Real Estate Debt Investments

The following table presents the Company’s one debt investment as of June 30, 2019 and December 31, 2018 (dollars in thousands):



			Carrying Value⁽²⁾
Asset Type:	Principal Amount		June 30, 2019 (Unaudited)		December 31, 2018		Fixed Rate		Unlevered Current Yield
Mezzanine loan⁽¹⁾	$	75,000	$	56,287	$	58,600	10.0	%	10.3	%

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(1)	Loan has a final maturity date of January 30, 2021.

(2)

As a result of impairments and other non-cash reserves recorded by the joint venture, the Company’s carrying value of its Espresso unconsolidated investment was reduced to zero in the fourth quarter of 2018. The Company has recorded the excess equity in losses related to its unconsolidated investment as a reduction to the carrying value of its mezzanine loan, which was originated to a subsidiary of the Espresso joint venture. As of June 30, 2019 and December 31, 2018, the cumulative excess equity in losses included in the mezzanine loan carrying value were $18.5 million and $16.2 million, respectively.

Credit Quality Monitoring

The Company evaluates its debt investments at least quarterly and differentiates the relative credit quality principally based on: (i) whether the borrower is currently paying contractual debt service in accordance with its contractual terms; and (ii) whether the Company believes the borrower will be able to perform under its contractual terms in the future, as well as the Company’s expectations as to the ultimate recovery of principal at maturity. The Company categorizes a debt investment for which it expects to receive full payment of contractual principal and interest payments as “performing.” The Company will categorize a weaker credit quality debt investment that is currently performing, but for which it believes future collection of all or some portion of principal and interest is in doubt, into a category called “performing with a loan loss reserve.” The Company will categorize a weaker credit quality debt investment that is not performing, which the Company defines as a loan in maturity default and/or past due at least 90 days on its contractual debt service payments, as a non-performing loan (“NPL”). The Company’s definition of an NPL may differ from that of other companies that track NPLs.

As of June 30, 2019, the Company’s debt investment was not performing in accordance with the contractual terms of its governing documents. The Company’s debt investment is a mezzanine loan to the Espresso joint venture that has several sub-portfolios, one of which has a tenant lease in default. The underlying tenant default has resulted in a default under the senior loan with respect to the applicable sub-portfolio, which in turn resulted in a default under the mezzanine loan. The Company is actively monitoring the actions of the senior lender and assessing the Company’s rights and remedies. The Company continues to assess the collectability of principal and interest. As of June 30, 2019, contractual debt service has been paid in accordance with contractual terms and the Company expects to receive full payment of contractual principal and interest. Accordingly, the debt investment was categorized as a performing loan.

For the six months ended June 30, 2019, the debt investment contributed 100.0% of the Company’s interest income on debt investments as presented on the consolidated statements of operations.