INVESTMENT IN REAL ESTATE LOANS

9 Months Ended

Sep. 30, 2022

Investment in real estate loans, net is as follows (in thousands):


	September 30, 2022		December 31, 2021
Real estate loans	$	1,500	$	2,350
Allowance for credit losses	(1,250)		(2,350)

	$	250	$	—

The amortized cost bases of our Investment in real estate loans, net approximate their fair values.

Seller-Financing Loans

On June 29, 2018, we sold the Holiday Inn in Duluth, GA and the Hilton Garden Inn in Duluth, GA for an aggregate selling

price of $24.9 million. We provided seller financing totaling $3.6 million on the sale of these properties under two, 3.5 year

second mortgage notes with a blended interest rate of 7.38% that are further collateralized by a personal guarantee from the

principal of the borrower. During the year ended December 31, 2020, we recorded an allowance for credit losses in an amount equal to the outstanding balance of the loans due to a borrower default caused by the negative effects of the Pandemic. On June 1, 2021, we amended the terms of the seller-financing loans and extended the maturity date of each loan to December 31, 2022. Under the amended loan terms, interest is accruing at a rate of 9.00% monthly, including 5.00% payable in cash and 4.00% paid-in-kind. Semiannual principal payments of $0.3 million began on April 15, 2022.

On September 15, 2022, we received a $0.6 million payment to repay one of the two loans in full. On September 15, 2022, we amended the terms of the seller-financing loans and extended the maturity date of the remaining loan to December 31, 2023. On October 26, 2022, we received a scheduled $0.3 million principal payment from the borrower on the remaining outstanding loan. The outstanding principal of the remaining seller-financing loan as of October 26, 2022 is $1.3 million. The outstanding principal balance of the seller-financing loan continues to be fully reserved pending further consistent performance by the borrower under the modified terms of the loan.

Real Estate Development Loans

During the year ended December 31, 2019, we executed a mezzanine loan to fund up to $28.9 million for a mixed-use

development project that includes the AC/Element Hotel, retail space, and parking. In December 2021, we modified the loan agreement to increase our funding commitment by $1.0 million. We completed the funding of our entire $29.9 million commitment during the first half of 2022. The loan was converted to equity in June 2022 upon the exercise of our Initial Purchase Option to acquire a 90% equity interest in the AC/Element Hotel. The loan was recorded as Investment in hotel properties, net on our Consolidated Balance Sheets at December 31, 2021.