The Company had the following notes receivable outstanding as of September 30, 2021 and December 31, 2020 ($ in thousands):


	Outstanding loan amount										Interest compounding
Development Project	September 30, 2021			December 31, 2020		Maximum loan commitment		Interest rate

Delray Beach Plaza	$	—		$	14,289	$	17,000	15.0	%	(a)	Annually

Interlock Commercial	92,254			85,318		107,000		15.0	%	(b)	None
Nexton Multifamily	18,549			—		22,315		11.0	%		Annually
Solis Apartments at Interlock	—			28,969		41,100		13.0	%		Annually
Total mezzanine	110,803			128,576		$	187,415
Other notes receivable	7,124			6,809
Notes receivable guarantee premium	1,631			2,631
Allowance for credit losses	(1,394)		(c)	(2,584)

Total notes receivable	$	118,164		$	135,432

(c) The amount excludes $0.1 million of CECL allowance that relates to the unfunded commitments, which was recorded as a liability under Other Liabilities in our consolidated balance sheet.

Interest on the mezzanine loans is accrued and funded utilizing the interest reserves for each loan, which are components of the respective maximum loan commitments, and such accrued interest is generally added to the loan receivable balances. The Company recognized interest income for the three and nine months ended September 30, 2021 and 2020 as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
Development Project	2021			2020			2021			2020


The Residences at Annapolis Junction	$	—		$	—	(a)	$	—		$	2,468	(a)(b)
Delray Beach Plaza	—			—		(a)	—		(a)	489		(a)
Nexton Multifamily	397			—			658			—
Nexton Square	—			380			—			1,177
Interlock Commercial	3,260		(b)	3,189		(b)	9,644		(b)	9,364		(b)
Solis Apartments at Interlock	—			847			4,005		(c)	2,522
Total mezzanine	3,657			4,416			14,307			16,020
Other interest income	109			1			321			35
Total interest income	$	3,766		$	4,417		$	14,628		$	16,055

On February 26, 2021, the Company acquired Delray Beach Plaza, a Whole Foods-anchored retail property located in Delray Beach, Florida for a contract price of $27.6 million plus capitalized transaction costs of $0.2 million. The developer of this property repaid the Company's mezzanine note receivable of $14.3 million at the time of the acquisition, which consisted of $12.3 million of principal and $2.0 million of accrued interest.

In March 2021, the Company loaned an additional $7.5 million as part of the Interlock Commercial loan to fund project costs due to an additional equity requirement to reduce the senior loan. In September 2021, the loan was modified to increase the maximum loan commitment to $107.0 million and to modify and clarify certain rights and responsibilities under the loan.

During the three months ended September 30, 2021, the borrower repaid $5.0 million, comprised of $3.8 million of principal and $1.2 million of accrued interest. During the nine months ended September 30, 2021, the borrower repaid $11.0 million of this loan, comprised of $6.8 million of principal and $4.2 million of accrued interest.

On April 1, 2021, the Company entered into a $22.3 million preferred equity investment for the development of a multifamily property located in Summerville, South Carolina, adjacent to the Company's Nexton Square property. The investment has economic terms consistent with a note receivable, including a mandatory redemption or maturity on October 1, 2026, and it is accounted for as a note receivable. The Company's investment bears interest at a rate of 11%, compounded annually.

Management has concluded that this entity is a VIE. Because the other investor in the project, TP Nexton LLC, is the developer of Nexton Multifamily, the Company does not have the power to direct the activities of the project that most significantly impact its performance. Accordingly, the Company is not the project's primary beneficiary and does not consolidate the project in its consolidated financial statements.

On June 7, 2021 the borrower paid off the Solis Apartments at Interlock note receivable in full. The Company received a total of $33.0 million, which consisted of $23.2 million outstanding principal, $7.4 million of accrued interest, and a prepayment premium of $2.4 million that resulted from the early payoff of the loan.

The Company is exposed to credit losses primarily through its mezzanine lending activities. As of September 30, 2021, the Company had two mezzanine loans, both of which are financing development projects in various stages of completion or lease-up. Each of these projects is subject to a loan that is senior to the Company’s mezzanine loan. Interest on these loans is paid in kind and is generally not expected to be paid until a sale of the project after completion of the development.

The Company's management performs a quarterly analysis of the loan portfolio to determine the risk of credit loss based on the progress of development activities, including leasing activities, projected development costs, and current and projected mezzanine and senior construction loan balances. The Company estimates future losses on its notes receivable using risk ratings that correspond to probabilities of default and loss given default. The Company's risk ratings are as follows:

•Pass: loans in this category are adequately collateralized by a development project with conditions materially consistent with the Company's underwriting assumptions.

•Special Mention: loans in this category show signs that the economic performance of the project may suffer as a result of slower-than-expected leasing activity or an extended development or marketing timeline. Loans in this category warrant increased monitoring by management.

•Substandard: loans in this category may not be fully collected by the Company unless remediation actions are taken. Remediation actions may include obtaining additional collateral or assisting the borrower with asset management activities to prepare the project for sale. The Company will also consider placing the loan on nonaccrual status if it does not believe that additional interest accruals will ultimately be collected.

On a quarterly basis, the Company compares the risk inherent in its loans to industry loan loss data experienced during past business cycles. The Company updated the risk ratings for each of its notes receivable as of September 30, 2021 and obtained industry loan loss data relative to these risk ratings. Each of the outstanding loans as of September 30, 2021 was Pass-rated.

At December 31, 2020, the Company reported $135.4 million of notes receivable, net of allowances of $2.6 million. At September 30, 2021, the Company reported $118.2 million of notes receivable, net of allowances of $1.4 million. Changes in the allowance for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Beginning balance	$	2,129	$	3,085	$	2,584	$	—
Cumulative effect of accounting change	—		—		—		2,825
Unrealized credit loss provision (release)	(617)		(33)		(284)		227
Extinguishment due to acquisition	—		—		(788)		—


Ending balance (a)	$	1,512	$	3,052	$	1,512	$	3,052

(a) The amount as of September 30, 2021 includes $0.1 million of allowance related to the unfunded commitments, which was recorded as Other liabilities on the Consolidated Balance Sheet.

The Company places loans on non-accrual status when the loan balance, together with the balance of any senior loan, approximately equals the estimated realizable value of the underlying development project. As of December 31, 2020, the Company had one loan with non-accrual status with an amortized cost basis of $13.6 million. As of September 30, 2021, there were no loans on non-accrual status.