Real Estate Assets, Net

3 Months Ended

Mar. 31, 2022

The Company acquires real estate assets either through direct purchases of properties or through conversions of mortgage loans in its portfolio such as when a mortgage loan is foreclosed upon and the Company takes title to the property on the foreclosure date or the borrower surrenders the deed in lieu of foreclosure.

Property Held-for-Sale and Rental Property

As of March 31, 2022 and December 31, 2021, the Company’s net investments in real estate owned properties were $6.6 million and $6.1 million, respectively, all of which related to properties held-for-sale. REO property is considered held-for-sale if the REO is expected to be actively marketed for sale. Also, included in the properties held-for-sale balance for the periods as of March 31, 2022 and December 31, 2021, was $0.5 million and $0.7 million, respectively, for properties undergoing renovation or which are otherwise in the process of being brought to market. As of March 31, 2022 and December 31, 2021, the Company had no rental properties. As of March 31, 2022 and December 31, 2021, the Company had a total of 31 real estate owned properties. For the three months ended March 31, 2022 and 2021, all of the additions to REO held-for-sale were acquired through foreclosure or deed in lieu of foreclosure, and reclassified out of the mortgage loan portfolio or from rental properties.

The following table presents the activity in the Company’s carrying value of property held-for-sale and rental property for the three months ended March 31, 2022 and 2021 ($ in thousands):


	Three months ended March 31,
	2022			2021
Property Held-for-Sale and Rental Property	Count	Amount		Count	Amount
Balance at beginning of period	31	$	6,063	38	$	8,526
Net transfers from mortgage loans	3	828		2	228
Adjustments to record at lower of cost or fair value	—	(169)		—	(171)
Depreciation on rental properties	—	—		—	(3)
Disposals	(3)	(136)		(9)	(1,482)
Balance at end of period	31	$	6,586	31	$	7,098

Dispositions

During the three months ended March 31, 2022, the Company sold three REO properties for a net loss of approximately $16 thousand. Comparatively, for the three months ended March 31, 2021, the Company sold nine REO properties, realizing a net gain of approximately $0.1 million. These amounts are included in Other income on the Company's consolidated statements of income. The Company recorded lower of cost or net realizable value adjustments in Real estate operating expense for each of the three month periods ended March 31, 2022 and 2021 of $0.2 million.