
	Outstanding loan amount (a)										Interest compounding
Development Project	June 30, 2022			December 31, 2021		Maximum loan commitment			Interest rate
City Park 2	$	8,014		$	—	$	20,594		13.0	%	Annually
Interlock Commercial	86,334			95,379		107,000		(b)	15.0	%	None
Nexton Multifamily	24,853			23,567		22,315			11.0	%	Annually
Total mezzanine & preferred equity	119,201			118,946		$	149,909
Exelon note receivable	12,834			—
Other notes receivable	7,455			7,234
Notes receivable guarantee premium	1,345			1,243
Allowance for credit losses	(1,452)		(c)	(994)

Total notes receivable	$	139,383		$	126,429

(c) The amount excludes $0.5 million of Current Expected Credit Losses ("CECL") allowance that relates to the unfunded commitments, which was recorded as a liability under Other liabilities in the consolidated balance sheet.

Interest on the notes receivable 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 six months ended June 30, 2022 and 2021 as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
Development Project	2022			2021			2022			2021




City Park 2	$	206	(a)	$	—		$	224	(a)	$	—
Interlock Commercial	2,361		(a)	3,310		(a)	5,187		(a)	6,384		(a)
Nexton Multifamily	672			261			1,286			261
Solis Apartments at Interlock	—			3,068		(b)	—			4,005		(b)
Total mezzanine	3,239			6,639			6,697			10,650
Other interest income	113			107			223			212
Total interest income	$	3,352		$	6,746		$	6,920		$	10,862

On March 23, 2022, the Company entered into a $20.6 million preferred equity investment for the development of a multifamily property located in Charlotte, North Carolina. The investment has economic terms consistent with a note receivable, including a mandatory redemption or maturity on April 28, 2026, and it is accounted for as a note receivable. The Company's investment bears interest at a rate of 13%, compounded annually.

Management has concluded that this entity is a VIE. Because the other investor in the project, TP City Park 2 LLC, is the developer of City Park 2 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.

During February 2022, the Company received $13.5 million as a partial repayment of the Interlock Commercial mezzanine loan, which consisted of $11.1 million of principal and $2.4 million of interest.

The Company is exposed to credit losses primarily through its mezzanine lending activities and preferred equity investments. As of June 30, 2022, the Company had three mezzanine loans (including the Nexton Multifamily and City Park 2 preferred equity investments that are accounted for as notes receivable), each 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 June 30, 2022 and obtained industry loan loss data relative to these risk ratings. Each of the outstanding loans as of June 30, 2022 was "Pass" rated.

At December 31, 2021, the Company reported $126.4 million of notes receivable, net of allowances of $1.0 million. At June 30, 2022, the Company reported $139.4 million of notes receivable, net of allowances of $1.5 million. Changes in the allowance for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Beginning balance	$	1,599	$	1,741	$	994	$	2,584

Unrealized credit loss provision (release)	295		388		900		333
Extinguishment due to acquisition	—		—		—		(788)


Ending balance (a)	$	1,894	$	2,129	$	1,894	$	2,129

(a) The amount as of June 30, 2022 includes $0.5 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 June 30, 2022, the Company had the Exelon note, which bears interest at 3% per annum, on non-accrual status. The principal balance of the note receivable is adequately secured by the seller's partnership interest. As of June 30, 2022 and December 31, 2021, there were no other loans on non-accrual status.