REAL ESTATE LOAN RECEIVABLE

6 Months Ended

Jun. 30, 2020

As of June 30, 2020, the Company, through an indirect wholly owned subsidiary, had originated one real estate loan receivable as follows (dollars in thousands):

Loan Name

Location of Related

Property or Collateral

Date Originated

Property Type

Loan Type

Outstanding Principal Balance as of June 30, 2020

Book Value

as of

June 30, 2020 ⁽¹⁾

Contractual Interest
Rate

Annualized Effective Interest Rate⁽²⁾

Maturity Date

Hardware Village First Mortgage ⁽³⁾

Salt Lake City, Utah

05/07/20

Apartment

Mortgage

$150,213

$147,648

⁽³⁾

5.34%

05/06/2021

_____________________

⁽¹⁾ Book value represents outstanding principal balance, adjusted for unamortized origination discounts and origination costs and net of an allowance for credit losses. During the three and six months ended June 30, 2020, the Company recorded a provision for credit loss of $0.7 million, applying a probability-of-default method to measure the allowance for credit losses.

⁽²⁾ Annualized effective interest rate is calculated as the actual interest income recognized in 2020, using the interest method, annualized and divided by the average amortized cost basis of the investment during 2020.

⁽³⁾ See “Recent Origination - Hardware Village First Mortgage.”

The following summarizes the activity related to the real estate loan receivable for the six months ended June 30, 2020 (in thousands):


Real estate loan receivable, net - December 31, 2019	$	—
Face value of real estate loan receivable originated	150,213
Discount on real estate loan receivable originated	(2,535)
Accretion of discount on real estate loan receivable originated	556
Origination costs on real estate loan receivable	120
Amortization of origination costs on real estate loan receivable	(26)
Provision for credit loss	(680)
Real estate loan receivable, net - June 30, 2020	$	147,648

For the three and six months ended June 30, 2020, interest income from the real estate loan receivable consisted of the following (in thousands):


	For the Three Months Ended June 30, 2020		For the Six Months Ended June 30, 2020
Contractual interest income	$	677	$	677
Accretion of origination discount	556		556
Amortization of origination costs	(26)		(26)
Interest income from real estate loan receivable	$	1,207	$	1,207

As of June 30, 2020, the Company had $0.4 million of accrued interest receivable included in rents and other receivables, net on the consolidated balance sheet. As of June 30, 2020, the borrower under the Hardware Village First Mortgage was current on its payments.

Recent Origination

Hardware Village First Mortgage

On May 7, 2020, the Company through a consolidated joint venture (the “Hardware Village Joint Venture”) sold a multi-family apartment project (“Hardware Village”) to a buyer unaffiliated with the Hardware Village Joint Venture, the Company or the Advisor for a purchase price of $178.0 million, before third-party closing costs, credits and the disposition fee payable to the Advisor. The purchase price was paid in a combination of approximately $27.8 million in cash and approximately $150.2 million in seller financing provided by an indirect wholly owned subsidiary of the Company (the “Lender”), as described below. The Company’s joint venture partner received a distribution of $6.4 million of the proceeds from the sale, assigned its interest in the Hardware Village Joint Venture to the Company and ceased to be a member of the Hardware Village Joint Venture effective May 7, 2020.

In connection with the sale and seller financing, on May 7, 2020, the buyer entered into a promissory note with the Lender for $150.2 million. The promissory note is secured by a first mortgage on Hardware Village (the “Hardware Village First Mortgage”). For the period commencing on May 7, 2020 through July 31, 2020, interest on the Hardware Village First Mortgage accrues based on the higher of 2.95% and 250 basis points plus one-month LIBOR. For the period commencing on August 1, 2020 and until the maturity date, interest on the Hardware Village First Mortgage will accrue based on the higher of 3.95% and 350 basis points plus one-month LIBOR. Monthly payments are interest only, with the outstanding principal due and payable at maturity on May 6, 2021; however, the buyer/borrower can prepay the outstanding principal and any unpaid accrued interest at any time without fee, premium or penalty.