4 million and other REO assets with a carrying value of $33.3 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 third quarter of 2019, a court-ordered stay that was previously issued, and which prevented the sale of certain assets, was lifted, thereby allowing us to market such assets for sale. 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. 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”. We expect our primary sources of liquidity over the next twelve months to consist of proceeds from the disposition of our existing REO assets held for sale and loan assets, proceeds from borrowings and equity issuances, current cash, mezzanine and mortgage loan interest income, and revenues from ownership or management of MacArthur Place and Broadway Tower. 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 assets 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 used third-party financing, proceeds from the sale of certain REO assets, and the payment of principal and interest on mortgage and related investments to satisfy for working capital purposes requirements through September 30, 2019. Subsequent to September 30, 2019, in order to meet impending liquidity requirements, we sold one of our mezzanine loan investments with a principal balance of $12.3 million at a discount incurring a loss of $2.6 million. We are also continuing to discuss the potential extension or restructuring of our Series B Preferred Stock with the holders of those shares and our outstanding debt obligations. There can be no assurance that these efforts will be successful or that we will sell our remaining REO assets in a timely manner or in obtaining additional or replacement financing, if needed, to sufficiently fund our 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.

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”. Effective August 1, 2019, the Company entered into a Non-Discretionary Investment Advisory Agreement (“Advisory Agreement”) with Juniper Investment Advisors, LLC (“Juniper Advisors”) pursuant to which Juniper Advisors will manage certain assets of the Company, including the Company’s loan portfolio and certain of its legacy real estate owned properties.

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 September 30, 2019, our accumulated deficit aggregated $710.9 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, 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 primarily 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.

As further described in Note 11, during the three months ended September 30, 2019, JPMorgan Chase Funding Inc. (“Chase Funding”) purchased 1,875,000 shares of our Series B-4 Cumulative Convertible Preferred Stock (the “Series B-4 Preferred Stock”), at a price of $3.20 per share, for a total purchase price of $6.0 million. Dividends on the Series B-4 Preferred Stock are cumulative and accrue from the issue date, compounding quarterly at the rate of 5.65% of the issue price per year, and are payable quarterly in arrears. Holders of the Series B-4 Preferred Stock are entitled to receive a liquidation preference of 145% of the sum of the original price per share of the Series B-4 Preferred Stock plus all accrued and unpaid dividends. The Series B-4 Preferred Stock contains redemption features similar in all material respects to the Company’s other outstanding shares of Series B Preferred Stock.

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 and the balance using Company funds. The master repurchase agreement has an initial maturity date of May 22, 2020. The Company has the option to extend the maturity date for one year if, among other conditions, certain debt yield and Broadway Tower occupancy rates are achieved.

In addition, in connection with the Company’s acquisition and renovation of the MacArthur Place Hotel in Sonoma, California (“MacArthur Place”), the Company entered into a building loan agreement and related agreements in October 2017 with MidFirst Bank in the amount of $32.3 million (the “MacArthur Loan”). 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 MacArthur Loan has an initial maturity of October 1, 2020 with two one-year extension options available if certain criteria is met.

The modified MacArthur Loan required the Company to fund minimum equity of $27.7 million, all of which has been funded as of September 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 September 30, 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.

Commencing in November 2017 the Company sponsored an offering under SEC Regulation D 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 were 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 MacArthur Place. As of September 30, 2019, the Hotel Fund had sold all of the Preferred Interests in the aggregate amount of $22.5 million. The Company has guaranteed and funded the payment of monthly 7% distributions to Preferred Interests since the commencement of the Hotel Fund which has totaled $1.6 million through September 30, 2019.

As of September 30, 2019, we had cash and cash equivalents of $7.4 million, REO assets held for sale with a carrying value of $7.4 million and other REO assets with a carrying value of $33.3 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 third quarter of 2019, a court-ordered stay that was previously issued, and which prevented the sale of certain assets, was lifted, thereby allowing us to market such assets for sale.

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. 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”.

We expect our primary sources of liquidity over the next twelve months to consist of proceeds from the disposition of our existing REO assets held for sale and loan assets, proceeds from borrowings and equity issuances, current cash, mezzanine and mortgage loan interest income, and revenues from ownership or management of MacArthur Place and Broadway Tower. 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 assets 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 used third-party financing, proceeds from the sale of certain REO assets, and the payment of principal and interest on mortgage and related investments to satisfy for working capital purposes requirements through September 30, 2019. Subsequent to September 30, 2019, in order to meet impending liquidity requirements, we sold one of our mezzanine loan investments with a principal balance of $12.3 million at a discount incurring a loss of $2.6 million. We are also continuing to discuss the potential extension or restructuring of our Series B Preferred Stock with the holders of those shares and our outstanding debt obligations. There can be no assurance that these efforts will be successful or that we will sell our remaining REO assets in a timely manner or in obtaining additional or replacement financing, if needed, to sufficiently fund our 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.